10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

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

For the fiscal year ended December 31, 2007

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

For the transition period from           to          

Commission file number 1-12297

Penske Automotive Group, Inc.

(Exact name of registrant as specified in its charter)

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

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

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

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

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

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

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

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

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

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

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

     The aggregate market value of the voting common stock held by non-affiliates as of June 30, 2007 was $894,529,752. As of February 15, 2008, there were 95,022,292 shares of voting common stock outstanding.

Documents Incorporated by Reference

Certain portions, as expressly described in this report, of the registrant’s proxy statement for the 2008 Annual Meeting of the Stockholders to be held May 1, 2008 are incorporated by reference into Part III, Items 10-14.

TABLE OF CONTENTS

Items			Page
PART I
	1.	Business		1
	1A.	Risk Factors		18
	1B.	Unresolved Staff Comments		27
	2.	Properties		27
	3.	Legal Proceedings		27
	4.	Submission of Matters to a Vote of Security Holders		27
PART II
	5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		27
	6.	Selected Financial Data		28
	7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
	7A.	Quantitative and Qualitative Disclosures About Market Risk		49
	8.	Financial Statements and Supplementary Data		50
	9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		50
	9A.	Controls and Procedures		50
	9B.	Other Information		50
PART III
	10.	Directors and Executive Officers and Corporate Governance		51
	11.	Executive Compensation		51
	12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		51
	13.	Certain Relationships and Related Transactions, and Director Independence		51
	14.	Principal Accountant Fees and Services		51
PART IV
	15.	Exhibits and Financial Statement Schedules		52
Amended and Restated Supplemental Indenture regarding our 3.5% Senior Subordinated Convertible Notes due 2026
Amended and Restated Supplemental Indenture regarding 7.75% Senior Subordinated Notes due 2016
Form of Dealership Agreement with BMW (GB) Limited
Distributor Agreement dated October 31, 2006 between smart gmbh and smart USA Distributor LLC
Amended and Restated Penske Automotive Group, Inc. 2002 Equity Compensation Plan
Amended and Restated Penske Automotive Group, Inc. Non-Employee Director Compensation Plan
Penske Automotive Group, Inc. Management Incentive Plan
Computation of Ratio of Earnings to Fixed Charges
Subsidiary List
Consent of Deloitte & Touche LLP
Consent of KPMG Audit Plc
Rule 13(a)-14(a)/15(d)-14(a) Certification
Rule 13(a)-14(a)/15(d)-14(a) Certification
Section 1350 Certifications

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PART I

Item 1.   Business

We are the second largest automotive retailer headquartered in the U.S. as measured by total revenues. As of February 1, 2008, we owned and operated 170 franchises in the U.S. and 145 franchises outside of the U.S., primarily in the United Kingdom. We offer a full range of vehicle brands, with 94% of our total revenue in 2007 generated from the sales of brands such as Audi, BMW, Honda, Lexus, Mercedes-Benz and Toyota (“non-U.S. brands”). Sales relating to premium brands, such as Audi, BMW, Cadillac and Porsche, represented 65% of our total revenue. As a result, we have the highest concentration of revenues from non-U.S. and premium brands among the U.S. publicly-traded automotive retailers.

Each of our dealerships offers a wide selection of new and used vehicles for sale. In addition to selling new and used vehicles, we offer a full range of maintenance and repair services, and we facilitate the placement of third-party finance and insurance products, third-party extended service contracts and replacement and aftermarket automotive products. We are also diversified geographically, with 62% of our revenues generated from U.S. operations and 38% generated from our operations outside the U.S. (predominately in the U.K.).

Beginning in 2007, our wholly-owned subsidiary, smart USA Distributor LLC, became the exclusive distributor of the smart fortwo vehicle in the U.S. and Puerto Rico.

We believe our diversified revenue streams help to mitigate the historical cyclicality found in some elements of the automotive sector. Revenues from higher margin service and parts sales are typically less cyclical than retail vehicle sales, and generate the largest part of our gross profit. The following graphic shows the percentage of our retail revenues by product area and their respective contribution to our overall gross profit in 2007:

Revenue Mix	Gross Profit Mix

Business Strategy

Our strategy is to sell and service outstanding vehicle brands in premium facilities. We believe offering our customers superior customer service in a premium location fosters a long-term relationship, which helps generate repeat and referral business, particularly in our higher-margin service and parts business. We believe our focus on developing a loyal customer base has helped to increase our profitability and generate incremental service and parts sales. In addition, our large number of dealerships, geographically concentrated by region, allows us the opportunity to achieve cost savings and implement best practices, while also providing access to a broad base of potential acquisitions.

Offer Outstanding Brands in Premium Facilities

We have the highest concentration of revenues from non-U.S. brands among the U.S. publicly-traded automotive retailers. We believe the market performance of the brands we represent contributed to our same-

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store revenue and gross profit growth, as non-U.S. vehicle brands have gained market share in recent years. The following chart reflects our revenue mix:

The following chart reflects our percentage of total revenues by brand in 2007:

Over time, we are making substantial investments in our retail dealerships in an effort to create an outstanding retail experience for our customers. We believe the experience we offer customers in our facilities drives repeat and referral business, particularly in our higher margin service and parts operations. Where advantageous, we attempt to aggregate our dealerships in a campus or group setting in order to build a destination location for our customers, which we believe helps to drive increased customer traffic to each of the brands at the location. This strategy also creates an opportunity to reduce personnel expenses and administrative expenses, and leverage operating expenses over a larger base of dealerships. We believe this strategy has enabled us to consistently achieve new unit vehicle sales per dealership that are significantly higher than industry averages for most of the brands we sell.

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

					2007
					Revenue
Location	Square Feet		Service Bays		(millions)		Franchises
North Scottsdale, Arizona		450,000		226	$	584.4	Acura, Audi, BMW, Jaguar, Land Rover, MINI, Porsche, Volkswagen, Volvo
Scottsdale, Arizona		136,000		76	$	299.2	Aston Martin, Bentley, Ferrari, Jaguar, Land Rover, Lexus, Maserati, Rolls-Royce
San Diego, California		348,000		232	$	683.9	Acura, Aston Martin, BMW, Jaguar, Lexus, Mercedes-Benz, Scion, smart, Toyota
Fayetteville, Arkansas		122,000		59	$	270.0	Acura, Chevrolet, Honda, HUMMER, Scion, Toyota
Tyson’s Corner, Virginia		191,000		138	$	274.4	Audi, Aston Martin, Mercedes-Benz, Porsche, smart
Inskip, Rhode Island		319,000		176	$	402.5	Acura, Audi, Bentley, BMW, Infiniti, Lexus, Mercedes-Benz, MINI, Nissan, Porsche, smart, Volvo
Turnersville, New Jersey		303,000		177	$	389.7	Acura, BMW, Cadillac, Chevrolet, Honda, HUMMER, Hyundai, Nissan, Scion, Toyota

By way of example, our Scottsdale 101 Auto Mall features nine separate showrooms and franchises with over 450,000 square feet of facilities. Typically, customers may choose from an inventory of over 1,500 new and used vehicles, and have access to approximately 226 service bays with the capacity to service approximately 1,000 vehicles per day. This campus also features an on/off road test course where customers may experience the uniqueness of the brands offered. We will continue to evaluate other opportunities to aggregate our facilities to reap the benefits of a destination location.

Expand Revenues at Existing Locations and Increase Higher-Margin Businesses

We aim to increase our existing business by generating additional revenue at existing dealerships, with a particular focus on developing our higher-margin businesses such as finance, insurance and other products and service, parts and collision repair services.

Increase Same-Store Sales.  We believe our emphasis on improving customer service and upgrading our facilities should result in continued increases in same-store sales. As part of the investment program noted above, we added numerous incremental service bays in order to better accommodate our customers.

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

Expand Service and Parts and Collision Repair Revenues.  In recent years, we have added a significant number of service bays at our dealerships in an effort to expand this higher-margin element of our business. Many of today’s vehicles are complex and require sophisticated equipment and specially trained technicians to perform certain services. Unlike independent service shops, our dealerships are authorized to perform this work as well as warranty work for the manufacturers. We believe that our brand-mix and the complexity of today’s vehicles, combined with our focus on customer service and superior facilities, contribute to our service and parts revenue increases. We also operate 27 collision repair centers which are operated as an integral part of our dealership operations. As a result, the repair centers benefit from the dealerships’ repeat and referral business.

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Continue Growth through Targeted Acquisitions

We believe that attractive acquisition opportunities exist for well-capitalized dealership groups with experience in identifying, acquiring and integrating dealerships. The automotive retail market provides us with significant growth opportunities in each of the markets in which we operate. In the U.S., the ten largest industry participants generated less than 10% of new vehicle industry sales in 2007. Generally, we seek to acquire dealerships with high growth automotive brands in highly concentrated or rapidly growing demographic areas. We focus on larger dealership operations that will benefit from our management assistance, manufacturer relations and scale of operations, as well as individual dealerships that can be effectively integrated into our existing operations.

Diversification Outside the U.S.

One of the unique attributes of our operations versus our peers is our diversification outside the U.S. Approximately 38% of our consolidated revenue during 2007 was generated from operations located outside the U.S. and Puerto Rico, predominately in the United Kingdom. According to industry data, the United Kingdom represented the third largest retail automotive market in Western Europe in 2007 with approximately 2.4 million new vehicle registrations. Our brand mix in the United Kingdom is predominantly premium. As of December 31, 2007, we believe we were the largest or second largest volume Audi, Bentley, BMW, Land Rover, Lexus, Mercedes-Benz, Porsche and Toyota dealer in this market. Additionally, we operate a number of dealerships in Germany, some in the form of joint ventures with experienced local partners, which sell and service Audi, BMW, Lexus, MINI, Toyota, Volkswagen and other premium brands.

Strengthen Customer Loyalty

Our ability to generate and maintain repeat and referral business depends on our ability to deliver superior customer service. We believe that customer loyalty contributes directly to increases in same-store sales. By offering outstanding brands in premium facilities, “one-stop” shopping convenience, competitive pricing and a well-trained and knowledgeable sales staff, we aim to establish lasting relationships with our customers, enhance our reputation in the community, and create the opportunity for significant repeat and referral business. We believe our low and steadily decreasing employee turnover has been critical to furthering our customer relationships. Additionally, we monitor customer satisfaction data accumulated by manufacturers to track the performance of dealership operations and use it as a factor in determining the compensation of general managers and sales and service personnel in our dealerships.

Maintain Diversified Revenue Stream and Variable Cost Structure

We believe that our diversified revenue mix may mitigate the historical cyclicality found in some elements of the automotive sector, and that demand for our higher-margin service and parts business is less affected by economic cycles than demand for new vehicles. We are further diversified due to our brand mix and the geographical dispersion of our dealership operations. In addition, a significant percentage of our operating expenses are variable, including sales compensation, floor plan interest expense (inventory-secured financing) and advertising, which we believe we can adjust over time to reflect economic trends.

Leverage Scale and Implement “Best Practices”

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

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smart Distributorship

smart USA Distributor, LLC, a wholly owned subsidiary, is the exclusive distributor of the smart fortwo vehicle in U.S. and Puerto Rico. The smart fortwo is manufactured by Mercedes-Benz Cars and is a Daimler brand. This technologically advanced vehicle achieves 40-plus miles per gallon on the highway and is an ultra-low emissions vehicle as certified by the State of California Air Resources Board. Though launched in the U.S. in 2008, more than 850,000 fortwo vehicles have previously been sold outside the U.S. As distributor, smart USA is responsible for developing and maintaining a smart vehicle dealership network throughout the U.S. and Puerto Rico.

smart USA has certified a network of 68 smart dealerships in 31 states, most of which have received the requisite licensing and other required approvals and are actively selling vehicles. Additional dealerships are expected to commence retailing vehicles during 2008 upon completion of their facilities and obtaining licensing approval. Of the 74 dealerships currently planned in the U.S., eight are owned and operated by us (see below “Acquisitions” for a listing of those dealerships). The smart fortwo offers three different versions, the Pure, Passion and Cabriolet with base prices ranging from $11,600 to $16,600. We currently expect to distribute at least 20,000 smart fortwo vehicles in 2008.

Industry Overview

The automotive retail industry is among the largest retail trade sectors in each of the markets in which we operate. In the U.S., the majority of automotive retail sales are generated by approximately 21,800 U.S. franchised dealerships, producing revenues of approximately $675 billion. Of these $675 billion in U.S. franchised dealer revenues, new vehicle sales represent approximately 59%, used vehicle sales represent approximately 29% and service and parts sales represent 12%. Dealerships also offer a wide range of higher-margin products and services, including extended service contracts, financing arrangements and credit insurance. The National Automobile Dealers Association figures noted above include finance and insurance revenues within either new or used vehicle sales as sales of these products are usually incremental with the sale of a vehicle.

Germany and the U.K. represented the first and third largest European automotive retail markets in 2007, with new car registrations of 3.1 million and 2.4 million vehicles, respectively. In 2006, U.K. and German automotive sales exceeded $260 billion and $330 billion, respectively. Combined, the UK and German markets make up approximately 35% of the European market, based on new vehicle sales.

The automotive retail industry is highly fragmented and largely privately held in the U.S and Europe, with the U.S. publicly held automotive retail groups accounting for less than 10% of total industry revenue. According to industry data, the number of U.S. franchised dealerships has declined from approximately 24,000 in 1990 to approximately 21,800 as of January 1, 2007. Although significant consolidation has already taken place, the industry remains highly fragmented, with more than 90% of the U.S. industry’s market share remaining in the hands of smaller regional and independent players. We believe that further consolidation in the industry is probable due to the significant capital requirements of maintaining manufacturer facility standards and the limited number of viable alternative exit strategies for dealership owners.

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

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Acquisitions

We have completed a number of dealership acquisitions since January 2005. Our financial statements include the results of operations of acquired dealerships from the date of acquisition. The following table sets forth information with respect to our current dealerships acquired or opened since January 2005:

	Date Opened
Dealership	or Acquired		Location	Franchises
U.S.
Honda Mall of Georgia		1/05	Buford, GA	Honda
Jaguar of Tulsa		1/05	Tulsa, OK	Jaguar
United Ford North		1/05	Tulsa, OK	Ford
United Ford South		1/05	Tulsa, OK	Ford
HUMMER of Turnersville		5/05	Turnersville, NJ	HUMMER
Inskip Nissan		7/05	Warwick, RI	Nissan
Stevens Creek Porsche Audi		10/05	San Jose, CA	Audi Porsche
Acura of Escondido		1/06	Escondido, CA	Acura
Aston Martin San Diego		1/06	San Diego, CA	Aston Martin
Audi of Escondido		1/06	Escondido, CA	Audi
Honda Mission Valley		1/06	San Diego, CA	Honda
Honda of Escondido		1/06	Escondido, CA	Honda
Jaguar Kearny Mesa		1/06	San Diego, CA	Jaguar
Kearny Mesa Acura		1/06	San Diego, CA	Acura
Mazda of Escondido		1/06	Escondido, CA	Mazda
United HUMMER of Tulsa		1/06	Tulsa, OK	HUMMER
Motorwerks BMW/MINI		5/06	Minneapolis, MN	BMW/MINI
West Palm Subaru		7/06	West Palm Beach, FL	Subaru
Triangle Nissan del Oeste		7/06	Puerto Rico	Nissan
Cadillac of Turnersville		11/06	Turnersville, NJ	Cadillac
Landers Ford Lincoln Mercury		1/07	Benton, Arkansas	Ford, Lincoln, Mercury
Lexus of Edison		3/07	Edison, NJ	Lexus
Round Rock Toyota-Scion		4/07	Round Rock, TX	Toyota, Scion
Round Rock Hyundai		4/07	Round Rock, TX	Hyundai
Round Rock Honda		4/07	Round Rock, TX	Honda
Inskip MINI		5/07	Warwick, RI	MINI
Royal Palm Toyota-Scion		1/08	Royal Palm, FL	Toyota, Scion
smart center Bedford		1/08	Bedford, OH	smart
smart center Bloomfield		1/08	Bloomfield Hills, MI	smart
smart center Chandler		1/08	Chandler, AZ	smart
smart center Fairfield		1/08	Fairfield, CT	smart
smart center Round Rock		1/08	Round Rock, TX	smart
smart center San Diego		1/08	San Diego, CA	smart
smart center Tysons Corner		1/08	Vienna, VA	smart
smart center Warwick		1/08	Warwick, RI	smart
Outside the U.S.
Kings Swindon		4/05	Swindon, England	Chrysler, Jeep, Dodge
Lexus of Milton Keynes		11/05	Milton Keynes, England	Lexus
BMW/ Mini Sunningdale		1/06	Berkshire, England	BMW, MINI
Guy Salmon Jaguar Ascot		1/06	Berks, England	Jaguar
Guy Salmon Jaguar Gatwick		1/06	West Sussex, England	Jaguar

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	Date Opened
Dealership	or Acquired		Location	Franchises
Guy Salmon Jaguar Maidstone		1/06	Kent, England	Jaguar
Guy Salmon Land Rover Ascot		1/06	Berks, England	Land Rover
Guy Salmon Land Rover Gatwick		1/06	West Sussex, England	Land Rover
Guy Salmon Land Rover Maidstone		1/06	Kent, England	Land Rover
Guy Salmon Land Rover Portsmouth		1/06	Portsmouth, England	Land Rover
Honda Redhill		1/06	Surrey, England	Honda
Kings Bristol Chrysler Jeep Dodge		1/06	Bristol, England	Chrysler, Jeep, Dodge
Rolls Royce Sunningdale		1/06	Berkshire, England	Rolls Royce
Sytner Coventry		1/06	West Midlands, England	BMW, MINI
Lamborghini Birmingham		6/06	Birmingham, England	Lamborghini
Lamborghini Edinburgh		6/06	Edinburgh, Scotland	Lamborghini
Kings Chrysler Jeep Dodge Newcastle		8/06	Cleveland, England	Chrysler, Jeep, Dodge
Kings Chrysler Jeep Dodge Stockton		8/06	Stockton-on-Tees, England	Chrysler, Jeep, Dodge
Mercedes-Benz of Carlisle		8/06	Cumbria, England	Mercedes-Benz
Mercedes-Benz of Newcastle		8/06	Cleveland, England	Mercedes-Benz
Mercedes-Benz of Stockton		8/06	Stockton-on-Tees, England	Mercedes-Benz
Mercedes-Benz of Sunderland		8/06	Sunderland, England	Mercedes-Benz
Sytner BMW/MINI Cardiff		8/06	South Glamorgan, Wales	BMW/MINI
Sytner BMW/MINI Central		8/06	West Midlands, England	BMW/MINI
Sytner BMW/MINI Newport		8/06	Newport, South Wales	BMW/MINI
Sytner BMW/MINI Sutton		8/06	West Midlands, England	BMW/MINI
Sytner BMW/MINI Warley		8/06	West Midlands, England	BMW/MINI
Audi Leicester		6/07	Leicester, England	Audi
Audi Nottingham		6/07	Nottingham, England	Audi
Toyota Solihull		9/07	West Midlands, England	Toyota
Maranello Ferrari/Maserati		10/07	Surrey, England	Ferrari, Maserati

In 2006 and 2007, we disposed of 23 and 21 dealerships, respectively, that we believe were not integral to our strategy or operations. We expect to continue to pursue acquisitions, selected dispositions and related transactions in the future.

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Dealership Operations

Franchises.  The following charts reflect our franchises by location and our dealership mix by franchise as of February 1, 2008:

Location	Franchises		Franchises	U.S.		Non-U.S.		Total
Arizona		21	Toyota/Lexus		38		14		52
Arkansas		14	BMW/MINI		11		30		41
California		26	Ford/PAG		18		22		40
Connecticut		5	Daimler		15		21		36
Florida		9	Honda/Acura		27		1		28
Georgia		4	Chrysler		9		18		27
Indiana		2	Audi		7		10		17
Michigan		7	General Motors		16		—		16
Minnesota		2	Porsche		5		4		9
Nevada		2	Nissan/Infiniti		7		—		7
New Jersey		19	Others		17		25		42
New York		4	Total		170		145		315
Ohio		6
Oklahoma		7
Puerto Rico		15
Rhode Island		12
Tennessee		2
Texas		8
Virginia		5
Total United States		170
United Kingdom		135
Germany		10
Total Foreign		145
Total Worldwide		315

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

New Vehicle Retail Sales.  In 2007, we sold 195,160 new vehicles which generated 59.1% of our retail revenue and 30.7% of our retail gross profit. We sell over forty brands of domestic and import family, sports and premium cars, light trucks and sport utility vehicles through 315 franchises in 18 U.S. states, Puerto Rico, the U.K. and Germany. As of February 1, 2008, we sold the following brands: Acura, Alpina, Aston Martin, Audi, BMW, Buick, Cadillac, Chevrolet, Chrysler, Dodge, Ferrari, Ford, GMC Truck, Honda, HUMMER, Hyundai, Infiniti, Jaguar, Jeep, Lamborghini, Land Rover, Lexus, Lincoln-Mercury, Lotus, Mazda, Maserati, Mercedes-Benz, MINI, Nissan, Pontiac, Porsche, Rolls Royce, Bentley, SAAB, Scion, smart, Subaru, Suzuki, Toyota, Volvo and Volkswagen.

New vehicles are typically acquired by dealerships directly from the manufacturer. We strive to maintain outstanding relations with the automotive manufacturers, based in part on our long-term presence in the automotive retail market, our commitment to providing premium facilities, the reputation of our management team and the

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consistent high sales volume from our dealerships. Our dealerships finance the purchase of new vehicles from the manufacturers through floor plan financing provided by various manufacturers’ captive finance companies.

Used Vehicle Retail Sales.  In 2007, we sold 102,214 used vehicles, which generated 26.5% of our retail revenue and 13.1% of our retail gross profit. We acquire used vehicles from various sources including, auctions open only to authorized new vehicle dealers, public auctions, trade-ins in connection with new purchases and lease expirations or terminations. Leased vehicles returned at the end of the lease provide us with low mileage, late model vehicles for our used vehicle sales operations. We clean, repair and recondition all used vehicles we acquire for resale. We believe we may benefit from the opportunity to retain used vehicle retail customers as service and parts customers. In addition, we offer for sale third-party extended service contracts on all of our used vehicles.

To improve customer confidence in our used vehicle inventory, each of our dealerships participates in all available manufacturer certification processes for used vehicles. If certification is obtained, the used vehicle owner is typically provided benefits and warranties similar to those offered to new vehicle owners by the applicable manufacturer. We believe growth opportunities relating to used vehicle sales exist in part because of the availability of high-quality, low-mileage, late model used vehicles, along with the proliferation of manufacturer certification processes for these vehicles.

We have also recently implemented additional initiatives designed to enhance our used vehicles sales. Several of our dealerships are piloting the use of software which assists in the procurement and sales process relating to used vehicles.

Through our scale in many markets, we have implemented closed-bid auctions that allow us to bring a large number of vehicles we do not intend to retail to a central market for other dealers or wholesalers to purchase. In the U.K., we also offer used vehicles for sale via an online auction. We believe these strategies have resulted in greater operating efficiency and helped to reduce costs associated with maintaining optimal inventories.

Vehicle Finance, Extended Service and Insurance Sales.  Finance and insurance sales represented 2.4% of our retail revenue and 15.1% of our retail gross profit in 2007. At our customers’ option, our dealerships can arrange third-party financing or leasing for our customers’ vehicle purchases. As compensation we typically receive a portion of the cost of financing or leasing paid by the customer for each transaction. While these services are generally non-recourse to us, we are subject to chargebacks in certain circumstances such as default under a financing arrangement or prepayment. These chargebacks vary by finance product but typically are limited to the fee income we receive absent a breach of our agreement with the third party finance or leasing company. We provide training to our finance and insurance personnel to help assure compliance with internal policies and procedures, as well as applicable state regulations. We also impose limits on the amount of revenue per transaction we may receive from certain finance products as part of our compliance efforts.

We offer our customers various vehicle warranty and extended protection products, including extended service contracts, maintenance programs, guaranteed auto protection (known as “GAP,” this protection covers the shortfall between a customer’s loan balance and insurance payoff in the event of a casualty), lease “wear and tear” insurance and theft protection products at competitive prices. The extended service contracts and other products that our dealerships currently offer to customers are underwritten by independent third parties, including the vehicle manufacturers’ captive finance subsidiaries. We also are subject to chargebacks in connection with the sale of certain of these products. We also offer for sale other aftermarket products, such as Sirius Satellite Radio, cellular phones, security systems and protective coatings.

Service and Parts Sales.  Service and parts sales represented 11.9% of our retail revenue and 41.1% of our retail gross profit in 2007. We generate service and parts sales for warranty and non-warranty work performed at each of our dealerships. Our service and parts revenues have increased each year, we believe in large part due to our increased service capacity, coupled with the increasingly complex technology used in vehicles which makes it difficult for independent repair facilities to maintain and repair today’s automobiles. As part of our agreements with our manufacturers, we obtain all the necessary equipment required by the manufacturer to service and maintain each make of vehicle sold at each of our dealerships.

A goal of each of our dealerships is to make each vehicle purchaser a customer of our service and parts department. Our dealerships keep detailed records of our customers’ maintenance and service histories, and many

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dealerships send reminders to customers when vehicles are due for periodic maintenance or service. Many of our dealerships have extended evening and weekend service hours for the convenience for our customers. We also operate 27 collision repair centers, each of which is operated as an integral part of our dealership operations.

Internet Presence.  The majority of our customers will consult the Internet for new and pre-owned automotive information. In order to attract customers and enhance our customer service, each of our dealerships maintain their own website. Our corporate website, www.penskeautomotive.com, provides a link to each of our dealership websites allowing consumers to source information and communicate directly with our dealerships locally.

In the U.S., all of our dealership websites are presented in common formats (except where otherwise required by manufacturers) which helps to minimize costs and provide a consistent image across dealerships. In addition, many automotive manufacturers’ websites provide links to our dealership websites.

Using our dealership websites, consumers can review our inventory for vehicles that meet their model and feature requirements and price range. Our websites provide detailed information for the purchase process, including photos, prices, promotions, specifications, reviews, tools to schedule service appointments and financial applications. We believe these features make it easier for consumers to meet all of their automotive research needs. Customers can contact dedicated Internet sales consultants on line via www.penskeautomotive.com or the dealership websites.

Non-U.S Operations.  Sytner Group, our U.K. subsidiary, is one of the leading retailers of premium vehicles in the U.K. As of February 1, 2008, Sytner operated 135 franchises, including: Alpina, Audi, Bentley, BMW, Chrysler, Dodge, Ferrari, Honda, Jaguar, Jeep, Lamborghini, Land Rover, Lexus, Maserati, Mercedes-Benz, MINI, Porsche, Rolls Royce, Saab, smart, Toyota, and Volvo. Revenues attributable to Sytner Group for the years ended December 31, 2007, 2006 and 2005 were $4.7 billion, $3.4 billion and $2.7 billion, respectively.

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The following is a list of all of our dealerships as of February 1, 2008:

U.S. DEALERSHIPS

ARIZONA
Acura North Scottsdale
Audi of Chandler
Audi North Scottsdale
BMW North Scottsdale
Jaguar North Scottsdale
Jaguar Scottsdale
Land Rover North Scottsdale
Land Rover Scottsdale
Lexus of Chandler
Mercedes-Benz of Chandler
MINI North Scottsdale
Porsche North Scottsdale
Rolls-Royce Scottsdale
Scottsdale Aston Martin
Scottsdale Bentley
Scottsdale Ferrari Maserati
Scottsdale Lexus
smart center Chandler
Tempe Honda
Volkswagen North Scottsdale
Volvo North Scottsdale

ARKANSAS
Acura of Fayetteville
Chevrolet/HUMMER of Fayetteville
Honda of Fayetteville
Landers Chevrolet HUMMER
Landers Chrysler Jeep Dodge
Landers Ford Lincoln Mercury
Toyota-Scion of Fayetteville

CALIFORNIA
Acura of Escondido
Aston Martin of San Diego
Audi Escondido
Audi Stevens Creek
BMW of San Diego
Capitol Honda
Cerritos Buick Pontiac HUMMER GMC
Honda Mission Valley
Honda North
Honda of Escondido
Jaguar Kearny Mesa
Kearny Mesa Acura
Kearny Mesa Toyota-Scion
Lexus Kearny Mesa
Los Gatos Acura
Marin Honda
Mazda of Escondido
Mercedes-Benz of San Diego
Penske Cadillac HUMMER South Bay
Porsche of Stevens Creek
smart center San Diego CONNECTICUT
Audi of Fairfield
Honda of Danbury
Mercedes-Benz of Fairfield
Porsche of Fairfield
smart center Fairfield

FLORIDA
Central Florida Toyota-Scion
Palm Beach Mazda
Palm Beach Subaru
Palm Beach Toyota-Scion
Royal Palm Toyota-Scion
West Palm Nissan

GEORGIA
Atlanta Toyota-Scion
Honda Mall of Georgia
United BMW of Gwinnett
United BMW of Roswell

INDIANA
Penske Chevrolet
Penske Honda

MICHIGAN
Honda Bloomfield
Rinke Cadillac
Rinke Toyota-Scion
smart center Bloomfield
Toyota-Scion of Waterford

MINNESOTA
Motorwerks BMW/MINI

NEW JERSEY
Acura of Turnersville
BMW of Turnersville
Chevrolet HUMMER Cadillac of Turnersville
DiFeo BMW
Lexus of Edison
Ferrari Maserati of Central New Jersey
Gateway Toyota-Scion
Honda of Turnersville
Hudson Nissan
Hudson Toyota-Scion
Hyundai of Turnersville
Lexus of Bridgewater
Nissan of Turnersville
Toyota-Scion of Turnersville

NEW YORK
Honda of Nanuet
Mercedes-Benz of Nanuet
Westbury Toyota-Scion NEVADA
Penske Wynn Ferrari Maserati

OHIO
Honda of Mentor
Infiniti of Bedford
Mercedes-Benz of Bedford
smart center Bedford
Toyota-Scion of Bedford

OKLAHOMA
Jaguar of Tulsa
Lincoln Mercury of Tulsa
United Ford North
United Ford South
United HUMMER of Tulsa
Volvo of Tulsa

RHODE ISLAND
Inskip Acura
Inskip Audi
Inskip Autocenter (Mercedes-Benz)
Inskip Bentley Providence
Inskip BMW
Inskip Infiniti
Inskip Lexus
Inskip MINI
Inskip Nissan
Inskip Porsche
Inskip Volvo
smart center Warwick

TENNESSEE
Wolfchase Toyota-Scion

TEXAS
BMW of Austin
Goodson Honda North
Goodson Honda West
Round Rock Honda
Round Rock Hyundai
Round Rock Toyota-Scion
smart center Round Rock

VIRGINIA
Aston Martin of Tysons Corner
Audi of Tysons Corner
Mercedes-Benz of Tysons Corner
Porsche of Tysons Corner
smart center Tysons Corner

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NON-U.S. DEALERSHIPS

UNITED KINGDOM

Audi
Audi Leicester
Audi Nottingham
Bradford Audi
Guildford Audi
Harrogate Audi
Leeds Audi
Mayfair Audi
Reading Audi
Slough Audi
Victoria Audi (After Sales)
Wakefield Audi
West London Audi

Bentley
Bentley Birmingham
Bentley Edinburgh
Bentley Manchester

BMW/MINI
Sytner BMW/MINI Cardiff
Sytner BMW/MINI Central
Sytner BMW/MINI Newport
Sytner BMW/MINI Sutton
Sytner BMW/MINI Warley
Sytner Canary Wharf
Sytner Chigwell
Sytner Coventry
Sytner Harold Wood
Sytner High Wycombe
Sytner Leicester
Sytner Nottingham (w/Alpina)
Sytner Sheffield
Sytner Solihull
Sytner Sunningdale

Chrysler/Jeep/Dodge

Kings Bristol
Kings Cheltenham & Gloucester
Kings Manchester
Kings Newcastle
Kings Swindon
Kings Teesside

Ferrari/Maserati

Graypaul Edinburgh
Graypaul Nottingham
Maranello Ferrari/Maserati Honda
Redhill Honda

Jaguar/Land Rover
Guy Salmon Jaguar Coventry
Guy Salmon Jaguar/Land Rover Gatwick
Guy Salmon Jaguar/Land Rover Maidstone
Guy Salmon Jaguar Northampton
Guy Salmon Jaguar Oxford
Guy Salmon Jaguar/Land Rover Stratford- upon-Avon
Guy Salmon Jaguar/Land Rover Thames Ditton
Guy Salmon Land Rover Coventry
Guy Salmon Land Rover Knutsford
Guy Salmon Land Rover Leeds
Guy Salmon Land Rover Portsmouth
Guy Salmon Land Rover Sheffield
Guy Salmon Land Rover Stockport
Guy Salmon Land Rover Stratford- upon-Avon
Guy Salmon Land Rover Wakefield

Lamborghini
Lamborghini Birmingham
Lamborghini Edinburgh

Lexus
Lexus Birmingham
Lexus Bristol
Lexus Cardiff
Lexus Leicester
Lexus Milton Keynes
Lexus Oxford

Mercedes-Benz/smart
Mercedes-Benz/smart of Teesside
Mercedes-Benz/smart of New Castle
Mercedes-Benz of Bath
Mercedes-Benz of Bedford
Mercedes-Benz of Carlisle
Mercedes-Benz of Cheltenham and Gloucester
Mercedes-Benz of Cribbs Causeway
Mercedes-Benz of Kettering
Mercedes-Benz/smart of Milton Keynes
Mercedes-Benz of Newbury
Mercedes-Benz of Northampton
Mercedes-Benz of Sunderland Mercedes-Benz/smart of Swindon
Mercedes-Benz of Weston-Super-Mare
Mercedes-Benz/smart of Bristol
Mercedes-Benz/smart of Swindon
smart North East Stockton
smart of Milton Keynes

Porsche
Porsche Centre Edinburgh
Porsche Centre Glasgow
Porsche Centre Mid-Sussex
Porsche Centre Silverstone

Rolls-Rovce
Rolls-Royce Motor Cars Sunningdale
Sytner Rolls-Royce Motor Cars

Saab
Oxford Saab

Toyota
Toyota World Birmingham
Toyota World (Bridgend)
Toyota World (Bristol North)
Toyota World (Bristol South)
Toyota World (Cardiff)
Toyota World (Newport)
Toyota World (Solihull)
Toyota World (Tamworth)

Volvo
Tollbar Coventry
Tollbar Twickenham
Tollbar Warwick

GERMANY
Tamsen, Bremen (Aston Martin,
Bentley, Ferrari,
Maserati, Rolls-Royce)
Tamsen, Hamburg (Aston Martin, Ferrari, Lamborghini, Maserati, Rolls-Royce)

PUERTO RICO
Lexus de San Juan
Triangle Chrysler, Dodge, Jeep, Honda del Oeste
Triangle Chrysler, Dodge, Jeep de Ponce
Triangle Honda 65 de Infanteria
Triangle Honda-Suzuki de Ponce
Triangle Mazda de Ponce
Triangle Nissan del Oeste
Triangle Toyota-Scion de San Juan

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We also own approximately 50% of the following dealerships:

GERMANY
Aix Automobile (Toyota, Lexus)
Audi Zentrum Aachen
Autohaus Augsburg (BMW(4)/MINI)
Autohaus Krings (Volkswagen)
Autohaus Nix (Frankfurt) (Toyota, Lexus)
Autohaus Nix (Offenbach) (Toyota, Lexus)
Autohaus Nix (Wachtersbach) (Toyota, Lexus)
Autohaus Piper (Volkswagen)
Autohaus Reisacher (Krumbach) (BMW)
Autohaus Reisacher (Memmingen) (BMW, MINI)
Autohaus Reisacher (Ulm) (BMW, MINI)
Autohaus Reisacher (Vöhringen) (BMW)
J-S Auto Park Stolberg (Volkswagen)
Lexus Forum Frankfort
TCD (Toyota)
Volkswagen Zentrum Aachen
Wolff & Meir (Volkswagen) MEXICO
Toyota de Aguascalientes
Toyota de Lindavista
Toyota de Monterrey

Management Information Systems

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

Our foreign dealership financial, accounting and operational data is processed through dealer management systems provided by a number of local software providers. Financial and operational information is aggregated following U.S. policies and accounting requirements, and is reported in our U.S. reporting format to ensure consistency of results among our worldwide operations. Similar to the U.S., the U.K. technology enables us to quickly integrate dealerships or dealership groups we acquire in the U.K.

Marketing

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

Agreements with Vehicle Manufacturers

Each of our dealerships operates under separate franchise agreements with the manufacturers of each brand of vehicle sold at that dealership. These agreements contain provisions and standards governing almost every aspect of

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the dealership, including ownership, management, personnel, training, maintenance of minimum working capital and in some cases net worth, maintenance of minimum lines of credit, advertising and marketing, facilities, signs, products and services, acquisitions of other dealerships (including restrictions on how many dealerships can be acquired or operated in any given market), maintenance of minimum amounts of insurance, achievement of minimum customer service standards and monthly financial reporting. Typically, the dealership principal and/or the owner of a dealership may not be changed without the manufacturer’s consent.

In exchange for complying with these provisions and standards, we are granted the non-exclusive right to sell the manufacturer’s brand of vehicles and related parts and services at our dealerships. The agreements also grant us a non-exclusive license to use each manufacturer’s trademarks, service marks and designs in connection with our sales and service of its brands at our dealerships.

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

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

Competition

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

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

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

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

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

According to various industry sources, the automotive retail industry in the U.S. is currently served by approximately 21,800 franchised automotive dealerships, over 50,000 independent used vehicle dealerships and individual consumers who sell used vehicles in private transactions. Several other companies have established national or regional automotive retail chains. Additionally, vehicle manufacturers have historically engaged in the retail sale and service of vehicles, either independently or in conjunction with their franchised dealerships, and may do so on an expanded basis in the future, subject to various state laws that restrict or prohibit manufacturer ownership of dealerships.

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

Employees and Labor Relations

As of December 31, 2007, we employed approximately 15,800 people, approximately 500 of whom were covered by collective bargaining agreements with labor unions. We consider our relations with our employees to be satisfactory. Our policy is to motivate our key managers through, among other things, variable compensation programs tied principally to dealership profitability and our equity incentive compensation plans. Due to our reliance on vehicle manufacturers, we may be adversely affected by labor strikes or work stoppages at the manufacturers’ facilities.

Regulation

We operate in a highly regulated industry. A number of regulations affect our business of marketing, selling, financing and servicing automobiles. We actively make efforts to assure compliance with these regulations. Under the laws of the jurisdictions in which we currently operate or into which we may expand, we typically must obtain a license in order to establish, operate or relocate a dealership or operate an automotive repair service, including dealer, sales, finance and insurance-related licenses issued by relevant authorities. These laws also regulate our conduct of business, including our advertising, operating, financing, employment and sales practices. Other laws and regulations include franchise laws and regulations, extensive laws and regulations applicable to new and used motor vehicle dealers, as well as wage-hour, anti-discrimination and other employment practices laws.

Our operations may also be subject to consumer protection laws. These laws typically require a manufacturer or dealer to replace a new vehicle or accept it for a full refund within a period of time after initial purchase if the vehicle does not conform to the manufacturer’s express warranties and the dealer or manufacturer, after a

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reasonable number of attempts, is unable to correct or repair the defect. Various laws also require various written disclosures to be provided on new vehicles, including mileage and pricing information.

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

In the U.S., we also benefit from the protection of numerous state dealer laws that generally provide that a manufacturer may not terminate or refuse to renew a franchise agreement unless it has first provided the dealer with written notice setting forth good cause and stating the grounds for termination or non-renewal. Some state dealer laws allow dealers to file protests or petitions or to attempt to comply with the manufacturer’s criteria within the notice period to avoid the termination or non-renewal. Europe generally does not have these laws and, as a result, our European dealerships operate without these protections.

In 2003, the European Commission approved changes to its regulatory landscape by limiting automotive manufacturers “block exemption” to certain anti-competitive rules in regards to establishing and maintaining a retail network. The principal changes were designed to allow existing manufacturer authorized retailers to relocate or add additional facilities throughout the European Union, offer multiple brands in the same facility, allow the operation of service facilities independent of new car sales facilities and ease restrictions on transfers of dealerships between existing franchisees within the European Union. We continue to monitor the actual effects of these rule changes for our dealerships in European Union (including the U.K.).

Environmental Matters

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

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

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

We believe that we do not have any material environmental liabilities and that compliance with environmental laws and regulations will not, individually or in the aggregate, have a material adverse effect on our results of operations, financial condition or cash flows. However, soil and groundwater contamination is known to exist at certain of our current or former properties. Further, environmental laws and regulations are complex and subject to

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change. In addition, in connection with our acquisitions, it is possible that we will assume or become subject to new or unforeseen environmental costs or liabilities, some of which may be material. Compliance with current, amended, new or more stringent laws or regulations, stricter interpretations of existing laws or the future discovery of environmental conditions could require additional expenditures by us, and such expenditures could be material.

Insurance

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

We purchase insurance, including umbrella and excess insurance policies, subject to specified deductibles and significant loss retentions. The level of risk we retain may change in the future as insurance market conditions or other factors affecting the economics of purchasing insurance change. We are exposed to uninsured and underinsured losses, that could have a material adverse effect on our results of operations, financial condition or cash flows. In certain instances, we post letters of credit to support our loss retentions and deductibles. We and Penske Corporation, which is our largest stockholder, have entered into a joint insurance agreement which provides that, with respect to our joint insurance policies (which includes our property policy), available coverage with respect to a loss shall be paid to each party as stipulated in the policies. In the event of losses by us and Penske Corporation that exceed the limit of liability for any policy or policy period, the total policy proceeds will be allocated based on the ratio of premiums paid. For information regarding our relationship with Penske Corporation, see Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Related Party Transactions.”

Seasonality

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

Available Information

For selected financial information concerning our U.S. and non-U.S. revenues and assets, see Note 16 to our consolidated financial statements included in Item 8 of this report. Our Internet website address is www.penskeautomotive.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act, are available free of charge through our website under the tab “Investor Relations” as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. We also make available on our website copies of materials regarding our corporate governance policies and practices, including our Corporate Governance Guidelines; our Code of Business Ethics; and the charters relating to the committees of our Board of Directors. You also may obtain a printed copy of the foregoing materials by sending a written request to: Investor Relations, Penske Automotive Group, Inc., 2555 Telegraph Road, Bloomfield Hills, MI 48302. The information on or linked to our website is not part of this document. We plan to disclose waivers, if any, for our executive officers or directors from our code of conduct on our website, www.penskeautomotive.com.

We are incorporated in the state of Delaware and began dealership operations in October 1992. We submitted to the New York Stock Exchange its required annual CEO certification in 2007 without qualification and have filed all required certifications under section 302 of the Sarbanes-Oxley Act as exhibits to this annual report on Form 10-K relating to 2007.

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Item 1A.   Risk Factors

Risks Relating to Automotive Manufacturers

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

Each of our dealerships operates under franchise agreements with automotive manufacturers or related distributors. We are dependent on automotive manufacturers because, without a franchise agreement, we cannot operate a new vehicle franchise or perform manufacturer authorized service.

Manufacturers exercise a great degree of control over the operations of our dealerships. For example, manufacturers can require our dealerships to meet specified standards of appearance, require individual dealerships to meet specified financial criteria such as maintenance of minimum net working capital and, in some cases, minimum net worth, impose minimum customer service and satisfaction standards, set standards regarding the maintenance of vehicle and parts inventories, restrict the use of manufacturers’ names and trademarks and, in many cases, must consent to the replacement of the dealership principal.

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

While U.S. franchise laws give us limited protection in selling a manufacturer’s product within a given geographic area, our franchise agreements do not give us the exclusive right to sell vehicles within a given area. In 2003, the European Commission approved changes to its regulatory landscape by limiting automotive manufacturers “block exemption” to certain anti-competitive rules in regards to establishing and maintaining a retail network. The principal changes were designed to allow existing manufacturer authorized retailers to relocate or add additional facilities throughout the European Union, offer multiple brands in the same facility, allow the operation of service facilities independent of new car sales facilities and ease restrictions on transfers of dealerships between existing franchisees within the European Union. While we continue to monitor the actual effects of these rule changes for our dealerships in European Union (including the U.K.), these rules could increase competition by facilitating the opening of additional dealerships near our dealerships. If a significant number of new dealerships are opened near our existing dealerships, our results of operations, financial condition or cash flows could be materially affected.

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

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

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

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

Our success depends on the overall success of the line of vehicles that each of our dealerships sells. As a result, our success depends to a great extent on the automotive manufacturers’ financial condition, marketing, vehicle design, production and distribution capabilities, reputation, management and labor relations. For 2007, BMW/MINI, Toyota/Lexus brands, Honda/Acura and Daimler brands accounted for 22%, 20%, 15% and 11%, respectively, of our total revenues. A significant decline in the sale of new vehicles manufactured by these manufacturers, or the loss or deterioration of our relationships with one or more of these manufacturers, could materially adversely affect our results of operations, financial condition or cash flows. No other manufacturer accounted for more than 10% of our total revenues for 2007.

Events such as labor strikes that may adversely affect a manufacturer may also materially adversely affect us, especially if these events were to interrupt the supply of vehicles or parts to us. Similarly, the delivery of vehicles from manufacturers at a time later than scheduled, which may occur particularly during periods of new product introductions, has led, and in the future could lead, to reduced sales during those periods. In addition, any event that causes adverse publicity involving one or more automotive manufacturers or their vehicles may materially adversely affect our results of operations, financial condition or cash flows.

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

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

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

A number of manufacturers impose restrictions on the sale and transfer of our common stock. The most prohibitive restrictions provide that, under specified circumstances, we may be forced to sell or surrender franchises (1) if a competing automotive manufacturer acquires a 5% or greater ownership interest in us or (2) if an individual or entity that has a criminal record in connection with business dealings with any automotive manufacturer, distributor or dealer or who has been convicted of a felony acquires a 5% or greater ownership interest in us. Further, several manufacturers have the right to approve the acquisition by a third party of 20% or more of our common stock, and a number of manufacturers continue to prohibit changes in ownership that may affect control of our company.

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

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Risks Relating to our Acquisition Strategy

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

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

•  integrating the operations and personnel of the acquired dealerships;

•  operating in new markets with which we are not familiar;

•  incurring unforeseen liabilities at acquired dealerships;

•  disruption to our existing business;

•  failure to retain key personnel of the acquired dealerships;

•  impairment of relationships with employees, manufacturers and customers; and

•  incorrectly valuing acquired entities.

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

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

Manufacturers’ restrictions on acquisitions may limit our future growth.

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

Certain manufacturers limit the total number of their dealerships that we may own in a particular geographic area and, in some cases, the total number of their vehicles that we may sell as a percentage of that manufacturer’s overall sales. Manufacturers may also limit the ownership of stores in contiguous markets and the dueling of a franchise with another brand. To date, we have only reached national ceilings with one manufacturer and have reached certain geographical limitations with several manufacturers. If additional manufacturers impose or expand these types of restrictions, our acquisition strategy and results of operations, financial condition or cash flows could be materially adversely affected.

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Other Business Risks

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

We believe that the automotive retail industry is influenced by general economic conditions and particularly by consumer confidence, the level of personal discretionary spending, interest rates, fuel prices, weather conditions, unemployment rates and credit availability. For some finance borrowers, credit availability has recently been restricted as compared to prior years. If credit availability generally were to be restricted, our results of operations could be materially adversely affected as many of our retail sales customers purchase vehicles using credit. Fuel prices are currently higher as compared to recent years. If fuel prices continue to increase, vehicle demand could be adversely affected which could materially adversely affect our results of operations. Historically, unit sales of motor vehicles, particularly new vehicles, have been cyclical, fluctuating with general economic cycles.

During economic downturns, new vehicle retail sales tend to experience periods of decline characterized by oversupply and weak demand. The automotive retail industry may experience sustained periods of decline in vehicle sales in the future. Any decline or change of this type could materially adversely affect our results of operations, financial condition or cash flows.

Some of our operations are regionally concentrated such as those in Arizona, California, the Northeastern U.S. and the United Kingdom. Adverse regional economic and competitive conditions in these areas could materially adversely affect our results of operations, financial condition or cash flows.

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

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

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

•  private market buyers and sellers of used vehicles;

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

•  vehicle rental companies that sell their used rental vehicles;

•  service center chain stores; and

•  independent service and repair shops.

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

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

The Internet is a significant part of the sales process in our industry. We believe that customers are using the Internet to compare pricing for cars and related finance and insurance services, which may reduce gross profit margins for new and used cars and profits generated from the sale of finance and insurance products. Some websites offer vehicles for sale over the Internet without the benefit of having a dealership franchise, although they must currently source their vehicles from a franchised dealer. If Internet new vehicle sales are allowed to be conducted without the involvement of franchised dealers, or if dealerships are able to effectively use the Internet to sell outside of their markets, our business could be materially adversely affected. We could also be materially adversely affected to the extent that Internet companies acquire dealerships or ally themselves with our competitors’ dealerships.

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Our distribution of the smart fortwo is a new business for us whose profitability is unproven.

We are incurring costs to develop processes, systems and strategies to distribute the smart fortwo vehicle in the U.S. and Puerto Rico. The wholesale distribution of vehicles is new to us and involves developing and successfully implementing processes and strategies different from that currently used in our automotive retail operations. In connection with this effort, our senior management has devoted substantial time and effort and we hired a team of employees. During 2007, the cost of these employees and efforts associated with developing the smart distribution business negatively impacted our earnings. If our efforts are not successful, or we incur unforeseen costs, our results of operations, financial condition or cash flows may be materially adversely affected.

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

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

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

We have a substantial amount of indebtedness. As of December 31, 2007, we had approximately $844.6 million of total non-floor plan debt outstanding and $1.6 billion of floor plan notes payable outstanding. In addition, we have additional debt capacity under our credit facilities.

Our substantial debt could have important consequences. For example, it could:

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

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

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

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

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

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

If our business does not generate sufficient cash flow from operations or future sufficient borrowings are not available to us, we might not be able to service our debt or to fund our other liquidity needs. If we are unable to service our debt, we may have to delay or cancel acquisitions, sell equity securities, sell assets or restructure or refinance our debt. If we are unable to service our debt, we may not be able to pursue these options on a timely basis

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or on satisfactory terms or at all. In addition, the terms of our existing or future franchise agreements, agreements with manufacturers or debt agreements may prohibit us from adopting any of these alternatives.

Our inability to raise capital, if needed, could adversely affect us.

We require substantial capital in order to acquire and renovate automotive dealerships. This capital might be raised through public or private financing, including through the issuance of debt or equity securities, sale-leaseback transactions and other sources. Availability under our credit agreements may be limited by the covenants and conditions of those facilities. We may not be able to raise additional funds. If we raise additional funds by issuing equity securities, dilution to then existing stockholders may result.

If adequate funds are not available, we may be required to significantly curtail our acquisition and renovation programs, which could materially and adversely affect our growth strategy.

We depend to a significant extent on our ability to finance the purchase of inventory in the form of floor plan financing. Floor plan financing is financing from a vehicle manufacturer secured by the vehicles we sell. Our dealerships borrow money to buy a particular vehicle from the manufacturer and pay off the floor plan financing when they sell the particular vehicle, paying interest during the interim period. Our floor plan financing is secured by substantially all of the assets of our automotive dealership subsidiaries. Our remaining assets are pledged to secure our credit facilities. This may impede our ability to borrow from other sources. Most of our floor plan lenders are associated with manufacturers with whom we have franchise agreements. Consequently, the deterioration of our relationship with a manufacturer could adversely affect our relationship with the affiliated floor plan lender and vice versa. Any inability to obtain floor plan financing on customary terms, or the termination of our floor plan financing arrangements by our floor plan lenders, could materially adversely affect our results of operations, financial condition or cash flows.

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

The potential for sales of substantial amounts of our common stock in the public market may have a material adverse effect on our stock price. In addition, the amount of equity securities that we issue in connection with acquisitions and renovations could be significant resulting in dilution to you or adversely affecting our stock price. The majority of our outstanding shares are held by two shareholders, each of whom has registration rights that could result in a substantial number of shares being sold in the market. Moreover, these shares could be resold at any time subject to the volume limitations under Rule 144. In addition, we also have reserved for issuance a significant number of shares relating to our 3.5% convertible senior subordinated notes which, if issued, may result in substantial dilution to you or adversely effect our stock price. Finally, we have a significant amount of authorized but unissued shares that, if issued, could materially adversely effect our stock price.

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

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

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

We believe that our success depends to a significant extent upon the efforts and abilities of our executive management and key employees, including, in particular, Roger S. Penske, our Chairman and Chief Executive Officer. Additionally, our business is dependent upon our ability to continue to attract and retain qualified

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

Our quarterly operating results may fluctuate due to seasonality and other factors.

The automotive industry typically experiences seasonal variations in vehicle revenues. Demand for automobiles in the U.S. is generally lower during the winter months than in other seasons, particularly in regions of the U.S. that may have severe winters. In the U.S., a higher number of vehicle sales generally occur in the second and third quarters of each year, due in part to consumer buying trends and the introduction of new vehicle models. In addition, the U.K. retail automotive industry typically experiences peak sales activity during March and September of each year. This seasonality results from the perception in the United Kingdom that the resale value of a vehicle may be determined by the date that the vehicle is registered. Because new vehicle registration periods begin on March 1 and September 1 each year, vehicles with comparable mileage that were registered in March may have an equivalent used vehicle value to vehicles registered in August of the same year.

Therefore, if conditions exist during these periods that depress or affect automotive sales, such as high fuel costs, depressed economic conditions or similar adverse conditions, our revenues for the year may be disproportionately adversely affected.

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

A significant portion of our new vehicle business involves the sale of vehicles, vehicle parts or vehicles composed of parts that are manufactured outside the region in which they are sold. As a result, our operations are subject to customary risks associated with imported merchandise, including fluctuations in the relative value of currencies, import duties, exchange controls, differing tax structures, trade restrictions, transportation costs, work stoppages and general political and economic conditions in foreign countries.

The locations in which we operate may, from time to time, impose new quotas, duties, tariffs or other restrictions, or adjust presently prevailing quotas, duties or tariffs on imported merchandise. Any of those impositions or adjustments could materially affect our operations and our ability to purchase imported vehicles and parts at reasonable prices, which could materially adversely affect our business.

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

A number of regulations affect our business of marketing, selling, financing, distributing and servicing automobiles. Under the laws of states in U.S. locations in which we currently operate, we typically must obtain a license in order to establish, operate or relocate a dealership or operate an automotive repair service, including dealer, sales, finance and insurance-related licenses. These laws also regulate our conduct of business, including our advertising, operating, financing, employment and sales practices. In addition, our foreign operations are subject to similar regulations in their respective jurisdictions.

Our financing activities with customers are subject to truth-in-lending, consumer leasing, equal credit opportunity and similar regulations as well as motor vehicle finance laws, installment finance laws, insurance laws, usury laws and other installment sales laws. Some jurisdictions regulate finance fees that may be paid as a result of vehicle sales. In recent years, private plaintiffs and state attorneys general in the U.S. have increased their scrutiny of advertising, sales, and finance and insurance activities in the sale and leasing of motor vehicles. These activities have led many lenders to limit the amounts that may be charged to customers as fee income for these activities. If these or similar activities were significantly to restrict our ability to generate revenue from arranging financing for our customers, we could be adversely affected.

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We could also be susceptible to claims or related actions if we fail to operate our business in accordance with applicable laws. Claims arising out of actual or alleged violations of law may be asserted against us or any of our dealers by individuals, either individually or through class actions, or by governmental entities in civil or criminal investigations and proceedings. Such actions may expose us to substantial monetary damages and legal defense costs, injunctive relief and criminal and civil fines and penalties, including suspension or revocation of our licenses and franchises to conduct dealership operations.

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

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

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

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

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

In the U.S., we may also have liability in connection with materials that were sent to third-party recycling, treatment, and/or disposal facilities under federal and state statutes, which impose liability for investigation and remediation of contamination without regard to fault or the legality of the conduct that contributed to the contamination. Similar to many of our competitors, we have incurred and will continue to incur, capital and operating expenditures and other costs in complying with such laws and regulations.

Soil and groundwater contamination is known to exist at some of our current or former properties. In connection with our acquisitions, it is possible that we will assume or become subject to new or unforeseen environmental costs or liabilities, some of which may be material. In connection with dispositions of businesses, or dispositions previously made by companies we acquire, we may retain exposure for environmental costs and liabilities, some of which may be material. Environmental laws and regulations are complex and subject to change. Compliance with new or more stringent laws or regulations, stricter interpretations of existing laws or the future discovery of environmental conditions could require additional expenditures by us which could materially adversely affect our results of operations, financial condition or cash flows.

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

Penske Corporation through various affiliates beneficially owns 39% of our outstanding common stock. In addition, Penske Corporation and its affiliates have entered into a stockholders agreement with our second largest stockholder, Mitsui & Co., Ltd. and one of its affiliates, pursuant to which they have agreed to vote together as to the election of our directors. Collectively, these two groups beneficially own 55% of our outstanding stock. As a result, these persons have the ability to control the composition of our board of directors and therefore they may be able to control the direction of our affairs and business.

This concentration of ownership, as well as various provisions contained in our agreements with manufacturers, our certificate of incorporation and bylaws and the Delaware General Corporation Law, could have the affect of discouraging, delaying or preventing a change in control of us or unsolicited acquisition proposals. These provisions include the stock ownership limits imposed by various manufacturers and our ability to issue “blank check” preferred stock and the “interested stockholder” provisions of Section 203 of the Delaware General Corporation Law.

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

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

Our operations outside the U.S. subject us to foreign currency translation risk and exposure to changes in exchange rates.

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

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

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

•  changes in international governmental regulations;

•  the impact of local economic and political conditions;

•  the impact of European Commission regulation and the relationship between the United Kingdom and continental Europe; and

•  increased competition and the impact from limited franchise protection in Europe.

If our operations outside the U.S. fail to perform as expected, we will be adversely impacted. In addition, our results of operations and financial position are reported in local currency and are then translated into U.S. dollars at the applicable foreign currency exchange rate for inclusion in our consolidated financial statements. As exchange

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rates fluctuate, particularly between the U.S. and U.K., our results of operations as reported in U.S. dollars will fluctuate. For example, if the U.S. dollar were to strengthen against the U.K. pound, one of the results would be that our U.K. results of operations would translate into less U.S. dollar reported results.

Item 1B.   Unresolved Staff Comments

Not Applicable.

Item 2.   Properties

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

Item 3.   Legal Proceedings

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

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

No matter was submitted to a vote of our security holders during the fourth quarter of the year ended December 31, 2007.

PART II

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

Our common stock is traded on the New York Stock Exchange under the symbol “PAG”. As of February 15, 2008, there were approximately 250 holders of record of our common stock.

The following table shows the high and low per share sales prices of our common stock as reported on the New York Stock Exchange Composite Tape for each quarter of 2007 and 2006, as well as the per share dividends paid in each quarter.

	High		Low		Dividend
2006:
First Quarter	$	22.61	$	18.63	$	0.06
Second Quarter		22.33		19.77		0.07
Third Quarter		23.90		19.73		0.07
Fourth Quarter		24.46		22.27		0.07
2007:
First Quarter	$	24.62	$	20.17	$	0.07
Second Quarter		22.51		19.39		0.07
Third Quarter		22.92		18.81		0.07
Fourth Quarter		22.57		17.33		0.09

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Dividends.  Future quarterly or other cash dividends will depend upon our earnings, capital requirements, financial condition, restrictions in any existing indebtedness and other factors considered relevant by the Board of Directors. Our U.S. credit agreement and the indenture governing our 7.75% senior subordinated notes each contain certain limitations on our ability to pay dividends. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” We are a holding company whose assets consist primarily of the direct or indirect ownership of the capital stock of our operating subsidiaries. Consequently, our ability to pay dividends is dependent upon the earnings of our subsidiaries and their ability to distribute earnings and other advances and payments to us. In addition, pursuant to the automobile franchise agreements to which our dealerships are subject, all dealerships are required to maintain a certain amount of working capital or net worth, which could limit our subsidiaries’ ability to pay us dividends.

SHARE INVESTMENT PERFORMANCE

The following graph compares the cumulative total stockholder returns on our common stock based on an investment of $100 on December 31, 2002 and the close of the market on December 31 of each year thereafter against (i) the Standard & Poor’s 500 Index and (ii) an industry/peer group consisting of Asbury Automotive Group, Inc., AutoNation, Inc., Group 1 Automotive, Inc., Lithia Motors Inc. and Sonic Automotive Inc. The graph also assumes the reinvestment of all dividends.

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

* $100 invested on 12/31/02 in stock or index-including reinvestment of dividends. Fiscal year ending December 31.

	Cumulative Total Return
	12/02		12/03		12/04		12/05		12/06		12/07
Penske Automotive Group, Inc.		100.00		251.99		241.75		316.49		394.92		296.65
S&P 500		100.00		128.68		142.69		149.70		173.34		182.87
Peer Group		100.00		151.67		153.45		169.42		186.75		124.00

Item 6.   Selected Financial Data

The following table sets forth our selected historical consolidated financial and other data as of and for each of the five years in the period ended December 31, 2007, which has been derived from our audited consolidated financial statements. During the periods presented, we made a number of acquisitions, each of which has been

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accounted for using the purchase method of accounting. Accordingly, our financial statements include the results of operations of acquired dealerships from the date of acquisition. As a result of the acquisitions, our period to period results of operations vary depending on the dates of the acquisitions. Accordingly, this selected financial data is not necessarily indicative of our future results. During the periods presented, we also sold certain dealerships which have been treated as discontinued operations in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. You should read this selected consolidated financial data in conjunction with our audited consolidated financial statements and related footnotes included elsewhere in this report.

	As of and for the Years Ended December 31,
	2007(1)		2006		2005(2)		2004(3)		2003(4)
	(In millions, except per share data)
Consolidated Statement of Income Data:
Total revenues	$	12,957.7	$	11,126.7	$	9,552.9	$	8,395.5	$	7,005.7
Gross profit	$	1,925.2	$	1,684.3	$	1,453.0	$	1,251.8	$	1,034.0
Income from continuing operations before cumulative effect of accounting change	$	127.8	$	132.2	$	118.5	$	108.7	$	77.7
Net income	$	127.7	$	124.7	$	119.0	$	111.7	$	82.9
Diluted earnings per share from continuing operations	$	1.35	$	1.40	$	1.26	$	1.19	$	0.94
Diluted earnings per share	$	1.35	$	1.32	$	1.27	$	1.22	$	1.00
Shares used in computing diluted share data		94.6		94.2		93.9		91.2		82.9
Balance Sheet Data:
Total assets	$	4,668.6	$	4,469.8	$	3,594.2	$	3,532.8	$	3,144.2
Floor plan notes payable	$	1,552.9	$	1,169.5	$	1,084.0	$	1,033.0	$	889.2
Total debt (excluding floor plan notes payable)	$	844.6	$	1,182.1	$	580.2	$	586.3	$	651.7
Total stockholders’ equity	$	1,421.5	$	1,295.7	$	1,145.7	$	1,075.0	$	828.4
Cash dividends per share	$	0.30	$	0.27	$	0.23	$	0.21	$	0.05

(1)	Includes charges of $18.6 million ($12.3 million after-tax), or $0.13 per share, relating to the redemption of the $300.0 million aggregate amount of 9.625% Senior Subordinated Notes and $6.3 million ($4.5 million after-tax), or $0.05 per share, relating to impairment losses.
(2)	Includes $8.2 million ($5.2 million after-tax), or $0.06 per share, of earnings attributable to the sale of all the remaining variable profits relating to the pool of extended service contracts sold at our dealerships from 2001 through 2005.
(3)	Includes an $11.5 million ($7.2 million after tax), or $0.08 per share, gain resulting from the sale of an investment and an $8.4 million ($5.3 million after tax), or $0.06 per share, gain resulting from a refund of U.K. consumption taxes. These gains were offset in part by non-cash charges of $7.8 million ($4.9 million after tax), or $0.05 per share, principally in connection with the planned relocation of certain U.K. franchises as part of our ongoing facility enhancement program.
(4)	Includes a $5.1 million charge ($3.1 million after tax), or $0.04 per share, from the cumulative effect of an accounting change relating to the adoption of Emerging Issues Task Force (“EITF”) Issue No. 02-16, Accounting by a Customer (Including a Reseller) for Cash Consideration Received from a Vendor.

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

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those discussed in “Item 1A. Risk Factors.” We have acquired a number of dealerships since inception. Our financial statements include the results of operations of acquired dealerships from the date of acquisition. This Management’s Discussion and Analysis of Financial Condition and Results of Operations has been updated to reflect the revision of our financial statements for entities which have been treated as discontinued operations through December 31, 2007 in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, revised to reflect the June 1, 2006 two-for-one split of our voting common stock in the form of a stock dividend, and restated for our adoption of Staff Accounting Bulletin (“SAB”) No. 108 “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements.”

Overview

On July 2, 2007, we changed our corporate name from “United Auto Group, Inc.” to “Penske Automotive Group, Inc.” We are the second largest automotive retailer headquartered in the U.S. as measured by total revenues. As of December 31, 2007, we owned and operated 162 franchises in the U.S. and 145 franchises outside of the U.S., primarily in the United Kingdom. We offer a full range of vehicle brands with 94% of our total revenue in 2007 generated from non-U.S. brands and with sales relating to premium brands, such as Audi, BMW, Cadillac and Porsche, representing 65% of our total revenue.

Each of our dealerships offers a wide selection of new and used vehicles for sale. In addition to selling new and used vehicles, we offer a full range of maintenance and repair services, and we facilitate the placement of third-party finance and insurance products, third-party extended service contracts and replacement and aftermarket automotive products. Beginning in 2007, our wholly-owned subsidiary, smart USA Distributor, LLC, became the exclusive distributor of the smart fortwo vehicle in the U.S. and Puerto Rico.

New and used vehicle revenues include sales to retail customers and to leasing companies providing consumer automobile leasing. We generate finance and insurance revenues from sales of third-party extended service contracts, sales of third-party insurance policies, fees for facilitating the sale of third-party finance and lease contracts and the sale of certain other products. Service and parts revenues include fees paid for repair, maintenance and collision services, the sale of replacement parts and the sale of aftermarket accessories.

smart USA Distributor, LLC, a wholly owned subsidiary, is the exclusive distributor of the smart fortwo vehicle in U.S. and Puerto Rico. The smart fortwo is manufactured by Mercedes-Benz Cars and is a Daimler brand. This technologically advanced vehicle achieves 40-plus miles per gallon on the highway and is an ultra-low emissions vehicle as certified by the State of California Air Resources Board. Though launched in the U.S. in 2008, more than 850,000 fortwo vehicles have previously been sold outside the U.S. As distributor, smart USA is responsible for developing and maintaining a smart vehicle dealership network throughout the U.S. and Puerto Rico.

smart USA has certified a network of 68 smart dealerships in 31 states, most of which have received the requisite licensing and other required approvals and are actively selling vehicles. Additional dealerships are expected to commence retailing vehicles during 2008 upon completion of their facilities and obtaining licensing approval. Of the 74 dealerships currently planned in the U.S., eight are owned and operated by us. The smart fortwo offers three different versions, the Pure, Passion and Cabriolet with base prices ranging from $11,600 to $16,600. We currently expect to distribute at least 20,000 smart fortwo vehicles in 2008.

We and Sirius Satellite Radio Inc. (“Sirius”) have agreed to jointly promote Sirius Satellite Radio service. Pursuant to the terms of our arrangement with Sirius, our dealerships in the U.S. endeavor to order a significant percentage of eligible vehicles with a factory installed Sirius radio. We and Sirius have also agreed to jointly market the Sirius service under a best efforts arrangement through January 4, 2009. Our costs relating to such marketing initiatives are expensed as incurred. As compensation for our efforts, we received warrants to purchase ten million

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shares of Sirius common stock at $2.392 per share in 2004 that are being earned ratably on an annual basis through January 2009. We earned warrants to purchase two million shares in each of 2005, 2006 and 2007. We measure the fair value of the warrants earned ratably on the date they are earned as there are no significant disincentives for non-performance. Since we can reasonably estimate the number of warrants that will be earned pursuant to the ratable schedule, the estimated fair value (based on current fair value) of these warrants is being recognized ratably during each annual period.

Through December 31, 2007, we also had the right to earn additional warrants to purchase Sirius common stock at $2.392 per share based upon the sale of certain units of specified brands. We earned warrants for 189,300, 1,269,700 and 522,400 shares during the years ended December 31, 2007, 2006 and 2005, respectively. Since we could not reasonably estimate the number of warrants that were earned subject to the sale of units, the fair value of these warrants was recognized when they were earned. The value of Sirius stock has been and is expected to be subject to significant fluctuations, which may result in variability in the amount we earn under this arrangement. The warrants may be cancelled upon the termination of our arrangement.

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

Our selling expenses consist of advertising and compensation for sales personnel, including commissions and related bonuses. General and administrative expenses include compensation for administration, finance, legal and general management personnel, rent, insurance, utilities and other outside services. A significant portion of our selling expenses are variable, and we believe a significant portion of our general and administrative expenses are subject to our control, allowing us to adjust them over time to reflect economic trends.

Floor plan interest expense relates to financing incurred in connection with the acquisition of new and used vehicle inventories which is secured by those vehicles. Other interest expense consists of interest charges on all of our interest-bearing debt, other than interest relating to floor plan financing.

The future success of our business will likely be dependent on, among other things, our ability to consummate and integrate acquisitions, our ability to increase sales of higher margin products, especially service and parts services, and our ability to realize returns on our significant capital investment in new and upgraded dealerships. See “Item 1A-Risk Factors.”

Critical Accounting Policies and Estimates

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

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

Revenue Recognition

Vehicle, Parts and Service Sales

We record revenue when vehicles are delivered and title has passed to the customer, when vehicle service or repair work is performed and when parts are delivered to our customers. Sales promotions that we offer to customers are accounted for as a reduction of revenues at the time of sale. Rebates and other incentives offered directly to us by manufacturers are recognized as a reduction of cost of sales. Reimbursement of qualified advertising expenses are

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treated as a reduction of selling, general and administrative expenses. The amounts received under various manufacturer rebate and incentive programs are based on the attainment of program objectives, and such earnings are recognized either upon the sale of the vehicle for which the award was received, or upon attainment of the particular program goals if not associated with individual vehicles. During the year ended December 31, 2007, 2006 and 2005, we earned $350.4 million, $271.6 million and $215.8 million, respectively, of rebates, incentives and reimbursements from manufacturers, of which $344.0 million, $265.0 million and $208.4 million was recorded as a reduction of cost of sales.

Finance and Insurance Sales

Subsequent to the sale of a vehicle to a customer, we sell our installment sale contracts to various financial institutions on a non-recourse basis to mitigate the risk of default. We receive a commission from the lender equal to either the difference between the interest rate charged to the customer and the interest rate set by the financing institution or a flat fee. We also receive commissions for facilitating the sale of various third-party insurance products to customers, including credit and life insurance policies and extended service contracts. These commissions are recorded as revenue at the time the customer enters into the contract. In the case of finance contracts, a customer may prepay or fail to pay their contract, thereby terminating the contract. Customers may also terminate extended service contracts and other insurance products, which are fully paid at purchase, and become eligible for refunds of unused premiums. In these circumstances, a portion of the commissions we received may be charged back to us based on the terms of the contracts. The revenue we record relating to these transactions is net of an estimate of the amount of chargebacks we will be required to pay. Our estimate is based upon our historical experience with similar contracts, including the impact of refinance and default rates on retail finance contracts and cancellation rates on extended service contracts and other insurance products. Aggregate reserves relating to chargeback activity were $19.4 million and $16.9 million as of December 31, 2007 and 2006, respectively. Changes in reserve estimates relate primarily to an increase in the amount of revenues subject to chargeback.

Intangible Assets

Our principal intangible assets relate to our franchise agreements with vehicle manufacturers, which represent the estimated value of franchises acquired in business combinations, and goodwill, which represents the excess of cost over the fair value of tangible and identified intangible assets acquired in business combinations. We believe the franchise value of our dealerships has an indefinite useful life based on the following facts:

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

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

•  Certain franchise agreement terms are indefinite;

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

•  Our history shows that manufacturers have not terminated our franchise agreements.

Impairment Testing

Franchise value impairment is assessed as of October 1 every year through a comparison of the carrying amounts of our franchises with their estimated fair values. An indicator of impairment exists if the carrying value of a franchise exceeds its estimated fair value and an impairment loss may be recognized equal to that excess. We also evaluate our franchises in connection with the annual impairment testing to determine whether events and circumstances continue to support our assessment that the franchise has an indefinite life.

Goodwill impairment is assessed at the reporting unit level as of October 1 every year and upon the occurrence of an indicator of impairment. An indicator of impairment exists if the carrying amount of the reporting unit including goodwill is determined to exceed its estimated fair value. If an indication of impairment exists, the impairment is measured by comparing the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill and an impairment loss may be recognized equal to that excess.

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The fair values of franchise value and goodwill are determined using a discounted cash flow approach, which includes assumptions that include revenue and profitability growth, franchise profit margins, residual values and our cost of capital. If future events and circumstances cause significant changes in the assumptions underlying our analysis and result in a reduction of our estimates of fair value, we may incur an impairment charge.

Investments

Investments include marketable securities and investments in businesses accounted for under the equity method. A majority of our investments are in joint venture relationships that are more fully described in “Joint Venture Relationships” below. Such joint venture relationships are accounted for under the equity method, pursuant to which we record our proportionate share of the joint venture’s income each period.

The net book value of our investments was $64.4 million and $65.5 million as of December 31, 2007 and 2006, respectively. Investments for which there is not a liquid, actively traded market are reviewed periodically by management for indicators of impairment. If an indicator of impairment was identified, management would estimate the fair value of the investment using a discounted cash flow approach, which would include assumptions relating to revenue and profitability growth, profit margins, residual values and our cost of capital. Declines in investment values that are deemed to be other than temporary may result in an impairment charge reducing the investments’ carrying value to fair value. During 2007, we recorded an adjustment to the carrying value of our investment in Internet Brands to recognize an other than temporary impairment of $3.4 million which became apparent upon their initial public offering.

Investments in marketable securities held by us are typically classified as available for sale and are stated at fair value on our balance sheet with unrealized gains and losses included in other comprehensive income, a separate component of stockholders’ equity. Declines in investment values that are deemed to be other than temporary would be an indicator of impairment and may result in an impairment charge reducing the investments’ carrying value to fair value.

Self-Insurance

We retain risk relating to certain of our general liability insurance, workers’ compensation insurance, auto physical damage insurance, property insurance, employment practices liability insurance, director’s and officers insurance and employee medical benefits in the U.S.. As a result, we are likely to be responsible for a majority of the claims and losses incurred under these programs. The amount of risk we retain varies by program, and, for certain exposures, we have pre-determined maximum loss limits for certain individual claims and/or insurance periods. Losses, if any, above the pre-determined loss limits are paid by third-party insurance carriers. Our estimate of future losses is prepared by management using our historical loss experience and industry-based development factors. Aggregate reserves relating to retained risk were $12.8 million and $13.4 million as of December 31, 2007 and 2006, respectively. Changes in the reserve estimate during 2007 relate primarily to changes in loss experience.

Income Taxes

Tax regulations may require items to be included in our tax return at different times than the items are reflected in our financial statements. Some of these differences are permanent, such as expenses that are not deductible on our tax return, and some are timing differences, such as the timing of depreciation expense. Timing differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that will be used as a tax deduction or credit in our tax return in future years which we have already recorded in our financial statements. Deferred tax liabilities generally represent deductions taken on our tax return that have not yet been recognized as expense in our financial statements. We establish valuation allowances for our deferred tax assets if the amount of expected future taxable income is not likely to allow for the use of the deduction or credit. A valuation allowance of $2.3 million has been recorded relating to state net operating loss and credit carryforwards in the U.S. based on our determination that it is more likely than not that they will not be utilized.

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Classification of Franchises in Continuing and Discontinued Operations

We classify the results of our operations in our consolidated financial statements based on the provisions of Statement of Financial Accounting Standards (SFAS) No. 144 which requires judgment in determining whether a franchise will be reported within continuing or discontinued operations. Such judgments include whether a franchise will be sold or terminated, the period required to complete the disposition, and the likelihood of changes to a plan for sale. If we determine that a franchise should be either reclassified from continuing operations to discontinued operations or from discontinued operations to continuing operations, our consolidated financial statements for prior periods are revised to reflect such reclassification.

New Accounting Pronouncements

SFAS No. 157, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure requirements relating to fair value measurements. The FASB provided a one year deferral of the provisions of this pronouncement for non-financial assets and liabilities, however, the relevant provisions of SFAS 157 required by SFAS 159 must be adopted as originally scheduled. SFAS 157 thus becomes effective for our non-financial assets and liabilities on January 1, 2009. We will continue to evaluate the impact of those elements of this pronouncement.

SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115” permits entities to choose to measure many financial instruments and certain other items at fair value and consequently report unrealized gains and losses on such items in earnings. Since we will not elect the fair value option with respect to any of our current financial assets or financial liabilities when the provisions of this pronouncement become effective for us on January 1, 2008, there will be no impact upon the adoption.

SFAS No. 141(R) “Business Combinations” requires almost all assets acquired and liabilities assumed to be recorded at fair value as of the acquisition date, liabilities related to contingent consideration to be remeasured at fair value in each subsequent reporting period and all acquisition costs in pre-acquisition periods to be expensed. The pronouncement also clarifies the accounting under various scenarios such as step purchases or where the fair value of assets and liabilities acquired exceeds the consideration. SFAS 141(R) will be effective for us on January 1, 2009. We are currently evaluating the impact of this pronouncement.

SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements an Amendment of ARB No. 51” clarifies that a noncontrolling interest in a subsidiary must be measured at fair value and classified as a separate component of equity. This pronouncement also outlines the accounting for changes in a parent’s ownership in a subsidiary. SFAS 160 will be effective for us on January 1, 2009. We are currently evaluating the impact of this pronouncement.

Results of Operations

The following tables present comparative financial data relating to our operating performance in the aggregate and on a “same-store” basis. Dealership results are included in same-store comparisons when we have consolidated the acquired entity during the entirety of both periods being compared. As an example, if a dealership was acquired on January 15, 2006, the results of the acquired entity would be included in annual same-store comparisons beginning with the year ended December 31, 2008 and in quarterly same-store comparisons beginning with the quarter ended June 30, 2007.

2007 compared to 2006 and 2006 compared to 2005 (in millions, except unit and per unit amounts)

Our results for the year ended December 31, 2007 include charges of $18.6 million ($12.3 million after-tax) relating to the redemption of the $300.0 million aggregate principal amount of 9.625% Senior Subordinated Notes and $6.3 million ($4.5 million after-tax) relating to impairment losses. In addition, our results for the year ended December 31, 2005 include $8.2 million ($5.2 million after-tax), or $0.06 per share, of earnings attributable to the sale of all the remaining variable profits relating to the pool of extended service contracts sold at our dealerships from 2001 through 2005.

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Total Retail Data

							2007 vs. 2006												2006 vs. 2005
Total Retail Data	2007			2006			Change			% Change			2006			2005			Change			% Change
Total retail unit sales		297,374			269,806			27,568			10.2	%		269,806			241,454			28,352			11.7	%
Total same-store retail unit sales		262,021			254,998			7,023			2.8	%		237,317			234,840			2,477			1.1	%
Total retail sales revenue	$	11,861.3		$	10,192.2		$	1,669.1			16.4	%	$	10,192.2		$	8,778.1		$	1,414.1			16.1	%
Total same-store retail sales revenue	$	10,303.3		$	9,545.0		$	758.3			7.9	%	$	8,968.1		$	8,596.9		$	371.2			4.3	%
Total retail gross profit	$	1,922.7		$	1,680.7		$	242.0			14.4	%	$	1,680.7		$	1,452.2		$	228.5			15.7	%
Total same-store retail gross profit	$	1,691.2		$	1,585.8		$	105.4			6.6	%	$	1,488.0		$	1,423.8		$	64.2			4.5	%
Total retail gross margin		16.2	%		16.5	%		(0.3	)%		(1.8	)%		16.5	%		16.5	%		0.0	%		0.0	%
Total same-store retail gross margin		16.4	%		16.6	%		(0.2	)%		(1.2	)%		16.6	%		16.6	%		0.0	%		0.0	%

Units

Retail data includes retail new vehicle, retail used vehicle, finance and insurance and service and parts transactions. Retail unit sales of vehicles increased by 27,568, or 10.2%, from 2006 to 2007 and increased by 28,352, or 11.7%, from 2005 to 2006. The increase from 2006 to 2007 is due to a 20,545 unit increase from net dealership acquisitions during the year, coupled with a 7,023, or 2.8%, increase in same-store retail unit sales. The increase from 2005 to 2006 is due to a 25,875 unit increase from net dealership acquisitions during the year, coupled with a 2,477, or 1.1%, increase in same-store retail unit sales. The same-store increase from 2006 to 2007 was driven by increases in our premium brands in the U.K. and domestic brands in the U.S. and U.K. The same-store increase from 2005 to 2006 was driven by an increase in our premium and volume foreign brands in the U.S., offset somewhat by a decrease in premium and volume foreign brands in the U.K. and decreases in domestic brands in the U.S.

Revenues

Retail sales revenue increased $1.7 billion, or 16.4%, from 2006 to 2007 and increased $1.4 billion, or 16.1%, from 2005 to 2006. The increase from 2006 to 2007 is due to a $758.3 million, or 7.9%, increase in same-store revenues, coupled with a $910.8 million increase from net dealership acquisitions during the year. The same-store revenue increase is due to: (1) a $1,736, or 5.1%, increase in average new vehicle revenue per unit, which increased revenue by $302.3 million, (2) a $1,692, or 6.0%, increase in average used vehicle revenue per unit, which increased revenue by $136.7 million, (3) an $85.3 million, or 7.4%, increase in service and parts revenues, (4) a $58, or 6.2%, increase in average finance and insurance revenue per unit, which increased revenue by $14.7 million, and (5) the 2.8% increase in retail unit sales, which increased revenue by $219.3 million. The increase from 2005 to 2006 is due to a $371.2 million, or 4.3%, increase in same-store revenues coupled with a $1,042.9 million increase from net dealership acquisitions during the year. The same-store revenue increase is due to: (1) a $763, or 2.3%, increase in average new vehicle revenue per unit, which increased revenue by $123.4 million, (2) a $1,425, or 5.3%, increase in average used vehicle revenue per unit, which increased revenue by $103.8 million, (3) a $72.8 million, or 7.3%, increase in service and parts revenues, and (4) the 1.1% increase in retail unit sales, which increased revenue by $72.6 million, partially offset by a $6, or 0.6%, decrease in average finance and insurance revenue per unit, which decreased revenue by $1.4 million.

Gross Profit

Retail gross profit increased $242.0 million, or 14.4%, from 2006 to 2007 and increased $228.5 million, or 15.7%, from 2005 to 2006. The increase from 2006 to 2007 is due to a $105.4 million, or 6.6%, increase in same-store gross profit, coupled with a $136.6 million increase from net dealership acquisitions during the year. The same-store gross profit increase is due to: (1) a $26, or 0.9%, increase in average gross profit per new vehicle retailed, which increased gross profit by $4.5 million, (2) a $39, or 1.6%, increase in average gross profit per used vehicle retailed, which increased gross profit by $3.2 million, (3) a $58, or 6.2%, increase in average finance and insurance revenue per unit, which increased gross profit by $14.8 million, (4) a $58.4 million, or 9.1%, increase in service and parts gross profit, and (5) the 2.8% increase in retail unit sales, which increased gross profit by $24.5 million. The increase in retail gross profit from 2005 to 2006 is due to a $64.2 million, or 4.5%, increase in

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same-store gross profit, coupled with a $164.3 million increase from net dealership acquisitions during the year. The same-store gross profit increase is due to: (1) a $26, or 0.9%, increase in average gross profit per new vehicle retailed, which increased gross profit by $4.2 million, (2) an $82, or 3.4%, increase in average gross profit per used vehicle retailed, which increased gross profit by $6.0 million, (3) a $47.0 million, or 8.6%, increase in service and parts gross profit, and (4) the 1.1%, increase in retail unit sales, which increased gross profit by $8.4 million, partially offset by a $6, or 0.6%, decrease in average finance and insurance revenue per unit, which decreased revenue by $1.4 million

New Vehicle Data

							2007 vs. 2006												2006 vs. 2005
New Vehicle Data	2007			2006			Change			% Change			2006			2005			Change			% Change
New retail unit sales		195,160			181,544			13,616			7.5	%		181,544			166,209			15,335			9.2	%
Same-store new retail unit sales		174,759			174,188			571			0.3	%		161,864			161,900			(36	)		(0.0	)%
New retail sales revenue	$	7,008.1		$	6,185.9		$	822.2			13.3	%	$	6,185.9		$	5,511.1		$	674.8			12.2	%
Same-store new retail sales revenue	$	6,205.0		$	5,882.3		$	322.7			5.5	%	$	5,522.3		$	5,399.9		$	122.4			2.3	%
New retail sales revenue per unit	$	35,909		$	34,074		$	1,835			5.4	%	$	34,074		$	33,158		$	916			2.8	%
Same-store new retail sales revenue per unit	$	35,506		$	33,770		$	1,736			5.1	%	$	34,117		$	33,354		$	763			2.3	%
Gross profit — new	$	591.0		$	541.7		$	49.3			9.1	%	$	541.7		$	486.4		$	55.3			11.4	%
Same-store gross profit — new	$	519.9		$	513.7		$	6.2			1.2	%	$	482.2		$	478.0		$	4.2			0.9	%
Average gross profit per new vehicle retailed	$	3,028		$	2,984		$	44			1.5	%	$	2,984		$	2,926		$	58			2.0	%
Same-store average gross profit per new vehicle retailed	$	2,975		$	2,949		$	26			0.9	%	$	2,979		$	2,953		$	26			0.9	%
Gross margin% — new		8.4	%		8.8	%		(0.4	)%		(4.5	)%		8.8	%		8.8	%		0.0	%		0.0	%
Same-store gross margin% — new		8.4	%		8.7	%		(0.3	)%		(3.4	)%		8.7	%		8.9	%		(0.2	)%		(2.2	%)

Units

Retail unit sales of new vehicles increased 13,616 units, or 7.5%, from 2006 to 2007, and increased 15,335 units, or 9.2%, from 2005 to 2006. The increase from 2006 to 2007 is due to a 13,045 unit increase from net dealership acquisitions during the year coupled with an 571 unit, or 0.3%, increase in same-store new retail unit sales. The same-store increase from 2006 to 2007 was driven by increases in our premium brands in the U.K., offset somewhat by a decrease in volume foreign brands in the U.K. and decreases in premium and volume foreign brands in the U.S. The increase from 2005 to 2006 is due to a 15,371 unit increase from net dealership acquisitions during the year as same-store new retail unit sales were flat. The flat same-store new retail unit sales were a result of increases in premium and volume foreign brands in the U.S., offset by a decrease in our domestic brands in the U.S. and in premium and volume foreign brands in the U.K.

Revenues

New vehicle retail sales revenue increased $822.2 million, or 13.3%, from 2006 to 2007 and increased $674.8 million, or 12.2%, from 2005 to 2006. The increase from 2006 to 2007 is due to a $322.7 million, or 5.5%, increase in same-store revenues, coupled with a $499.5 million increase from net dealership acquisitions during the year. The same-store revenue increase is due primarily to a $1,736, or 5.1%, increase in comparative average selling price per unit which increased revenue by $302.4 million, coupled with the 0.3% increase in new retail unit sales which increased revenue by $20.3 million. The increase from 2005 to 2006 is due to a $122.4 million, or 2.3%, increase in same-store revenues, coupled with a $552.4 million increase from net dealership acquisitions during the year. The same-store revenue increase is due to a $763, or 2.3%, increase in comparative average selling price per unit.

Gross Profit

Retail gross profit from new vehicle sales increased $49.3 million, or 9.1%, from 2006 to 2007, and increased $55.3 million, or 11.4%, from 2005 to 2006. The increase from 2006 to 2007 is due to a $6.2 million, or 1.2%, increase in same-store gross profit, coupled with a $43.1 million increase from net dealership acquisitions during

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the year. The same-store retail gross profit increase is due to a $26, or 0.9%, increase in average gross profit per new vehicle retailed, which increased gross profit by $4.5 million, coupled with the 0.3% increase in new retail unit sales, which increase gross profit by $1.7 million. The increase in retail gross profit from 2005 to 2006 is due to a $4.2 million, or 0.9%, increase in same-store gross profit, coupled with a $51.1 million increase from net dealership acquisitions during the year. The same-store retail gross profit increase is due to a $26, or 0.9%, increase in average gross profit per new vehicle retailed.

Used Vehicle Data

							2007 vs. 2006												2006 vs. 2005
Used Vehicle Data	2007			2006			Change			% Change			2006			2005			Change			% Change
Used retail unit sales		102,214			88,262			13,952			15.8	%		88,262			75,245			13,017			17.3	%
Same-store used retail unit sales		87,262			80,810			6,452			8.0	%		75,453			72,940			2,513			3.4	%
Used retail sales revenue	$	3,149.1		$	2,531.0		$	618.1			24.4	%	$	2,531.0		$	2,015.7		$	515.3			25.6	%
Same-store used retail sales revenue	$	2,597.7		$	2,268.9		$	328.8			14.5	%	$	2,145.4		$	1,970.1		$	175.3			8.9	%
Used retail sales revenue per unit	$	30,809		$	28,676		$	2,133			7.4	%	$	28,676		$	26,788		$	1,888			7.0	%
Same-store used retail sales revenue per unit	$	29,769		$	28,077		$	1,692			6.0	%	$	28,434		$	27,009		$	1,425			5.3	%
Gross profit — used	$	251.1		$	214.3		$	36.8			17.2	%	$	214.3		$	179.0		$	35.3			19.7	%
Same-store gross profit — used	$	216.0		$	196.9		$	19.1			9.7	%	$	186.8		$	174.6		$	12.2			7.0	%
Average gross profit per used vehicle retailed	$	2,457		$	2,427		$	30			1.2	%	$	2,427		$	2,379		$	48			2.0	%
Same-store average gross profit per used vehicle retailed	$	2,476		$	2,437		$	39			1.6	%	$	2,475		$	2,393		$	82			3.4	%
Gross margin % — used		8.0	%		8.5	%		(0.5	)%		(5.9	)%		8.5	%		8.9	%		(0.4	)%		(4.5	)%
Same-store gross margin % — used		8.3	%		8.7	%		(0.4	)%		(4.6	)%		8.7	%		8.9	%		(0.2	)%		(2.2	%)

Units

Retail unit sales of used vehicles increased 13,952 units, or 15.8%, from 2006 to 2007 and increased 13,017 units, or 17.3%, from 2005 to 2006. The increase from 2006 to 2007 is due to a 6,452 unit, or 8.0%, increase in same-store used retail unit sales, coupled with a 7,500 unit increase from net dealership acquisitions during the year. The increase from 2005 to 2006 is due to a 2,513 unit, or 3.4%, increase in same-store used retail unit sales coupled with a 10,504 unit increase from net dealership acquisitions during the year. The same-store increase in 2007 versus 2006 was driven primarily by increases in our premium and volume foreign brands in the U.S. and U.K. The same-store increase in 2006 versus 2005 was driven primarily by increases in our premium brands in the U.S. and U.K. offset somewhat by decreases in our domestic brands in the U.S. and U.K.

Revenues

Used vehicle retail sales revenue increased $618.1 million, or 24.4%, from 2006 to 2007 and increased $515.3 million, or 25.6%, from 2005 to 2006. The increase from 2006 to 2007 is due to a $328.8 million, or 14.5%, increase in same-store revenues, coupled with a $289.3 million increase from net dealership acquisitions during the year. The same-store revenue increase is due primarily to a $1,692, or 6.0%, increase in comparative average selling price per vehicle, which increased revenue by $136.7 million, coupled with the 8.0% increase in retail unit sales, which increased revenue by $192.1 million. The increase from 2005 to 2006 is due to a $175.3 million, or 8.9%, increase in same-store revenues, coupled with a $340.0 million increase from net dealership acquisitions during the year. The same-store revenue increase is due to a $1,425, or 5.3%, increase in comparative average selling price per unit, which increased revenue by $103.9 million, coupled with the 3.4% increase in retail unit sales, which increased revenue by $71.4 million.

Gross Profit

Retail gross profit from used vehicle sales increased $36.8 million, or 17.2%, from 2006 to 2007 and increased $35.3 million, or 19.7%, from 2005 to 2006. The increase from 2006 to 2007 is due to a $19.1 million, or 9.7%, increase in same-store gross profit, coupled with a $17.7 million increase from net dealership acquisitions during the year. The same-store gross profit increase from 2006 to 2007 is due to a $39, or 1.6%, increase in average gross

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profit per used vehicle retailed, which increased gross profit by $3.2 million, coupled with the 8.0% increase in used retail unit sales, which increased gross profit by $15.9 million. The increase in gross margin from 2006 to 2007 included increases in our U.S. and U.K. premium brands and U.S. volume foreign and domestic brands. The same-store increase in retail gross profit from 2005 to 2006 is due to a $12.2 million, or 7.0%, increase in same-store gross profit, coupled with a $23.1 million increase from net dealership acquisitions during the year. The same-store gross profit increase is due to an $82, or 3.4%, increase in average gross profit per used vehicle retailed, which increased gross profit by $6.0 million, coupled with the 3.4% increase in used retail unit sales, which increased gross profit by $6.2 million. The increase in gross margin from 2005 to 2006 included increases in our U.S. and U.K. premium brands, offset somewhat by decreases in our U.S. and U.K. domestic brands.

Finance and Insurance Data

					2007 vs. 2006									2006 vs. 2005
Finance and Insurance Data	2007		2006		Change		% Change			2006		2005		Change			% Change
Total retail unit sales		297,374		269,806		27,568		10.2	%		269,806		241,454		28,352			11.7	%
Total same-store retail unit sales		262,021		254,998		7,023		2.8	%		237,317		234,840		2,477			1.1	%
Finance and insurance revenue	$	290.1	$	246.4	$	43.7		17.7	%	$	246.4	$	227.5	$	18.9			8.3	%
Same-store finance and insurance revenue	$	258.3	$	236.7	$	21.6		9.1	%	$	223.8	$	223.0	$	0.8			0.4	%
Finance and insurance revenue per unit	$	976	$	913	$	63		6.9	%	$	913	$	943	$	(30	)		(3.2	)%
Same-store finance and insurance revenue per unit	$	986	$	928	$	58		6.2	%	$	943	$	949	$	(6	)		(0.6	%)

Finance and insurance revenue increased $43.7 million, or 17.7%, from 2006 to 2007 and increased $18.9 million, or 8.3%, from 2005 to 2006. The increase from 2006 to 2007 is due to a $21.6 million, or 9.1%, increase in same-store revenues, coupled with a $22.1 million increase from net dealership acquisitions during the year. The same-store revenue increase is due to the 2.8% increase in retail unit sales, which increased revenue by $6.9 million, coupled with a $58, or 6.2%, increase in comparative average finance and insurance revenue per unit, which increased revenue by $14.7 million. The $58 increase in comparative average finance and insurance revenue per unit is due primarily to increased sales penetration of certain products, particularly in the U.K. The increase from 2005 to 2006 is due to an $0.8 million, or 0.4%, increase in same-store revenues, coupled with an $18.1 million increase from net dealership acquisitions during the year. The same-store revenue increase is the result of the 1.1% increase in retail unit sales, which increased revenue by $2.3 million, offset by a $6, or 0.6%, decrease in comparative average finance and insurance revenue per unit, which decreased revenue by $1.5 million. The $6 decrease in comparative average finance and insurance revenue per unit is due to a reduction in average finance and insurance revenue per unit from our Sirius Satellite Radio promotion arrangement and the 2005 sale of all the remaining variable profits relating to a pool of extended service contracts sold at the company’s dealerships from 2001 through 2005, offset somewhat by an increase in comparative average finance and insurance revenue per unit due primarily to increased sales penetration of certain products.

Service and Parts Data

							2007 vs. 2006												2006 vs. 2005
Service and Parts Data	2007			2006			Change			% Change			2006			2005			Change			% Change
Service and parts revenue	$	1,414.0		$	1,228.9		$	185.1			15.1	%	$	1,228.9		$	1,023.9		$	205.0			20.0	%
Same-store service and parts revenue	$	1,242.3		$	1,157.0		$	85.3			7.4	%	$	1,076.7		$	1,003.9		$	72.8			7.3	%
Gross profit	$	790.4		$	678.4		$	112.0			16.5	%	$	678.4		$	559.3		$	119.1			21.3	%
Same-store gross profit	$	696.9		$	638.5		$	58.4			9.1	%	$	595.2		$	548.2		$	47.0			8.6	%
Gross margin		55.9	%		55.2	%		0.7	%		1.3	%		55.2	%		54.6	%		0.6	%		1.1	%
Same-store gross margin		56.1	%		55.2	%		0.9	%		1.6	%		55.3	%		54.6	%		0.7	%		1.3	%

Revenues

Service and parts revenue increased $185.1 million, or 15.1%, from 2006 to 2007 and increased $205.0 million, or 20.0%, from 2005 to 2006. The increase from 2006 to 2007 is due to an $85.3 million, or 7.4%, increase in same-store revenues, coupled with a $99.8 million increase from net dealership acquisitions during the year. The increase

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from 2005 to 2006 is due to a $72.8 million, or 7.3%, increase in same-store revenues, coupled with a $132.2 million increase from net dealership acquisitions during the year. We believe that our service and parts business is being positively impacted by the growth in total retail unit sales at our dealerships in recent years and capacity increases in our service and parts operations resulting from our facility improvement and expansion programs.

Gross Profit

Service and parts gross profit increased $112.0 million, or 16.5%, from 2006 to 2007 and increased $119.1 million, or 21.3%, from 2005 to 2006. The increase from 2006 to 2007 is due to a $58.4 million, or 9.1%, increase in same-store gross profit, coupled with a $53.6 million increase from net dealership acquisitions during the year. The same-store gross profit increase is due to the $85.3 million, or 7.4%, increase in revenues, which increased gross profit by $47.8 million, and a 1.6% increase in gross margin percentage, which increased gross profit by $10.6 million. The increase from 2005 to 2006 is due to a $47.0 million, or 8.6%, increase in same-store gross profit, coupled with a $72.1 million increase from net dealership acquisitions during the year. The same-store gross profit increase is due to the $72.8 million, or 7.3%, increase in revenues, which increased gross profit by $40.1 million, and a 1.3% increase in gross margin percentage, which increased gross profit by $6.9 million.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expenses increased $194.6 million, or 14.6%, from 2006 to 2007 and increased $201.2 million, or 17.7%, from 2005 to 2006. The aggregate increase from 2006 to 2007 is due to an $84.0 million, or 6.7%, increase in same-store SG&A expenses, coupled with a $110.6 million increase from net dealership acquisitions during the year. The aggregate increase in SG&A expenses from 2005 to 2006 is due to a $59.9 million, or 5.4%, increase in same-store SG&A expenses, coupled with a $141.3 million increase from net dealership acquisitions during the year. The increase in same-store SG&A expenses is due in large part to (1) increased variable selling expenses, including increases in variable compensation, as a result of the 6.6% and 4.5% increase in retail gross profit over the prior year in 2007 and 2006, respectively, (2) increased rent and related costs in both years due in part to our facility improvement and expansion program and (3) increased advertising and promotion caused by the overall competitiveness of the retail vehicle market. SG&A expenses as a percentage of total revenue were 11.8%, 12.0% and 11.9% in 2007, 2006 and 2005, respectively, and as a percentage of gross profit were 79.6%, 79.4% and 78.2% in 2007, 2006 and 2005, respectively.

Depreciation and Amortization

Depreciation and amortization increased $7.8 million, or 18.1%, from 2006 to 2007 and increased $5.8 million, or 15.5%, from 2005 to 2006. The increase from 2006 to 2007 is due to a $5.2 million, or 12.7%, increase in same-store depreciation and amortization, coupled with a $2.6 million increase from net dealership acquisitions during the year. The increase from 2005 to 2006 is due to a $3.5 million increase from net dealership acquisitions during the year, coupled with a $2.3 million, or 6.3%, increase in same-store depreciation and amortization. The same-store increases in both periods are due in large part to our facility improvement and expansion program.

Floor Plan Interest Expense

Floor plan interest expense increased $14.9 million, or 25.0%, from 2006 to 2007 and increased $13.5 million, or 29.3%, from 2005 to 2006. The increase from 2006 to 2007 is due to an $8.1 million, or 14.3%, increase in same-store floor plan interest expense, coupled with a $6.8 million increase from net dealership acquisitions during the year. The increase from 2005 to 2006 is due to an $8.0 million, or 17.6%, increase in same-store floor plan interest expense, coupled with a $5.5 million increase from net dealership acquisitions during the year. Floor plan interest expense was negatively impacted in 2007 by an increase in our average floor plan notes outstanding. Floor plan interest expense was negatively impacted in 2006 by an increase in our weighted average borrowing rate due primarily to increases in the applicable benchmark rates of our revolving floor plan arrangements.

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Other Interest Expense

Other interest expense increased $7.1 million, or 14.4%, from 2006 to 2007 and increased $0.2 million, or 0.3%, from 2005 to 2006. The increase from 2006 to 2007 is due to an increase in average total outstanding indebtedness in 2007 compared to 2006, offset by a decrease in our weighted average borrowing rate. The decrease in our weighted average borrowing rate was due primarily to the issuance of $375.0 million of 7.75% Senior Subordinated Notes on December 7, 2006 which was used to redeem our 9.625% Senior Subordinated Notes in March 2007. The increase from 2005 to 2006 is due to an increase in average total outstanding indebtedness in 2006 compared to 2005, offset by a decrease in our weighted average borrowing rate. The decrease in our weighted average borrowing rate was due primarily to the issuance of $375.0 million of 3.5% Convertible Senior Subordinated Notes on January 31, 2006 the proceeds of which were used to repay higher-rate debt under our credit agreement.

Income Taxes

Income taxes decreased $1.6 million, or 2.3%, from 2006 to 2007 and increased $0.4 million, or 0.6%, from 2005 to 2006. The decrease from 2006 to 2007 is due primarily to a decrease in pre-tax income. Our effective income tax rate in 2007 benefited from an increase in the relative proportion of our U.K. operations, which are taxed at a lower rate, but was higher on a comparative basis to the prior year due to tax savings from certain tax planning initiatives that benefited the prior year. The increase from 2005 to 2006 is due primarily to an increase in pre-tax income being more than offset by a reduction in our effective income tax rate due to an increase in the relative contribution to earnings of our U.K. operations, which are taxed at a lower rate, and tax savings from certain tax planning initiatives.

Liquidity and Capital Resources

Our cash requirements are primarily for working capital, inventory financing, the acquisition of new dealerships, the improvement and expansion of existing facilities, the construction of new facilities, and dividends. Historically, these cash requirements have been met through cash flow from operations, borrowings under our credit agreements and floor plan arrangements, the issuance of debt securities, sale-leaseback transactions and the issuance of equity securities. As of December 31, 2007, we had working capital of $205.6 million, including $10.9 million of cash, available to fund our operations and capital commitments. In addition, we had $250.0 million and £68.8 million ($136.7 million) available for borrowing under our U.S. credit agreement and our U.K. credit agreement, respectively, each of which is discussed below.

We paid the following dividends in 2006 and 2007:

Per Share Dividends
2006 :	First Quarter	$	0.06	2007:	First Quarter	$	0.07
	Second Quarter		0.07		Second Quarter		0.07
	Third Quarter		0.07		Third Quarter		0.07
	Fourth Quarter		0.07		Fourth Quarter		0.09

We have also declared a cash dividend on our common stock of $0.09 cents per share payable on March 3, 2008 to shareholders of record on February 11, 2008. Future quarterly or other cash dividends will depend upon our earnings, capital requirements, financial condition, restrictions on any then existing indebtedness and other factors considered relevant by our Board of Directors.

We have expanded our retail automotive operations primarily through organic growth and through the acquisition of retail automotive dealerships. In addition, one of our subsidiaries is the exclusive distributor of smart fortwo vehicles in the U.S. and Puerto Rico. We believe that cash flow from operations and our existing capital resources, including the liquidity provided by our credit agreements and floor plan financing arrangements, will be sufficient to fund our operations and commitments for at least the next twelve months. To the extent we pursue additional significant acquisitions, other expansion opportunities, or refinance existing debt, we may need to raise additional capital either through the public or private issuance of equity or debt securities or through additional borrowings, which sources of funds may not necessarily be available on terms acceptable to us, if at all.

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Our board of directors has approved a stock repurchase program for up to $150 million of our outstanding common stock. We may, from time to time as market conditions warrant, purchase our outstanding common stock through open market purchases, in privately negotiated transactions and other means. We currently intend to fund any repurchases through cash flow from operations and borrowings under our U.S. credit facility. The decision to make stock repurchases will be based on such factors as the market price of our common stock versus our view of its intrinsic value, the potential impact on our capital structure and the expected return on competing uses of capital such as strategic store acquisitions and capital investments in our current businesses, as well as any then-existing limits imposed by our finance agreements.

Inventory Financing

We finance substantially all of our new and a portion of our used vehicle inventories under revolving floor plan arrangements with various lenders. In the U.S., the floor plan arrangements are due on demand; however, we are generally not required to make loan principal repayments prior to the sale of the vehicles financed. We typically make monthly interest payments on the amount financed. In the U.K., substantially all of our floor plan arrangements are payable on demand or have an original maturity of 90 days or less and we are generally required to repay floor plan advances at the earlier of the sale of the vehicles financed or the stated maturity. The floor plan agreements grant a security interest in substantially all of the assets of our dealership subsidiaries. Interest rates under the floor plan arrangements are variable and increase or decrease based on changes in various benchmarks. We receive non-refundable credits from certain of our vehicle manufacturers, which are treated as a reduction of cost of sales as vehicles are sold.

U.S. Credit Agreement

We are party to a credit agreement with DCFS USA LLC and Toyota Motor Credit Corporation, as amended, which provides for up to $250.0 million of borrowing capacity for working capital, acquisitions, capital expenditures, investments and for other general corporate purposes, including $10.0 million of availability for letters of credit, through September 30, 2010. The revolving loans bear interest at defined London Interbank Offered Rate (“LIBOR”) plus 1.75%.

The U.S. credit agreement is fully and unconditionally guaranteed on a joint and several basis by our domestic subsidiaries and contains a number of significant covenants that, among other things, restrict our ability to dispose of assets, incur additional indebtedness, repay other indebtedness, pay dividends, create liens on assets, make investments or acquisitions and engage in mergers or consolidations. We are also required to comply with specified financial and other tests and ratios, each as defined in the U.S. credit agreement, including: a ratio of current assets to current liabilities, a fixed charge coverage ratio, a ratio of debt to stockholders’ equity, a ratio of debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”), a ratio of domestic debt to domestic EBITDA, and a measurement of stockholders’ equity. A breach of these requirements would give rise to certain remedies under the agreement, the most severe of which is the termination of the agreement and acceleration of the amounts owed. As of December 31, 2007, we were in compliance with all covenants under the U.S. credit agreement, and we believe we will remain in compliance with such covenants for the foreseeable future. In making such determination, we have considered the current margin of compliance with the covenants and our expected future results of operations, working capital requirements, acquisitions, capital expenditures and investments. See “Forward Looking Statements”.

The U.S. credit agreement also contains typical events of default, including change of control, non-payment of obligations and cross-defaults to our other material indebtedness. Substantially all of our domestic assets not pledged as security under floor plan arrangements are subject to security interests granted to lenders under the U.S. credit agreement. Other than $0.5 million of outstanding letters of credit, no amounts were outstanding under the U.S. credit agreement as of December 31, 2007.

U.K. Credit Agreement

Our subsidiaries in the U.K. are party to an agreement with the Royal Bank of Scotland plc, as agent for National Westminster Bank plc, which provides for a multi-option credit agreement, a fixed rate credit agreement

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and a seasonally adjusted overdraft line of credit to be used to finance acquisitions, working capital, and general corporate purposes. The U.K. credit agreement provides for (1) up to £70.0 million in revolving loans through August 31, 2011, which have an original maturity of 90 days or less and bear interest between defined LIBOR plus 0.65% and defined LIBOR plus 1.25%, (2) a £30.0 million funded term loan which bears interest between 5.94% and 6.54% and is payable ratably in quarterly intervals through June 30, 2011, and (3) a seasonally adjusted overdraft line of credit for up to £30.0 million that bears interest at the Bank of England Base Rate plus 1.00% and matures on August 31, 2011.

The U.K. credit agreement is fully and unconditionally guaranteed on a joint and several basis by our U.K. subsidiaries, and contains a number of significant covenants that, among other things, restrict the ability of our U.K. subsidiaries to pay dividends, dispose of assets, incur additional indebtedness, repay other indebtedness, create liens on assets, make investments or acquisitions and engage in mergers or consolidations. In addition, our U.K. subsidiaries are required to comply with specified ratios and tests, each as defined in the U.K. credit agreement, including: a ratio of earnings before interest and taxes plus rental payments to interest plus rental payments (as defined), a measurement of maximum capital expenditures, and a debt to EBITDA ratio (as defined). A breach of these requirements would give rise to certain remedies under the agreement, the most severe of which is the termination of the agreement and acceleration of the amounts owed. As of December 31, 2007, we were in compliance with all covenants under the U.K. credit agreement, and we believe we will remain in compliance with such covenants for the foreseeable future. In making such determination, we have considered the current margin of compliance with the covenants and our expected future results of operations, working capital requirements, acquisitions, capital expenditures and investments in the U.K. See “Forward Looking Statements”.

The U.K. credit agreement also contains typical events of default, including change of control and non-payment of obligations and cross-defaults to other material indebtedness of our U.K. subsidiaries. Substantially all of our U.K. subsidiaries’ assets not pledged as security under floor plan arrangements are subject to security interests granted to lenders under the U.K. credit agreement. As of December 31, 2007, outstanding loans under the U.K. credit agreement amounted £45.9 million ($91.3 million).

7.75% Senior Subordinated Notes

On December 7, 2006 we issued $375.0 million aggregate principal amount of 7.75% Senior Subordinated Notes due 2016 (the “7.75% Notes”). The 7.75% Notes are unsecured senior subordinated notes and are subordinate to all existing and future senior debt, including debt under our credit agreements and floor plan indebtedness. The 7.75% Notes are guaranteed by substantially all wholly-owned domestic subsidiaries on a senior subordinated basis. We can redeem all or some of the 7.75% Notes at our option beginning in December 2011 at specified redemption prices, or prior to December 2011 at 100% of the principal amount of the notes plus an applicable “make-whole” premium, as defined. In addition, we may redeem up to 40% of the 7.75% Notes at specified redemption prices using the proceeds of certain equity offerings before December 15, 2009. Upon certain sales of assets or specific kinds of changes of control, we are required to make an offer to purchase the 7.75% Notes. The 7.75% Notes also contain customary negative covenants and events of default. As of December 31, 2007, we were in compliance with all negative covenants and there were no events of default.

Senior Subordinated Convertible Notes

On January 31, 2006, we issued $375.0 million aggregate principal amount of 3.50% Senior Subordinated Convertible Notes due 2026 (the “Convertible Notes”). The Convertible Notes mature on April 1, 2026, unless earlier converted, redeemed or purchased by us. The Convertible Notes are unsecured senior subordinated obligations and are guaranteed on an unsecured senior subordinated basis by substantially all of our wholly owned domestic subsidiaries. The Convertible Notes also contain customary negative covenants and events of default. As of December 31, 2007, we were in compliance with all negative covenants and there were no events of default.

Holders of the convertible notes may convert them based on a conversion rate of 42.2052 shares of our common stock per $1,000 principal amount of the Convertible Notes (which is equal to an initial conversion price of approximately $23.69 per share), subject to adjustment, only under the following circumstances: (1) in any

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quarterly period commencing after March 31, 2006, if the closing price of our common stock for twenty of the last thirty trading days in the prior quarter exceeds $28.43 (subject to adjustment), (2) for specified periods, if the trading price of the Convertible Notes falls below specific thresholds, (3) if the Convertible Notes are called for redemption, (4) if specified distributions to holders of our common stock are made or specified corporate transactions occur, (5) if a fundamental change (as defined) occurs, or (6) during the ten trading days prior to, but excluding, the maturity date.

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

In the event of a conversion due to a change of control on or before April 6, 2011, we will pay, to the extent described in the indenture, a make-whole premium by increasing the conversion rate applicable to such Convertible Notes. In addition, we will pay contingent interest in cash, commencing with any six-month period from April 1 to September 30 and from October 1 to March 31, beginning on April 1, 2011, if the average trading price of a Convertible Note for the five trading days ending on the third trading day immediately preceding the first day of that six-month period equals 120% or more of the principal amount of the Convertible Note.

On or after April 6, 2011, we may redeem the Convertible Notes, in whole at any time or in part from time to time, for cash at a redemption price of 100% of the principal amount of the Convertible Notes to be redeemed, plus any accrued and unpaid interest to the applicable redemption date. Holders of the Convertible Notes may require us to purchase all or a portion of their Convertible Notes for cash on April 1, 2011, April 1, 2016 or April 1, 2021 at a purchase price equal to 100% of the principal amount of the Convertible Notes to be purchased, plus accrued and unpaid interest, if any, to the applicable purchase date.

9.625% Senior Subordinated Notes

In March 2007, we redeemed our outstanding $300.0 million aggregate principal amount of 9.625% senior subordinated notes due 2012 (the “9.625% Notes”). The 9.625% Notes were unsecured senior subordinated notes and were subordinate to all existing senior debt, including debt under our credit agreements and floor plan indebtedness. We incurred an $18.6 million pre-tax charge in connection with the redemption, consisting of a $14.4 million redemption premium and the write-off of $4.2 million of unamortized deferred financing costs.

Share Repurchase

On January 26, 2006, we repurchased 1.0 million shares of our outstanding common stock for $19.0 million, or $18.96 per share. These shares and all other shares held as treasury stock were retired during the second quarter of 2007.

Interest Rate Swaps

In January 2008, we entered into new three year interest rate swap agreements pursuant to which the LIBOR portion of $300.0 million of our U.S. floating rate floor plan debt was fixed at 3.67%. This arrangement is in effect through January 2011. We may terminate this arrangement at any time, subject to the settlement at that time of the fair value of the swap arrangement. The swap is designated as a cash flow hedge of future interest payments of LIBOR based U.S. floor plan borrowings.

We were party to an interest rate swap agreement that expired in January 2008 pursuant to which a notional $200.0 million of our U.S. floating rate debt was exchanged for fixed rate debt. The swap was designated as a cash flow hedge of future interest payments of LIBOR based U.S. floor plan borrowings. As of December 31, 2007, we expect approximately $0.02 million associated with the swap to be recognized as a reduction of interest expense in January of 2008.

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Other Financing Arrangements

We have in the past and expect in the future to enter into significant sale-leaseback transactions to finance certain property acquisitions and capital expenditures, pursuant to which we sell property and/or leasehold improvements to third-parties and agree to lease those assets back for a certain period of time. Such sales generate proceeds which vary from period to period.

Off-Balance Sheet Arrangements — 3.5% Convertible Senior Subordinated Notes due 2026

The Convertible Notes are convertible into shares of our common stock, at the option of the holder, based on certain conditions described above. Certain of these conditions are linked to the market value of our common stock. This type of financing arrangement was selected by us in order to achieve a more favorable interest rate (as opposed to other forms of available financing). Since we or the holders of the Convertible Notes can redeem these notes on April 2011, a conversion or a redemption of these notes is likely to occur in 2011. Such redemption conversion will include cash for the principal amount of the Convertible Notes then outstanding plus an amount payable in either cash or stock, at our option, depending on the trading price of our common stock.

Cash Flows

Cash and cash equivalents increased by $5.5 million during the year ended December 31, 2006, and decreased by $2.3 and $9.2 million during the years ended December 31, 2007 and 2005, respectively. The major components of these changes are discussed below.

Cash Flows from Continuing Operating Activities

Cash provided by operating activities was $310.1 million, $116.1 million and $169.8 million during the years ended December 31, 2007, 2006 and 2005, respectively. Cash flows from operating activities include net income adjusted for non-cash items and the effects of changes in working capital.

We finance substantially all of our new and a portion of our used vehicle inventories under revolving floor plan notes payable with various lenders. In accordance with the guidance under SFAS No. 95, “Statement of Cash Flows”, we report all cash flows arising in connection with floor plan notes payable to the manufacturer of a particular new vehicle as an operating activity in our statement of cash flows and all cash flows arising in connection with floor plan notes payable to a party other than the manufacturer of a particular new vehicle and all floor plan notes payable relating to pre-owned vehicles as a financing activity in our statement of cash flows. However, we believe that changes in aggregate floor plan liabilities are typically linked to changes in vehicle inventory and, therefore, are an integral part of understanding changes in our working capital and operating cash flow. As a result, we have presented the following reconciliation of cash flow from operating activities as reported in our condensed consolidated statement of cash flows as if all changes in vehicle floor plan were classified as an operating activity for informational purposes:

	Year Ended December 31,
	2007		2006			2005
Net cash from operating activities as reported	$	310.1	$	116.1		$	169.8
Floor plan notes payable — non-trade as reported		193.5		(54.4	)		14.9
Net cash from operating activities including all floor plan notes payable	$	503.6	$	61.7		$	184.7

Cash Flows from Continuing Investing Activities

Cash used in investing activities was $228.4 million, $488.0 million and $223.2 million during the years ended December 31, 2007, 2006 and 2005, respectively. Cash flows from investing activities consist primarily of cash used for capital expenditures, proceeds from sale-leaseback transactions and net expenditures for dealership acquisitions. Capital expenditures were $195.0 million, $224.0 million and $216.1 million during the years ended December 31, 2007, 2006 and 2005, respectively. Capital expenditures relate primarily to improvements to our existing dealership facilities and the construction of new facilities. Proceeds from sale-leaseback transactions were $131.8 million, $106.2 million and $118.5 million during the years ended December 31, 2007, 2006 and 2005,

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respectively. Cash used in business acquisitions, net of cash acquired, was $180.7 million, $370.2 million and $125.6 million during the years ended December 31, 2007, 2006 and 2005, respectively, and included repayments of seller’s floor plan notes payable of $51.9 million, $113.4 million and $44.7 million, respectively. The year ended December 31, 2007 also includes $15.5 million of proceeds of other investing activities.

Cash Flows from Continuing Financing Activities

Cash provided by financing activities was $441.2 million and $1.1 million during the years ended December 31, 2006 and 2005, respectively, and cash used in financing activities was $180.9 million during the year ended December 31, 2007. Cash flows from financing activities include borrowings and repayments of long-term debt, net borrowings or repayments of floor plan notes payable non-trade, proceeds from the issuance of common stock, including proceeds from the exercise of stock options, repurchases of common stock and dividends. During the year ended December 31, 2006 we issued $750.0 million of subordinated debt and we paid $17.2 million of financing costs. Proceeds of the $750.0 million of subordinated debt issuance were used to repurchase one million shares of our common stock and to repay debt. This activity, combined with borrowing to fund acquisition and other liquidity requirements, resulted in net repayments of long-term debt of $211.1 million during the year ended December 31, 2006 and allowed us to redeem our 9.625% Notes in early 2007 for $314.4 million, including redemption premium of $14.4 million. In addition to these activities, we had other net repayments of long-term debt of $34.2 million and $2.4 million during the years ended December 31, 2007 and 2005, respectively. We had net borrowings of floor plan notes payable non-trade of $193.5 and $14.9 million during the years ended December 31, 2007 and 2005, respectively, and net repayments of floor plan notes payable non-trade of $54.4 million during the year ended December 31, 2006. During the years ended December 31, 2007, 2006 and 2005, we received proceeds of $2.6 million, $18.1 million and $4.7 million, respectively, from exercises of options for common stock. During the years ended December 31, 2007, 2006 and 2005, we paid $28.4 million, $25.2 million and $20.8 million, respectively, of cash dividends to our stockholders.

Cash Flows from Discontinued Operations

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

Contractual Payment Obligations

The table below sets forth our best estimates as to the amounts and timing of future payments relating to our most significant contractual obligations as of December 31, 2007. The information in the table reflects future unconditional payments and is based upon, among other things, the terms of any relevant agreements. Future events, including acquisitions, divestitures, entering into new operating lease agreements, the amount of borrowings or repayments under our credit agreements and floor plan arrangements and purchases or refinancing of our securities, could cause actual payments to differ significantly from these amounts. See “Section 1A — Risk Factors.”

			Less than						More than
	Total		1 year		1 to 3 years		3 to 5 years		5 years
Floorplan Notes Payable(A)	$	1,552.9	$	1,552.9	$	—	$	—	$	—
Long Term Debt Obligations(B)		844.6		14.5		28.2		49.4		752.5
Operating Lease Commitments		4,772.4		167.6		328.1		321.6		3,955.1
Purchase Obligations		189.5		189.5		—		—		—
Scheduled Interest Payments(B)(C)		495.7		42.2		84.4		84.4		284.7
Other Long Term Liabilities(D)		48.5		8.1		—		—		40.4
	$	7,903.6	$	1974.8	$	440.7	$	455.4	$	5,032.7

(A) Floor plan notes payable are revolving financing arrangements. Payments are generally made as required pursuant to the floor plan borrowing agreements discussed above under “Inventory Financing”.

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(B)	Interest and principal repayments under our $375.0 million of 3.5% senior subordinated notes due 2026 are reflected in the table above, however, at our option, certain of these amounts may be settled by in shares of common stock. While these notes are not due until 2026, in 2011 the holders may require us to purchase all or a portion of their notes for cash. This acceleration of ultimate repayment is not reflected in the table above, nor is any optional redemption on our part.
(C)	Estimates of future variable rate interest payments under floorplan notes payable and our credit agreements are excluded. See “Inventory Financing,” “U.S. Credit Agreement”, and “U.K. Credit Agreement” above for a discussion of such variable rates.
(D)	Includes uncertain tax positions. Due to the subjective nature of our uncertain tax positions, we are unable to make reasonably reliable estimates of the timing of payments arising in connection with the unrecognized tax benefits. We have thus classified this as “More than 5 years.”

We expect that the amounts above will be funded through cash flow from operations. In the case of balloon payments at the end of the terms of our debt instruments, we expect to be able to refinance such instruments in the normal course of business.

Commitments

We are party to a joint venture with respect to our Honda of Mentor dealership in Ohio. We are required to repurchase our partner’s interest in this joint venture in July 2008. We expect this payment to be approximately $4.9 million.

Related Party Transactions

Stockholders Agreement

Roger S. Penske, our Chairman of the Board and Chief Executive Officer, is also Chairman of the Board and Chief Executive Officer of Penske Corporation, and through entities affiliated with Penske Corporation, our largest stockholder owning approximately 40% of our outstanding common stock. Mitsui & Co., Ltd. and Mitsui & Co. (USA), Inc. (collectively, “Mitsui”) own approximately 16% of our outstanding common stock. Mitsui, Penske Corporation and certain other affiliates of Penske Corporation are parties to a stockholders agreement pursuant to which the Penske affiliated companies agreed to vote their shares for one director who is a representative of Mitsui. In turn, Mitsui agreed to vote their shares for up to fourteen directors voted for by the Penske affiliated companies. This agreement terminates in March 2014, upon the mutual consent of the parties, or when either party no longer owns any of our common stock.

Other Related Party Interests and Transactions

Several of our directors and officers are affiliated with Penske Corporation or related entities. Roger S. Penske is also a managing member of Penske Capital Partners and Transportation Resource Partners, each organizations that undertake investments in transportation-related industries. Richard J. Peters, one of our directors, is a managing director of Transportation Resource Partners. Mr. Peters and Roger S. Penske, Jr., our President, are each directors of Penske Corporation. Eustace W. Mita and Lucio A. Noto (two of our directors) are investors in Transportation Resource Partners. One of our directors, Hiroshi Ishikawa, serves as our Executive Vice President — International Business Development and serves in a similar capacity for Penske Corporation. Robert H. Kurnick, Jr., our Vice Chairman and a director, is also the President and a director of Penske Corporation.

We are currently a tenant under a number of non-cancelable lease agreements with Automotive Group Realty, LLC and its subsidiaries (together “AGR”), which are subsidiaries of Penske Corporation. From time to time, we may sell AGR real property and improvements that are subsequently leased by AGR to us. In addition, we may purchase real property or improvements from AGR. Each of these transactions is valued at a price that is independently confirmed. We sometimes pay to and/or receive fees from Penske Corporation and its affiliates for services rendered in the normal course of business, or to reimburse payments made to third parties on each others’ behalf. These transactions and those relating to AGR mentioned above, are reviewed periodically by our Audit Committee and reflect the provider’s cost or an amount mutually agreed upon by both parties.

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We and Penske Corporation have entered into a joint insurance agreement which provides that, with respect to our joint insurance policies (which includes our property policy), available coverage with respect to a loss shall be paid to each party as stipulated in the policies. In the event of losses by us and Penske Corporation that exceed the limit of liability for any policy or policy period, the total policy proceeds shall be allocated based on the ratio of premiums paid.

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

Joint Venture Relationships

From time to time, we enter into joint venture relationships in the ordinary course of business, through which we acquire dealerships together with other investors. We may provide these dealerships with working capital and other debt financing at costs that are based on our incremental borrowing rate. As of December 31, 2007, our joint venture relationships were as follows:

			Ownership
Location	Dealerships		Interest
Fairfield, Connecticut		Audi, Mercedes-Benz, Porsche, smart		90.00	%(A)(B)
Edison, New Jersey		Ferrari, Maserati		70.00	%(B)
Tysons Corner, Virginia		Aston Martin, Audi, Mercedes-Benz, Porsche, smart		90.00	%(B)(C)
Las Vegas, Nevada		Ferrari, Maserati		50.00	%(D)
Mentor, Ohio		Honda		75.00	%(B)
Munich, Germany		BMW, MINI		50.00	%(D)
Frankfurt, Germany		Lexus, Toyota		50.00	%(D)
Aachen, Germany		Audi, Lexus, Toyota, Volkswagen		50.00	%(D)
Mexico		Toyota		48.70	%(D)
Mexico		Toyota		45.00	%(D)

(A)	An entity controlled by one of our directors, Lucio A. Noto (the “Investor”), owns an 10.0% interest in this joint venture, which entitles the Investor to 20% of the operating profits of the dealerships owned by the joint venture. In addition, the Investor has an option to purchase up to a 20% interest in the joint venture for specified amounts.
(B)	Entity is consolidated in our financial statements.
(C)	Roger S. Penske, Jr. owns a 10% interest in this joint venture.
(D)	Entity is accounted for using the equity method of accounting.

Cyclicality

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

Seasonality

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

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Effects of Inflation

We believe that inflation rates over the last few years have not had a significant impact on revenues or profitability. We do not expect inflation to have any near-term material effects on the sale of our products and services, however, we cannot be sure there will be no such effect in the future.

We finance substantially all of our inventory through various revolving floor plan arrangements with interest rates that vary based on various benchmarks. Such rates have historically increased during periods of increasing inflation.

Forward-Looking Statements

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

•  our future financial performance;

•  future acquisitions;

•  future capital expenditures;

•  our ability to obtain cost savings and synergies;

•  our ability to respond to economic cycles;

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

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

•  our liquidity;

•  interest rates;

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

•  our business strategy.

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

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

•  because we depend on the success and popularity of the brands we sell, adverse conditions affecting one or more automobile manufacturers may negatively impact our revenues and profitability;

•  we may not be able to satisfy our capital requirements for acquisitions, dealership renovation projects or financing the purchase of our inventory;

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

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

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

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

•  because most customers finance the cost of purchasing a vehicle, increased interest rates in the U.S. or the U.K. may adversely affect our vehicle sales;

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

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

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

•  our U.K. dealerships are not afforded the same legal franchise protections as those in the U.S. so we could be subject to additional competition from other local dealerships in the U.K.;

•  our automotive dealerships are subject to environmental regulations that may result in claims and liabilities;

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

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

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

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

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

•  our operations outside of the U.S. subject our profitability to fluctuations relating to changes in foreign currency valuations especially as between the U.S. dollar and British pound;

In addition:

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

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

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

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

Interest Rates.  We are exposed to market risk from changes in interest rates on a significant portion of our outstanding indebtedness. Certain balances under our credit agreements bear interest at variable rates based on a margin over defined benchmarks. Based on the amount outstanding as of December 31, 2007, a 100 basis point change in interest rates would result in an approximate $0.2 million change to our annual interest expense.

Similarly, amounts outstanding under floor plan financing arrangements bear interest at a variable rate based on a margin over defined benchmarks. We continually evaluate our exposure to interest rate fluctuations and follow established policies and procedures to implement strategies designed to manage the amount of variable rate indebtedness outstanding at any point in time in an effort to mitigate the effect of interest rate fluctuations on our

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earnings and cash flows. We are currently party to swap agreements pursuant to which a notional $300.0 million of our floating rate floor plan debt was exchanged for fixed rate debt through January 2011. Based on an average of the aggregate amounts outstanding under our floor plan financing arrangements subject to variable interest payments during the year ended December 31, 2007, a 100 basis point change in interest rates would result in an approximate $12.5 million change to our annual interest expense.

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

Foreign Currency Exchange Rates.  As of December 31, 2007, we had dealership operations in the U.K. and Germany. In each of these markets, the local currency is the functional currency. Due to the limited number of cross border transactions we are party to and our intent to remain permanently invested in these foreign markets, we do not hedge against foreign currency fluctuations. In the event our operations change or we change our intent with respect to the investment in any of our international operations, we would expect to implement strategies designed to manage those risks in an effort to mitigate the effect of foreign currency fluctuations on our earnings and cash flows. A ten percent change in average exchange rates versus the U.S. Dollar would have resulted in an approximate $487.6 million change to our revenues for the year ended December 31, 2007.

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

Item 8.   Financial Statements and Supplementary Data

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

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

None.

Item 9A.   Controls and Procedures

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

Based upon this evaluation, and as discussed in our report, the Company’s principal executive and financial officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, we maintain internal controls designed to provide us with the information required for accounting and financial reporting purposes. There were no changes in our internal control over financial reporting that occurred during our fourth quarter of 2007 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.   Other Information

Not applicable.

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PART III

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

Securities Authorized for Issuance Under Equity Compensation Plans.

The following table provides details regarding the shares of common stock issuable upon the exercise of outstanding options, warrants and rights granted under our equity compensation plans (including individual equity compensation arrangements) as of December 31, 2007.

			Weighted-average		Number of securities remaining
	Number of securities to		exercise price of		available for future issuance
	be issued upon exercise		outstanding		under equity compensation
	of outstanding options,		options, warrants		plans (excluding securities
	warrants and rights		And rights		reflected in column (A))
Plan Category	(A)		(B)		(C)
Equity compensation plans approved by security holders		385,780		9.11		2,630,117
Equity compensation plans not approved by security holders		0		—		—
Total		385,780		9.11		2,630,117

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PART IV

Item 15.   Exhibits and Financial Statement Schedules

(1) Financial Statements

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

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

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

52

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 25, 2008.

Penske Automotive Group, Inc.

By:  /s/  Roger S. Penske

Roger S. Penske

Chairman of the Board and

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by following persons on behalf of the registrant and in the capacities and on the date indicated.

Signature	Title	Date
/s/  Roger S. Penske Roger S. Penske	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	February 25, 2008
/s/  Robert T. O’Shaughnessy Robert T. O’Shaughnessy	Executive Vice President — Finance and Chief Financial Officer (Principal Financial and Accounting Officer)	February 25, 2008
/s/  John D. Barr John D. Barr	Director	February 25, 2008
/s/  Michael R. Eisenson Michael R. Eisenson	Director	February 25, 2008
/s/  Hiroshi Ishikawa Hiroshi Ishikawa	Director	February 25, 2008
/s/  Robert H. Kurnick, Jr. Robert H. Kurnick, Jr.	Director	February 25, 2008
/s/  William J. Lovejoy William J. Lovejoy	Director	February 25, 2008
/s/  Kimberly J. McWaters Kimberly J. McWaters	Director	February 25, 2008
/s/  Eustace W. Mita Eustace W. Mita	Director	February 25, 2008

53

Signature	Title	Date
/s/  Lucio A. Noto Lucio A. Noto	Director	February 25, 2008
/s/  Richard J. Peters Richard J. Peters	Director	February 25, 2008
/s/  Ronald G. Steinhart Ronald G. Steinhart	Director	February 25, 2008
/s/  H. Brian Thompson H. Brian Thompson	Director	February 25, 2008

54

INDEX OF EXHIBITS

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

3	.1	Certificate of Incorporation (incorporated by reference to exhibit 3.2 to our Form 8-K filed on July 2, 2007).
3	.2	Bylaws (incorporated by reference to exhibit 3.1 to our Form 8-K filed on December 7, 2007).
4	.1.1	Indenture regarding our 3.5% senior subordinated convertible notes due 2026, dated January 31, 2006, by and among us, as Issuer, the subsidiary guarantors named therein and The Bank of New York Trust Company, N.A., as trustee (incorporated by reference to exhibit 4.1 to our Form 8-K filed February 2, 2006).
4	.1.2	Amended and Restated Supplemental Indenture regarding our 3.5% senior subordinated convertible notes due 2026 dated as of February 21, 2008, among us, as Issuer, and certain of our domestic subsidiaries, as Guarantors, and The Bank of New York Trust Company, N.A., as trustee.
4	.2.1	Indenture regarding our 7.75% senior subordinated notes due 2016 dated December 7, 2006, by and among us as Issuer, the subsidiary guarantors named therein and The Bank of New York Trust Company, N.A., as trustee (incorporated by reference to exhibit 4.1 to our current report on Form 8-K filed on December 12, 2006).
4	.2.2	Amended and Restated Supplemental Indenture regarding 7.75% Senior Subordinated Notes due 2016 dated February 21, 2008, among us, as Issuer, and certain of our domestic subsidiaries, as Guarantors, and Bank of New York Trust Company, N.A., as trustee.
4	.3.1	Second Amended and Restated Credit Agreement, dated as of September 8, 2004, among us, DaimlerChrysler Financial Services Americas LLC and Toyota Motor Credit Corporation (incorporated by reference to our September 8, 2004 Form 8-K).
4	.3.2	Second Amended and Restated Security Agreement dated as of September 8, 2004 among us, DaimlerChrysler Financial Services Americas LLC and Toyota Motor Credit Corporation (incorporated by reference to Exhibit 10.2 to our September 8, 2004 Form 8-K).
4	.3.3	First amendment dated April 18, 2006 to the Second Amended and Restated Credit Agreement dated September 8, 2004 by and among us, DaimlerChrysler Financial Services Americas LLC and Toyota Motor Credit Corporation (incorporated by reference from exhibit 4.1 to our 8-K filed April 18, 2006).
4	.3.4	Second amendment dated May 9, 2006 to the Second Amended and Restated Credit Agreement dated September 8, 2004 by and among us, DaimlerChrysler Financial Services Americas LLC and Toyota Motor Credit Corporation (incorporated by reference from exhibit 4.4 to our 10-Q filed May 10, 2006).
4	.3.5	Third amendment dated August 8, 2006 to the Second Amended and Restated Credit Agreement dated September 8, 2004 by and among us, DaimlerChrysler Financial Services Americas LLC and Toyota Motor Credit Corporation (incorporated by reference to exhibit 4.1 to our Form 10-Q filed on August 9, 2006).
4	.3.6	Fourth Amendment dated December 19, 2007 to the Second Amended and Restated Credit Agreement dated September 8, 2004 by and among us, DaimlerChrysler Financial Services Americas LLC and Toyota Motor Credit Corporation (incorporated by reference to exhibit 4.1 to our Form 8-K filed December 21, 2007.)
4	.5.1	Multi-Option Credit Agreement dated as of August 31, 2006 between Sytner Group Limited and The Royal Bank of Scotland, plc, as agent for National Westminster Bank Plc. (incorporated by reference to exhibit 4.1 to our Form 8-K filed on September 5, 2006).
4	.5.2	Fixed Rate Credit Agreement dated as of August 31, 2006 between Sytner Group Limited and The Royal Bank of Scotland, plc, as agent for National Westminster Bank Plc. (incorporated by reference to exhibit 4.2 to our Form 8-K filed on September 5, 2006).
4	.5.3	Seasonally Adjusted Overdraft Agreement dated as of August 31, 2006 between Sytner Group Limited and The Royal Bank of Scotland, plc, as agent for National Westminster Bank Plc. (incorporated by reference to exhibit 4.3 to our Form 8-K filed on September 5, 2006).
10	.1	Form of Dealer Agreement with Honda Automobile Division, American Honda Motor Co. (incorporated by reference to exhibit 10.2.3 to our 2001 Form 10-K).
10	.2	Form of Car Center Agreement with BMW of North America, Inc. (incorporated by reference to exhibit 10.2.5 to our 2001 Form 10-K).

55

10	.3	Form of SAV Center Agreement with BMW of North America, Inc. (incorporated by reference to exhibit 10.2.6 to our 2001 Form 10-K).
10	.4	Form of Dealership Agreement with BMW (GB) Limited
10	.5	Form of Dealer Agreement with Toyota Motor Company (incorporated by reference to exhibit 10.2.7 to our 2001 Form 10-K).
10	.6	Form of Mercedes-Benz USA, Inc. Passenger and Car Retailer Agreement (incorporated by reference to exhibit 10.2.11 to our Form 10-Q for the quarter ended March 31, 2000).
10	.7	Form of Mercedes-Benz USA, Inc. Light Truck Retailer Agreement (incorporated by reference to exhibit 10.2.12 to our Form 10-Q for the quarter ended March 31, 2000).
10	.8	Distributor Agreement dated October 31, 2006 between smart gmbh and smart USA Distributor LLC**
*10	.9	Amended and Restated Penske Automotive Group, Inc. 2002 Equity Compensation Plan.
*10	.10	Form of Restricted Stock Agreement (incorporated by reference to exhibit 10.3 to our Form 10-Q for the quarter ended June 30, 2003).
*10	.11	Amended and Restated Penske Automotive Group, Inc. Non-Employee Director Compensation Plan.
*10	.12	Penske Automotive Group, Inc. Management Incentive Plan.
10	.13.1	First Amended and Restated Limited Liability Company Agreement dated April 1, 2003 between UAG Connecticut I, LLC and Noto Holdings, LLC (incorporated by reference to exhibit 10.3 to our Form 10-Q filed May 15, 2003).
10	.13.2	Letter Agreement dated April 1, 2003 among UAG Connecticut I, LLC, Noto Holdings, LLC and the other parties named therein (incorporated by reference to exhibit 10.4 to our Form 10-Q filed May 15, 2003.
10	.13.3	Letter Agreement dated April 1, 2003 between UAG Connecticut I, LLC and Noto Holdings, LLC (incorporated by reference to exhibit 10.5 to our Form 10-Q filed May 15, 2003).
10	.14	Registration Rights Agreement among us and Penske Automotive Holdings Corp. dated as of December 22, 2000 (incorporated by reference to exhibit 10.26.1 to our Form 10-K filed February 6, 2002.
10	.15	Second Amended and Restated Registration Rights Agreement among us, Mitsui & Co., Ltd. and Mitsui & Co. (U.S.A.), Inc. dated as of March 26, 2004 (incorporated by reference to the exhibit 10.2 to our March 26, 2004 Form 8-K).
10	.16	Letter Agreement among Penske Corporation, Penske Capital Partners, L.L.C., Penske Automotive Holdings Corp., International Motor Cars Group I, L.L.C., Mitsui & Co., Ltd. and Mitsui & Co. (U.S.A.), Inc. dated April 4, 2003 (incorporated by reference to exhibit 5 to the Schedule 13D filed by Mitsui on April 10, 2003).
10	.17	Purchase Agreement by and between Mitsui & Co., Ltd., Mitsui & Co. (U.S.A.), Inc., International Motor Cars Group I, L.L.C., International Motor Cars Group II, L.L.C., Penske Corporation, Penske Automotive Holdings Corp, and Penske Automotive Group, Inc. (incorporated by reference to exhibit 10.1 to our Form 8-K filed on February 17, 2004).
10	.18	HBL, LLC Limited Liability Company Agreement dated December 31, 2001, between H.B.L. Holdings, Inc. and Roger S. Penske, Jr. (incorporated by reference to exhibit 10.28.1 to registration statement no. 333-82264 filed February 6, 2002).
10	.19	Stockholders Agreement among International Motor Cars Group II, L.L.C., Penske Automotive Holdings Corp., Penske Corporation and Mitsui & Co., Ltd. and Mitsui & Co. (USA), Inc. dated as of March 26, 2004 (incorporated by reference to exhibit 10.1 to our March 26, 2004 Form 8-K).
10	.20	VMC Holding Corporation Stockholders’ Agreement dated April 28, 2005 among VMC Holding Corporation, U.S., Transportation Resource Partners, LP., Penske Truck Leasing Co. LLP., and Opus Ventures General Partners Limited (incorporated by reference to exhibit 10.1 to our Form 10-Q filed on May 5, 2005).
10	.21	Management Services Agreement dated April 28, 2005 among VMC Acquisition Corporation, Transportation Resource Advisors LLC., Penske Truck Leasing Co. L.P. and Opus Ventures General Partner Limited (incorporated by reference to exhibit 10.1 to our Form 10-Q filed on May 5, 2005).
10	.22	Joint Insurance Agreement dated August 7, 2006 between us and Penske Corporation (incorporated by reference to exhibit 10.1 to our Form 10-Q filed August 9, 2006).

56

12		Computation of Ratio of Earnings to Fixed Charges.
21		Subsidiary List
23	.1	Consent of Deloitte & Touche LLP.
23	.2	Consent of KPMG Audit Plc.
31	.1	Rule 13(a)-14(a)/15(d)-14(a) Certification.
31	.2	Rule 13(a)-14(a)/15(d)-14(a) Certification.
32		Section 1350 Certifications.

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

57

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PENSKE AUTOMOTIVE GROUP, INC
As of December 31, 2007 and 2006 and For the Years Ended
December 31, 2007, 2006 and 2005

Management Reports on Internal Control Over Financial Reporting	F-2
Reports of Independent Registered Public Accounting Firms	F-3
Consolidated Balance Sheets	F-7
Consolidated Statements of Income	F-8
Consolidated Statements of Stockholders’ Equity and Comprehensive Income	F-9
Consolidated Statements of Cash Flows	F-10
Notes to Consolidated Financial Statements	F-11

F-1

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

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

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

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework. Based on our assessment we believe that, as of December 31, 2007, the Company’s internal control over financial reporting is effective based on those criteria.

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

Penske Automotive Group, Inc.

February 25, 2008

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

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

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

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework. Based on our assessment we believe that, as of December 31, 2007, the Company’s internal control over financial reporting is effective based on those criteria.

The Company’s independent registered public accounting firm that audited the consolidated financial statements of UAG UK Holdings Limited has issued an audit report on the effectiveness of the Company’s internal control over financial reporting. This report appears on page F-5.

UAG UK Holdings Limited

February 25, 2008

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Bloomfield Hills, Michigan

We have audited the accompanying consolidated balance sheets of Penske Automotive Group, Inc. and subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholders’ equity and comprehensive income (loss), and cash flows for each of the three years in the period ended December 31, 2007. Our audits also included the financial statement schedule listed in the Index at Item 15. We also have audited the Company’s internal control over financial reporting as of December 31, 2007 based on criteria established in the Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and financial statement schedule and an opinion on the Company’s internal control over financial reporting based on our audits. We did not audit the financial statements or the effectiveness of internal control over financial reporting of UAG UK Holdings Limited and subsidiaries (a consolidated subsidiary), which statements reflect total assets constituting 32% and 31% of consolidated total assets as of December 31, 2007 and 2006, respectively, and total revenues constituting 36%, 31%, and 29% of consolidated total revenues and income from continuing operations constituting 48%, 37% and 32% of consolidated income from continuing operations for the years ended December 31, 2007, 2006, and 2005, respectively. Those statements and the effectiveness of UAG UK Holdings Limited and subsidiaries’ internal control over financial reporting were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts and to the effectiveness of UAG UK Holdings Limited and subsidiaries’ internal control over financial reporting is based solely on the report of the other auditors.

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

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

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal

F-3

control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, based on our audits and the report of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2007 and 2006, and the results of its operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, based on our audits and (as to the amounts included for UAG UK Holdings Limited and subsidiaries) the report of the other auditors, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also, in our opinion, based on our audit and the report of the other auditors, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2006, the Company elected application of Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”.

Detroit, Michigan

February 25, 2008

F-4

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

UAG UK Holdings Limited:

We have audited the accompanying consolidated balance sheets of UAG UK Holdings Limited and subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2007. In connection with our audits of the consolidated financial statements, we also have audited the related financial statement schedule. We also have audited UAG UK Holdings Limited’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these consolidated financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule and an opinion on the Company’s internal control over financial reporting based on our audits.

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

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

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2007 and 2006, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria

F-5

established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2006, the Company elected application of Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”.

/s/  KPMG Audit Plc

Birmingham, United Kingdom

February 25, 2008

F-6

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2007		2006
	(In thousands, except
	per share amounts)
ASSETS
Cash and cash equivalents	$	10,895	$	13,147
Accounts receivable, net of allowance for doubtful accounts of $2,949 and $2,735, as of December 31, 2007 and 2006, respectively		449,278		465,579
Inventories, net		1,688,286		1,506,237
Other current assets		66,312		71,398
Assets held for sale		86,838		193,026
Total current assets		2,301,609		2,249,387
Property and equipment, net		618,491		592,718
Goodwill		1,424,853		1,274,410
Franchise value		238,706		243,635
Other assets		84,894		109,652
Total Assets	$	4,668,553	$	4,469,802
LIABILITIES AND STOCKHOLDERS’ EQUITY
Floor plan notes payable	$	1,074,820	$	872,906
Floor plan notes payable — non-trade		478,077		296,580
Accounts payable		268,214		298,066
Accrued expenses		212,601		213,957
Current portion of long-term debt		14,522		13,385
Liabilities held for sale		47,805		56,972
Total current liabilities		2,096,039		1,751,866
Long-term debt		830,106		1,168,666
Other long-term liabilities		320,949		253,617
Total Liabilities		3,247,094		3,174,149
Commitments and contingent liabilities
Stockholders’ Equity
Preferred Stock, $0.0001 par value; 100 shares authorized; none issued and outstanding		—		—
Common Stock, $0.0001 par value, 240,000 shares authorized; 95,020 shares issued and outstanding at December 31, 2007; 94,468 shares issued and outstanding at December 31, 2006		9		9
Non-voting Common Stock, $0.0001 par value, 7,125 shares authorized; none issued and outstanding		—		—
Class C Common Stock, $0.0001 par value, 20,000 shares authorized; none issued and outstanding		—		—
Additional paid-in-capital		733,896		768,794
Retained earnings		587,566		492,704
Accumulated other comprehensive income		99,988		79,379
Treasury stock, at cost; 0 and 5,306 shares at December 31, 2007 and 2006, respectively		—		(45,233	)
Total Stockholders’ Equity		1,421,459		1,295,653
Total Liabilities and Stockholders’ Equity	$	4,668,553	$	4,469,802

See Notes to Consolidated Financial Statements.

F-7

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME

	Year Ended December 31,
	2007			2006			2005
	(In thousands, except per share amounts)
Revenue:
New vehicle	$	7,008,071		$	6,185,880		$	5,511,081
Used vehicle		3,149,145			2,531,001			2,015,657
Finance and insurance, net		290,144			246,448			227,487
Service and parts		1,413,986			1,228,876			1,023,853
Fleet and wholesale		1,096,393			934,514			774,860
Total revenues		12,957,739			11,126,719			9,552,938
Cost of sales:
New vehicle		6,417,064			5,644,220			5,024,711
Used vehicle		2,898,051			2,316,748			1,836,663
Service and parts		623,585			550,520			464,490
Fleet and wholesale		1,093,830			930,967			774,086
Total cost of sales		11,032,530			9,442,455			8,099,950
Gross profit		1,925,209			1,684,264			1,452,988
Selling, general and administrative expenses		1,531,628			1,337,019			1,135,814
Depreciation and amortization		50,957			43,164			37,362
Operating income		342,624			304,081			279,812
Floor plan interest expense		(74,749	)		(59,806	)		(46,266	)
Other interest expense		(56,245	)		(49,174	)		(49,004	)
Equity in earnings of affiliates		4,084			8,201			4,271
Loss on debt redemption		(18,634	)		—			—
Income from continuing operations before income taxes and minority interests		197,080			203,302			188,813
Income taxes		(67,310	)		(68,906	)		(68,504	)
Minority interests		(1,972	)		(2,172	)		(1,814	)
Income from continuing operations		127,798			132,224			118,495
(Loss) income from discontinued operations, net of tax		(59	)		(7,523	)		478
Net income	$	127,739		$	124,701		$	118,973
Basic earnings per share:
Continuing operations	$	1.36		$	1.42		$	1.28
Discontinued operations		(0.00	)		(0.08	)		0.01
Net income	$	1.36		$	1.34		$	1.28
Shares used in determining basic earnings per share		94,104			93,393			92,832
Diluted earnings per share:
Continuing operations	$	1.35		$	1.40		$	1.26
Discontinued operations		(0.00	)		(0.08	)		0.01
Net income	$	1.35		$	1.32		$	1.27
Shares used in determining diluted earnings per share		94,558			94,178			93,932
Cash dividends per share	$	0.30		$	0.27		$	0.23

See Notes to Consolidated Financial Statements.

F-8

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

	Voting and
	Non-voting											Accumulated
	Common Stock					Additional						Other									Total
	Issued					Paid-in			Retained			Comprehensive			Unearned			Treasury			Stockholders’			Comprehensive
	Shares			Amount		Capital			Earnings			Income (Loss)			Compensation			Stock			Equity			Income
	(Dollars in thousands)
Balances, January 1, 2005		92,965,208		$	9	$	742,547		$	305,881		$	57,463		$	(4,587	)	$	(26,278	)	$	1,075,035
Equity compensation		333,164			—		5,492			—			—			(1,964	)		—			3,528
Reclassification of unamortized restricted stock expense		—			—		(6,551	)		—			—			6,551			—			—
Exercise of options, including tax benefit of $1,195		469,096			—		4,673			—			—			—			—			4,673
Dividends		—			—		—			(20,844	)		—			—			—			(20,844	)
Foreign currency translation		—			—		—			—			(39,473	)		—			—			(39,473	)	$	(39,473	)
Other		—			—		—			—			3,840			—			—			3,840			3,840
Net income		—			—		—			118,973			—			—			—			118,973			118,973
Balances, December 31, 2005		93,767,468		$	9	$	746,161		$	404,010		$	21,830		$	—		$	(26,278	)	$	1,145,732		$	83,340
Adjustment (note 1)		—			—		—			(10,792	)		—			—			—			(10,792	)
Equity compensation		226,797			—		4,564			—			—			—			—			4,564
Exercise of options, including tax benefit of $8,695		1,473,748			—		18,069			—			—			—			—			18,069
Repurchase of common stock		(1,000,000	)		—		—			—			—			—			(18,955	)		(18,955	)
Dividends		—			—		—			(25,215	)		—			—			—			(25,215	)
Foreign currency translation		—			—		—			—			53,420			—			—			53,420		$	53,420
Other		—			—		—			—			4,129			—			—			4,129			4,129
Net income		—			—		—			124,701			—			—			—			124,701			124,701
Balances, December 31, 2006		94,468,013		$	9	$	768,794		$	492,704		$	79,379		$	—		$	(45,233	)	$	1,295,653		$	182,250
Adoption of FIN 48 (note 15)		—			—		—			(4,430	)		—			—			—			(4,430	)
Equity compensation		346,265			—		7,721			—			—			—			—			7,721
Exercise of options, including tax benefit of $1,113		205,485			—		2,614			—			—			—			—			2,614
Dividends		—			—		—			(28,447	)		—			—			—			(28,447	)
Foreign currency translation		—			—		—			—			12,745			—			—			12,745		$	12,745
Other		—			—		—			—			7,864			—			—			7,864			7,864
Retirement of treasury stock		—			—		(45,233	)		—			—			—			45,233			—
Net income		—			—		—			127,739			—			—			—			127,739			127,739
Balances, December 31, 2007		95,019,763		$	9	$	733,896		$	587,566		$	99,988		$	—		$	—		$	1,421,459		$	148,348

See Notes to Consolidated Financial Statements.

F-9

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2007			2006			2005
	(In thousands)
Operating Activities:
Net income	$	127,739		$	124,701		$	118,973
Adjustments to reconcile net income to net cash from continuing operating activities:
Depreciation and amortization		50,957			43,164			37,362
Undistributed earnings of equity method investments		(4,084	)		(7,951	)		(4,271	)
Loss (Income) from discontinued operations, net of tax		59			7,523			(478	)
Loss on debt redemption		18,634			—			—
Deferred income taxes		29,744			29,947			17,381
Minority interests		1,972			2,172			1,814
Changes in operating assets and liabilities:
Accounts receivable		23,668			(49,198	)		(59,462	)
Inventories		(140,613	)		(213,665	)		23,154
Floor plan notes payable		209,556			139,874			25,555
Accounts payable and accrued expenses		(29,221	)		54,229			(19,099	)
Other		21,664			(14,719	)		28,889
Net cash from continuing operating activities		310,075			116,077			169,818
Investing Activities:
Purchase of equipment and improvements		(194,954	)		(223,967	)		(216,125	)
Proceeds from sale-leaseback transactions		131,793			106,167			118,470
Dealership acquisitions, net, including repayment of sellers floor plan notes payable of $51,904, $113,386 and $44,745, respectively		(180,721	)		(370,231	)		(125,579	)
Other		15,518			—			—
Net cash from continuing investing activities		(228,364	)		(488,031	)		(223,234	)
Financing Activities:
Proceeds from borrowings under U.S. Credit Agreement		426,900			441,500			195,000
Repayments under U.S. Credit Agreement		(426,900	)		(713,500	)		(177,800	)
Issuance of subordinated debt		—			750,000			—
Net (repayments) borrowings of other long-term debt		(34,190	)		60,928			(14,844	)
Net borrowings (repayments) of floor plan notes payable — non-trade		193,537			(54,395	)		14,900
Payment of deferred financing costs		—			(17,210	)		—
Redemption 95/8% Senior Subordinated Debt		(314,439	)		—			—
Proceeds from exercises of common stock including excess tax benefit		2,614			18,069			4,674
Repurchase of common stock		—			(18,955	)		—
Dividends		(28,447	)		(25,215	)		(20,844	)
Net cash from continuing financing activities		(180,925	)		441,222			1,086
Discontinued operations:
Net cash from discontinued operating activities		10,587			(64,009	)		(14,461	)
Net cash from discontinued investing activities		69,969			56,023			70,950
Net cash from discontinued financing activities		16,406			(55,784	)		(13,381	)
Net cash from discontinued operations		96,962			(63,770	)		43,108
Net change in cash and cash equivalents		(2,252	)		5,498			(9,222	)
Cash and cash equivalents, beginning of period		13,147			7,649			16,871
Cash and cash equivalents, end of period	$	10,895		$	13,147		$	7,649
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	138,941		$	105,787		$	98,815
Income taxes		35,054			35,230			37,461
Seller financed/assumed debt		2,992			64,168			5,300

See Notes to Consolidated Financial Statements.

F-10

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

1.   Organization and Summary of Significant Accounting Policies

Business Overview and Concentrations

Penske Automotive Group, Inc. (the “Company”) is engaged in the sale of new and used motor vehicles and related products and services, including vehicle service, parts, collision repair, finance and lease contracts, third-party insurance products and other aftermarket products. The Company operates dealerships under franchise agreements with a number of automotive manufacturers. In accordance with individual franchise agreements, each dealership is subject to certain rights and restrictions typical of the industry. The ability of the manufacturers to influence the operations of the dealerships, or the loss of a franchise agreement, could have a material impact on the Company’s operating results, financial position or cash flows. For the year ended December 31, 2007, BMW/MINI accounted for 22% of the Company’s total revenues, Toyota/Lexus brands accounted for 20%, Honda/Acura accounted for 15% and Daimler brands accounted for 11%. No other manufacturer accounted for more than 10% of our total revenue. At December 31, 2007 and 2006, the Company had receivables from manufacturers of $89,551 and $89,480, respectively. In addition, a large portion of the Company’s contracts in transit are due from manufacturers’ captive finance subsidiaries. In 2007, the Company established a wholly-owned subsidiary, smart USA Distributor LLC, which is the exclusive distributor of the smart fortwo vehicle in the U.S. and Puerto Rico.

Basis of Presentation

The consolidated financial statements include all majority-owned subsidiaries. Investments in affiliated companies, typically representing an ownership interest in the voting stock of the affiliate of between 20% and 50%, are stated at cost of acquisition plus the Company’s equity in undistributed net income since acquisition. All significant intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial statements have been updated for entities that have been treated as discontinued operations through December 31, 2007 in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

In September 2006, the SEC released Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”), which permits the Company to adjust for the cumulative effect of prior period immaterial errors in the carrying amount of assets and liabilities as of the beginning of the current fiscal year, with an offsetting adjustment to the opening balance of retained earnings in the year of adoption. SAB 108 requires the adjustment of any prior quarterly financial statements within the fiscal year of adoption for the effects of such errors on the quarters when the information is next presented. Such adjustments do not require previously filed reports with the SEC to be amended. SAB 108 was effective for the Company for the fiscal year ending December 31, 2006. As a result, the Company adjusted its opening retained earnings for fiscal 2006 and its financial results for the first three quarters of fiscal 2006 to correct errors related to operating leases with scheduled rent increases which were not accounted for on a straight line basis over the rental period. The errors, which were previously determined to be immaterial on a quantitative and qualitative basis under the Company’s assessment methodology for each individual period, impacted net income by $804 during the year ended December 31, 2005. A summary of the amounts of the errors follows:

	2006
Cumulative effect on stockholders’ equity as of January 1,	$	(10,792	)
Effect on:
Net income for the three months ended March 31,	$	(138	)
Net income for the three months ended June 30,	$	(143	)
Net income for the three months ended September 30,	$	(143	)

F-11

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

Results for the year ended December 31, 2007 include charges of $18,634 ($12,300 after-tax) relating to the redemption of the $300.0 million aggregate principal amount of 9.625% Senior Subordinated Notes and $6,267 ($4,500 after tax) relating to impairment losses. Results for the year ended December 31, 2005 include $8,163 ($5,200 after-tax) of earnings attributable to the sale of all the remaining variable profits relating to the pool of extended service contracts sold at the Company’s dealerships from 2001 through 2005.

Estimates

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

Cash and Cash Equivalents

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

Contracts in Transit

Contracts in transit represent receivables from unrelated finance companies for the portion of the vehicle purchase price financed by customers through sources arranged by the Company. Contracts in transit, included in accounts receivable, net in the Company’s consolidated balance sheets, amounted to $182,443 and $181,683 as of December 31, 2007 and 2006, respectively.

Inventory Valuation

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

Property and Equipment

Property and equipment are recorded at cost and depreciated over estimated useful lives using the straight-line method. Useful lives for purposes of computing depreciation for assets, other than leasehold improvements, are between 3 and 15 years. Leasehold improvements and equipment under capital lease are depreciated over the shorter of the term of the lease or the estimated useful life of the asset.

Expenditures relating to recurring repair and maintenance are expensed as incurred. Expenditures that increase the useful life or substantially increase the serviceability of an existing asset are capitalized. When equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the balance sheet, with any resulting gain or loss being reflected in income.

Income Taxes

Tax regulations may require items to be included in our tax return at different times than the items are reflected in our financial statements. Some of these differences are permanent, such as expenses that are not deductible on our tax return, and some are timing differences, such as the timing of depreciation expense. Timing differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that will be used as a tax deduction or credit in our tax return in future years which we have already recorded in our financial statements. Deferred tax liabilities generally represent deductions taken on our tax return that have not yet been recognized as

F-12

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

expense in our financial statements. We establish valuation allowances for our deferred tax assets if the amount of expected future taxable income is not more likely than not to allow for the use of the deduction or credit.

Intangible Assets

Our principal intangible assets relate to our franchise agreements with vehicle manufacturers, which represent the estimated value of franchises acquired in business combinations, and goodwill, which represents the excess of cost over the fair value of tangible and identified intangible assets acquired with business combinations. Intangible assets are required to be amortized over their estimated useful lives. We believe the franchise values of our dealerships have an indefinite useful life based on the following facts:

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

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

•  Certain franchise agreement terms are indefinite;

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

•  Our history shows that manufacturers have not terminated franchise agreements.

The following is a summary of the changes in the carrying amount of goodwill and franchise value during the years ended December 31, 2007 and 2006:

				Franchise
	Goodwill			Value
Balance — December 31, 2005	$	1,023,215		$	186,336
Additions		217,249			47,832
Foreign currency translation		33,946			9,467
Balance — December 31, 2006	$	1,274,410		$	243,635
Additions		104,846			41,917
Deletions		(10,254	)		(1,224	)
Reclassifications		49,248			(49,248	)
Foreign currency translation		6,603			3,626
Balance — December 31, 2007	$	1,424,853		$	238,706

As of December 31, 2007 and 2006, approximately $652,584 and $648,334, respectively, of the Company’s goodwill is deductible for tax purposes. The Company has established deferred tax liabilities related to the temporary differences arising from such tax deductible goodwill. During 2007, the Company recorded a reclassification between goodwill and franchise value to correct an immaterial error in the carrying value of franchise value recorded in connection with certain business combination transactions between 2002 and 2006.

Impairment Testing

Franchise value impairment is assessed as of October 1 every year through a comparison of its carrying amounts with its estimated fair values. An indicator of impairment exists if the carrying value of a franchise exceeds its estimated fair value and an impairment loss may be recognized up to that excess. We also evaluate our franchises in connection with the annual impairment testing to determine whether events and circumstances continue to support our assessment that the franchise has an indefinite life. Goodwill impairment is assessed at the reporting

F-13

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

unit level as of October 1 every year and upon the occurrence of an indicator of impairment. An indicator of impairment exists if the carrying amount of the reporting unit including goodwill is determined to exceed its estimated fair value. If an indication of goodwill impairment exists, the impairment is measured by comparing the estimated fair value of its reporting unit goodwill with its carrying amount and an impairment loss may be recognized up to that excess.

The fair values of franchise value and goodwill are determined using a discounted cash flow approach, which includes assumptions that include revenue and profitability growth, franchise profit margins, residual values and our cost of capital. If future events and circumstances cause significant changes in the assumptions underlying our analysis and result in a reduction of our estimates of fair value, we may incur an impairment charge.

Investments

Investments include marketable securities and investments in businesses accounted for under the equity method. The majority of the Company’s investments are in joint venture relationships. Such joint venture relationships are accounted for under the equity method, pursuant to which the Company records its proportionate share of the joint ventures’ income each period.

Investments for which there is not a liquid, actively traded market are reviewed periodically by management for indicators of impairment. If an indicator of impairment was identified, management would estimate the fair value of the investment using a discounted cash flow approach, which would include assumptions relating to revenue and profitability growth, profit margins, residual values and our cost of capital. Declines in investment values that are deemed to be other than temporary may result in an impairment charge reducing the investments’ carrying value to fair value. During 2007, the Company recorded an adjustment to the carrying value of its investment in Internet Brands to recognize an other than temporary impairment of $3,360 which became apparent upon their initial public offering.

The Company and Sirius Satellite Radio Inc. (“Sirius”) have agreed to jointly promote Sirius Satellite Radio service. Pursuant to the terms of the arrangement with Sirius, the Company’s dealerships in the U.S. endeavor to order a significant percentage of eligible vehicles with a factory installed Sirius radio. The Company and Sirius have also agreed to jointly market the Sirius service under a best efforts arrangement through January 4, 2009. The Company’s costs relating to such marketing initiatives are expensed as incurred. As compensation for its efforts, the Company received warrants to purchase shares of Sirius common stock in 2004 that are being earned ratably on an annual basis through January 2009. The Company measures the fair value of the warrants earned ratably on the date they are earned as there are no significant disincentives for non-performance. Since the Company can reasonably estimate the number of warrants being earned pursuant to the ratable schedule, the estimated fair value (based on current fair value) of these warrants is being recognized ratably during each annual period.

The Company also received the right to earn additional warrants to purchase Sirius common stock based upon the sale of certain units of specified vehicle brands through December 31, 2007. Since the Company could not reasonably estimate the number of warrants earned subject to the sale of units, the fair value of these warrants was recognized when they were earned.

As of December 31, 2007, the Company had $1,318 of investments in Sirius common stock and warrants to purchase common stock that were classified as trading securities for which unrealized gains and losses have been included in earnings. The value of Sirius stock has been and is expected to be subject to significant fluctuations, which may result in variability in the amount the Company earns under this arrangement. The warrants may be cancelled upon the termination of the arrangement.

The remaining marketable securities held by us are classified as available for sale and are stated at fair value on our balance sheet with unrealized gains and losses included in other comprehensive income (loss), a separate component of stockholders’ equity. A decline in the value of an investment that is deemed to be other than

F-14

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

temporary would be an indicator of impairment and may result in an impairment charge reducing the investment’s carrying value to fair value.

Foreign Currency Translation

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

Fair Value of Financial Instruments

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

	December 31,		December 31,
	2007		2006
$375,000, 7.75% Senior Subordinated Notes due 2016	$	361,875	$	375,468
$375,000, 3.5% Senior Subordinated Convertible Notes due 2026		373,650		433,125
Interest rate swap		176		1,369
$300,000, 9.625% Senior Subordinated Notes due 2012		—		316,050

Revenue Recognition

Vehicle, Parts and Service Sales

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

Finance and Insurance Sales

Subsequent to the sale of a vehicle to a customer, the Company sells its credit sale contracts to various financial institutions on a non-recourse basis to mitigate the risk of default. The Company receives a commission from the lender equal to either the difference between the interest rate charged to the customer and the interest rate set by the financing institution or a flat fee. The Company also receives commissions for facilitating the sale of various third-party insurance products to customers, including credit and life insurance policies and extended service contracts. These commissions are recorded as revenue at the time the customer enters into the contract. In the case of finance contracts, a customer may prepay or fail to pay their contract, thereby terminating the contract. Customers may also terminate extended service contracts and other insurance products, which are fully paid at purchase, and become eligible for refunds of unused premiums. In these circumstances, a portion of the commissions the Company received may be charged back based on the terms of the contracts. The revenue the Company records relating to

F-15

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

these transactions is net of an estimate of the amount of chargebacks the Company will be required to pay. The Company’s estimate is based upon the Company’s historical experience with similar contracts, including the impact of refinance and default rates on retail finance contracts and cancellation rates on extended service contracts and other insurance products.

Defined Contribution Plans

The Company sponsors a number of defined contribution plans covering a significant majority of the Company’s employees. Company contributions to such plans are discretionary and are based on the level of compensation and contributions by plan participants. The Company incurred expense of $11,053, $9,596 and $8,315 relating to such plans during the years ended December 31, 2007, 2006 and 2005, respectively.

Advertising

Advertising costs are expensed as incurred or when such advertising takes place. The Company incurred net advertising costs of $88,472, $85,104 and $73,506 during the years ended December 31, 2007, 2006 and 2005, respectively. Qualified advertising expenditures reimbursed by manufacturers, which are treated as a reduction of advertising expense, were $15,545, $6,955 and $7,168 during the years ended December 31, 2007, 2006 and 2005, respectively.

Self Insurance

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

Earnings Per Share

Basic earnings per share is computed using net income and the weighted average shares of voting common stock outstanding. Diluted earnings per share is computed using net income and the weighted average shares of voting common stock outstanding, adjusted for the dilutive effect of stock options and restricted stock. A reconciliation of the number of shares used in the calculation of basic and diluted earnings per share for the years ended December 31, 2007, 2006 and 2005 follows:

	Year Ended December 31,
	2007		2006		2005
Weighted average number of common shares outstanding		94,104		93,393		92,832
Effect of stock options		193		425		820
Effect of restricted stock		261		360		280
Weighted average number of common shares outstanding, including effect of dilutive securities		94,558		94,178		93,932

In addition, the Company has senior subordinated convertible notes outstanding which, under certain circumstances discussed in Note 8, may be converted to voting common stock. As of December 31, 2007 and

F-16

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

2006, no shares related to the senior subordinated convertible notes were included in the calculation of diluted earnings per share because the effect of such securities was not dilutive.

Hedging

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. Under SFAS No. 133, all derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. SFAS No. 133 defines requirements for designation and documentation of hedging relationships, as well as ongoing effectiveness assessments, which must be met in order to qualify for hedge accounting. For a derivative that does not qualify as a hedge, changes in fair value are recorded in earnings immediately. If the derivative is designated in a fair-value hedge, the changes in the fair value of the derivative and the hedged item are recorded in earnings. If the derivative is designated in a cash-flow hedge, effective changes in the fair value of the derivative are recorded in accumulated other comprehensive income (loss), a separate component of stockholders’ equity, and recorded in the income statement only when the hedged item affects earnings. Changes in the fair value of the derivative attributable to hedge ineffectiveness are recorded in earnings immediately.

Stock-Based Compensation

The Company elected to adopt SFAS No. 123(R), “Share-Based Payment,” as amended and interpreted, effective July 1, 2005. The Company utilized the modified prospective method approach, pursuant to which the Company has recorded compensation expense for all awards granted after July 1, 2005 based on their fair value. The Company’s share-based payments have generally been in the form of “non-vested shares,” the fair value of which are measured as if they were vested and issued on the grant date.

Prior to July 1, 2005, the Company accounted for stock-based compensation using the intrinsic value method pursuant to Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” During that time, the Company followed the disclosure only provisions of SFAS No. 123, “Accounting for Stock Based Compensation,” as interpreted and amended. As a result, no compensation expense was recorded with respect to option grants. Had the Company elected to recognize compensation expense for option grants using the fair value method prior to July 1, 2005, the effect on net income and basic and diluted earnings per share would not have been material for the year ended December 31, 2005. See footnote 13 for a detailed description of the Company’s stock compensation plans.

New Accounting Pronouncements

SFAS No. 157, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure requirements relating to fair value measurements. The FASB provided a one year deferral of the provisions of this pronouncement for non-financial assets and liabilities, however, the relevant provisions of SFAS 157 required by SFAS 159 must be adopted as originally scheduled. SFAS 157 thus becomes effective for our non-financial assets and liabilities on January 1, 2009. We will continue to evaluate the impact of those elements of this pronouncement.

SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115” permits entities to choose to measure many financial instruments and certain other items at fair value and consequently report unrealized gains and losses on such items in earnings. Since we will not elect the fair value option with respect to any of our current financial assets or financial liabilities when the provisions of this pronouncement become effective for us on January 1, 2008, there will be no impact upon the adoption.

F-17

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

SFAS No. 141(R) “Business Combinations” requires almost all assets acquired and liabilities assumed to be recorded at fair value as of the acquisition date, liabilities related to contingent consideration to be remeasured at fair value in each subsequent reporting period and all acquisition costs in pre-acquisition periods to be expensed. The pronouncement also clarifies the accounting under various scenarios such as step purchases or where the fair value of assets and liabilities acquired exceeds the consideration. SFAS 141(R) will be effective for us on January 1, 2009. We are currently evaluating the impact of this pronouncement.

SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements an Amendment of ARB No. 51” clarifies that a noncontrolling interest in a subsidiary must be measured at fair value and classified as a separate component of equity. This pronouncement also outlines the accounting for changes in a parent’s ownership in a subsidiary. SFAS 160 will be effective for us on January 1, 2009. We are currently evaluating the impact of this pronouncement.

2.   Equity Method Investees

The Company’s investments in companies that are accounted for on the equity method consist of the following: the Jacobs Group (50%), the Nix Group (50%), the Reisacher Group (50%), Penske Wynn Ferrari Maserati (50%), Toyota de Monterrey (48.7%), Toyota de Aguascalientes (45%), QEK Global Solutions (22.5%), National Powersports (9.4%) and Fleetwash (7%). All of these operations except QEK, Fleetwash and National Powersports are engaged in the sale and servicing of automobiles. QEK is an automotive fleet management company, Fleetwash provides vehicle fleet washing services and National Powersports provides auction services to the motorcycle, ATV and other recreational vehicle market. The Company’s investment in entities accounted for under the equity method amounted to $64,384 and $65,470 at December 31, 2007 and 2006, respectively.

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

Condensed income statement information:

	Year Ended December 31,
	2007		2006		2005
Revenues	$	1,074,144	$	927,158	$	859,324
Gross margin		199,033		172,089		163,942
Net income		7,079		17,372		9,532
Equity in net income of affiliates		4,084		8,201		4,271

Condensed balance sheet information:

	December 31,		December 31,
	2007		2006
Current assets	$	318,965	$	203,409
Noncurrent assets		284,184		245,647
Total assets	$	603,149	$	449,056
Current liabilities	$	305,607	$	202,666
Noncurrent liabilities		124,368		73,638
Equity		173,174		172,752
Total liabilities and equity	$	603,149	$	449,056

F-18

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

3.   Business Combinations

The Company acquired eleven and fifty four franchises during 2007 and 2006, respectively. The Company’s financial statements include the results of operations of the acquired dealerships from the date of acquisition. Purchase price allocations may be subject to final adjustment. Of the total amount allocated to intangible assets, approximately $4,250 and $98,000 is deductible for tax purposes as of December 31, 2007 and 2006, respectively. A summary of the aggregate purchase price allocations in each year follows:

	December 31,
	2007			2006
Accounts receivable	$	16,198		$	24,171
Inventory		68,449			165,504
Other current assets		2,979			20,197
Property and equipment		6,152			70,983
Goodwill		104,846			214,749
Franchise value		41,917			47,832
Other assets		6,921			13,813
Current liabilities		(19,219	)		(99,060	)
Non-current liabilities		(44,530	)		(23,790	)
Total purchase price		183,713			434,399
Seller financed/assumed debt		(2,992	)		(64,168	)
Cash used in dealership acquisitions	$	180,721		$	370,231

The following unaudited consolidated pro forma results of operations of the Company for the years ended December 31, 2007 and 2006 give effect to acquisitions consummated during 2007 and 2006 as if they had occurred on January 1, 2006.

	December 31,
	2007		2006
Revenues	$	13,193,063	$	12,141,566
Income from continuing operations		129,218		135,168
Net income		129,159		127,645
Income from continuing operations per diluted common share		1.37		1.44
Net income per diluted common share	$	1.37	$	1.36

4.   Discontinued Operations

The Company accounts for dispositions as discontinued operations when it is evident that the operations and cash flows of a franchise being disposed of will be eliminated from on-going operations and that the Company will not have any significant continuing involvement in its operations. In reaching the determination as to whether the cash flows of a dealership will be eliminated from ongoing operations, the Company considers whether it is likely that customers will migrate to similar franchises that it owns in the same geographic market. The Company’s consideration includes an evaluation of the brands sold at other dealerships it operates in the market and their proximity to the disposed dealership. When the Company disposes of franchises, it typically does not have continuing brand representation in that market. If the franchise being disposed of is located in a complex of Company owned dealerships, the Company does not treat the disposition as a discontinued operation if the Company believes that the cash flows previously generated by the disposed franchise will be replaced by expanded

F-19

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

operations of the remaining franchises. Combined financial information regarding dealerships accounted for as discontinued operations follows:

	Year Ended December 31,
	2007			2006			2005
Revenues	$	490,875		$	983,133		$	1,432,104
Pre-tax income (loss)		(2,250	)		(6,205	)		(3,832	)
Gain (loss) on disposal		4,044			(3,917	)		6,988

	December 31,		December 31,
	2007		2006
Inventories	$	47,502	$	120,528
Other assets		39,336		72,498
Total assets	$	86,838	$	193,026
Floor plan notes payable (including non-trade)	$	37,556	$	32,099
Other liabilities		10,249		24,873
Total liabilities	$	47,805	$	56,972

In December 2007, the Company reclassified a group of dealerships previously reported as held for sale as held and used. The Company reduced the carrying value of the assets in this group of dealerships by $2,907 of depreciation expense deferred pursuant to SFAS No. 144 which has been included in selling, general and administrative expenses. Combined financial information regarding dealerships returned to held and used status follows:

	Year Ended December 31,
	2007			2006		2005
Revenues	$	239,737		$	180,041	$	196,471
Pre-tax income (loss)		2,840			2,081		(361	)
Carrying value adjustment		(2,907	)		—		—

5.   Inventories

Inventories consisted of the following:

	December 31,		December 31,
	2007		2006
New vehicles	$	1,224,414	$	1,069,140
Used vehicles		379,986		359,629
Parts, accessories and other		83,886		77,468
Total inventories, net	$	1,688,286	$	1,506,237

The Company receives non-refundable credits from certain of its vehicle manufacturers that reduce cost of sales when the vehicles are sold. Such credits amounted to $31,555, $30,097 and $27,437 during the years ended December 31, 2007, 2006 and 2005, respectively.

F-20

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

6.   Property and Equipment

Property and equipment consisted of the following:

	December 31,
	2007			2006
Buildings and leasehold improvements	$	529,689		$	489,365
Furniture, fixtures and equipment		293,653			268,857
Total		823,342			758,222
Less: Accumulated depreciation and amortization		(204,851	)		(165,504	)
Property and equipment, net	$	618,491		$	592,718

As of December 31, 2007 and 2006, approximately $5,170 and $2,199, respectively, of capitalized interest is included in buildings and leasehold improvements and is being amortized over the useful life of the related assets.

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

The Company finances substantially all of its new and a portion of its used vehicle inventories under revolving floor plan arrangements with various lenders. In the U.S., the floor plan arrangements are due on demand; however, the Company is generally not required to repay floor plan advances prior to the sale of the vehicles that have been financed. The Company typically makes monthly interest payments on the amount financed. Outside of the U.S., substantially all of the floor plan arrangements are payable on demand or have an original maturity of 90 days or less and the Company is generally required to repay floor plan advances at the earlier of the sale of the vehicles that have been financed or the stated maturity. All of the floor plan agreements grant a security interest in substantially all of the assets of the Company’s dealership subsidiaries. Interest rates under the floor plan arrangements are variable and increase or decrease based on changes in the prime rate, defined LIBOR or Euro Interbank Offer Rate. The weighted average interest rate on floor plan borrowings, including the effect of the interest rate swap discussed in Note 9, was 5.2%, 6.1% and 5.4% for the years ended December 31, 2007, 2006 and 2005, respectively. The Company classifies floor plan notes payable to a party other than the manufacturer of a particular new vehicle, and all floor plan notes payable relating to pre-owned vehicles, as floor plan notes payable — non-trade on its consolidated balance sheets and classifies related cash flows as a financing activity on its consolidated statements of cash flows.

8.   Long-Term Debt

Long-term debt consisted of the following:

	December 31,			December 31,
	2007			2006
U.S. Credit Agreement	$	—		$	—
U.K. Credit Agreement		91,265			117,544
9.625% Senior Subordinated Notes due 2012		—			300,000
7.75% Senior Subordinated Notes due 2016		375,000			375,000
3.5% Senior Subordinated Convertible Notes due 2026		375,000			375,000
Other		3,363			14,507
Total long-term debt		844,628			1,182,051
Less: current portion		(14,522	)		(13,385	)
Net long-term debt	$	830,106		$	1,168,666

F-21

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

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

2008	$	14,522
2009		14,151
2010		14,129
2011		49,295
2012		113
2013 and thereafter		752,418
Total long-term debt	$	844,628

U.S. Credit Agreement

The Company is party to a credit agreement with DCFS USA LLC and Toyota Motor Credit Corporation, as amended (the “U.S. Credit Agreement”), which provides for up to $250,000 of borrowing capacity for working capital, acquisitions, capital expenditures, investments and for other general corporate purposes, and for an additional $10,000 of availability for letters of credit, through September 30, 2010. The revolving loans bear interest at defined LIBOR plus 1.75%.

The U.S. Credit Agreement is fully and unconditionally guaranteed on a joint and several basis by the Company’s domestic subsidiaries and contains a number of significant covenants that, among other things, restrict the Company’s ability to dispose of assets, incur additional indebtedness, repay other indebtedness, pay dividends, create liens on assets, make investments or acquisitions and engage in mergers or consolidations. The Company is also required to comply with specified financial and other tests and ratios, each as defined in the U.S. Credit Agreement, including: a ratio of current assets to current liabilities, a fixed charge coverage ratio, a ratio of debt to stockholders’ equity, a ratio of debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”), a ratio of domestic debt to domestic EBITDA, and a measurement of stockholders’ equity. A breach of these requirements would give rise to certain remedies under the agreement, the most severe of which is the termination of the agreement and acceleration of the amounts owed. As of December 31, 2007, the Company was in compliance with all covenants under the U.S. Credit Agreement.

The U.S. Credit Agreement also contains typical events of default, including change of control, non-payment of obligations and cross-defaults to the Company’s other material indebtedness. Substantially all of the Company’s domestic assets not pledged as security under floor plan arrangements are subject to security interests granted to lenders under the U.S. Credit Agreement. Other than $500 of letters of credit 2007, no other amounts were outstanding under this facility as of December 31, 2007.

U.K. Credit Agreement

The Company’s subsidiaries in the U.K. (the “U.K. Subsidiaries”) are party to an agreement with the Royal Bank of Scotland plc, as agent for National Westminster Bank plc, which provides for a multi-option credit agreement, a fixed rate credit agreement and a seasonally adjusted overdraft line of credit (collectively, the “U.K. Credit Agreement”) to be used to finance acquisitions, working capital, and general corporate purposes. The U.K. Credit Agreement provides for (1) up to £70,000 in revolving loans through August 31, 2011, which have an original maturity of 90 days or less and bear interest between defined LIBOR plus 0.65% and defined LIBOR plus 1.25%, (2) a £30,000 funded term loan which bears interest between 5.94% and 6.54% and is payable ratably in quarterly intervals through June 30, 2011, and (3) a seasonally adjusted overdraft line of credit for up to £30,000 that bears interest at the Bank of England Base Rate plus 1.00% and matures on August 31, 2011.

The U.K. Credit Agreement is fully and unconditionally guaranteed on a joint and several basis by the U.K. Subsidiaries, and contains a number of significant covenants that, among other things, restrict the ability of the U.K.

F-22

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

Subsidiaries to pay dividends, dispose of assets, incur additional indebtedness, repay other indebtedness, create liens on assets, make investments or acquisitions and engage in mergers or consolidations. In addition, the U.K. Subsidiaries are required to comply with specified ratios and tests, each as defined in the U.K. Credit Agreement, including: a ratio of earnings before interest and taxes plus rental payments to interest plus rental payments (as defined), a measurement of maximum capital expenditures, and a debt to EBITDA ratio (as defined). A breach of these requirements would give rise to certain remedies under the agreement, the most severe of which is the termination of the agreement and acceleration of the amounts owed. As of December 31, 2007, the Company was in compliance with all covenants under the U.K. Credit Agreement.

The U.K. Credit Agreement also contains typical events of default, including change of control and non-payment of obligations and cross-defaults to other material indebtedness of the U.K. Subsidiaries. Substantially all of the U.K. Subsidiaries’ assets not pledged as security under floor plan arrangements are subject to security interests granted to lenders under the U.K. Credit Agreement. As of December 31, 2007, outstanding loans under the U.K. Credit Agreement amounted to £45,931 ($91,265).

7.75% Senior Subordinated Notes

On December 7, 2006, the Company issued $375,000 aggregate principal amount of 7.75% senior subordinated notes (the “7.75% Notes”) due 2016. The 7.75% Notes are unsecured senior subordinated notes and are subordinate to all existing and future senior debt, including debt under the Company’s credit agreements and floor plan indebtedness. The 7.75% Notes are guaranteed by substantially all wholly-owned domestic subsidiaries on a senior subordinated basis. Those guarantees are full and unconditional and joint and several. The Company can redeem all or some of the 7.75% Notes at its option beginning in December 2011 at specified redemption prices, or prior to December 2011 at 100% of the principal amount of the notes plus an applicable “make-whole” premium, as defined. In addition, the Company may redeem up to 40% of the 7.75% Notes at specified redemption prices using the proceeds of certain equity offerings before December 15, 2009. Upon certain sales of assets or specific kinds of changes of control the Company is required to make an offer to purchase the 7.75% Notes. The 7.75% Notes also contain customary negative covenants and events of default. As of December 31, 2007, the Company was in compliance with all negative covenants and there were no events of default.

Senior Subordinated Convertible Notes

On January 31, 2006, the Company issued $375,000 aggregate principal amount of 3.50% senior subordinated convertible notes due 2026 (the “Convertible Notes”). The Convertible Notes mature on April 1, 2026, unless earlier converted, redeemed or purchased by the Company. The Convertible Notes are unsecured senior subordinated obligations and are guaranteed on an unsecured senior subordinated basis by substantially all of the Company’s wholly owned domestic subsidiaries. Those guarantees are full and unconditional and joint and several. The Convertible Notes also contain customary negative covenants and events of default. As of December 31, 2007, the Company was in compliance with all negative covenants and there were no events of default.

Holders of the convertible notes may convert them based on a conversion rate of 42.2052 shares of common stock per $1,000 principal amount of the Convertible Notes (which is equal to an initial conversion price of approximately $23.69 per share), subject to adjustment, only under the following circumstances: (1) in any quarterly period commencing after March 31, 2006, if the closing price of the common stock for twenty of the last thirty trading days in the prior quarter exceeds $28.43 (subject to adjustment), (2) for specified periods, if the trading price of the Convertible Notes falls below specific thresholds, (3) if the Convertible Notes are called for redemption, (4) if specified distributions to holders of the common stock are made or specified corporate transactions occur, (5) if a fundamental change (as defined) occurs, or (6) during the ten trading days prior to, but excluding, the maturity date.

F-23

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

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

In the event of a conversion due to a change of control on or before April 6, 2011, the Company will pay, to the extent described in the indenture, a make-whole premium by increasing the conversion rate applicable to such Convertible Notes. In addition, the Company will pay contingent interest in cash, commencing with any six-month period from April 1 to September 30 and from October 1 to March 31, beginning on April 1, 2011, if the average trading price of a Convertible Note for the five trading days ending on the third trading day immediately preceding the first day of that six-month period equals 120% or more of the principal amount of the Convertible Note.

On or after April 6, 2011, the Company may redeem the Convertible Notes, in whole at any time or in part from time to time, for cash at a redemption price of 100% of the principal amount of the Convertible Notes to be redeemed, plus any accrued and unpaid interest to the applicable redemption date. Holders of the Convertible Notes may require the Company to purchase all or a portion of their Convertible Notes for cash on each of April 1, 2011, April 1, 2016 and April 1, 2021 at a purchase price equal to 100% of the principal amount of the Convertible Notes to be purchased, plus accrued and unpaid interest, if any, to the applicable purchase date.

9.625% Senior Subordinated Notes

In March 2007, the Company redeemed its $300,000 aggregate principal amount of 9.625% senior subordinated notes due 2012 (the “9.625% Notes”) at a price of 104.813%. The 9.625% Notes were unsecured senior subordinated notes and were subordinate to all existing senior debt, including debt under the Company’s credit agreements and floor plan indebtedness. The Company incurred an $18,634 pre-tax charge in connection with the redemption, consisting of a $14,439 redemption premium and the write-off of $4,195 of unamortized deferred financing costs.

9.   Interest Rate Swaps

The Company was party to an interest rate swap agreement through January 2008, pursuant to which a notional $200,000 of its U.S. floating rate debt was exchanged for fixed rate debt. The swap was designated as a cash flow hedge of future interest payments of the LIBOR based U.S. floor plan borrowings. During the year ended December 31, 2007, the swap reduced the weighted average interest rate on floor plan borrowings by approximately 0.1%. As of December 31, 2007, the Company expects approximately $19 associated with the swap to be recognized as a reduction of interest expense in January of 2008.

In January 2008, we entered into new three year interest rate swap agreements pursuant to which the LIBOR portion of $300.0 million of our U.S. floating rate floor plan debt was fixed at 3.67%. Under this arrangement, we will receive from or pay to, the counterparty the difference between the LIBOR interest cost for $300.0 million, and 3.67%. This arrangement is in effect through January 2011 or earlier termination of the arrangement. We may terminate this arrangement at any time, subject to the settlement at that time of the future value of the swap arrangement. The swap is designated as a cash flow hedge of future interest payments of LIBOR based U.S. floor plan borrowings.

10.   Off-Balance Sheet Arrangements

The Convertible Notes are convertible into shares of the Company’s common stock, at the option of the holder, as described in Note 8. Certain of these conditions are linked to the market value of the common stock. This type of

F-24

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

financing arrangement was selected in order to achieve a more favorable interest rate (as opposed to other forms of available financing). Since the Company or the holders of the Convertible Notes can redeem these notes on or after April, 2011, a conversion or a redemption of these notes is likely to occur in 2011. The repayment will include cash for the principal amount of the Convertible Notes then outstanding plus an amount payable in either cash or stock, at the Company’s option, depending on the trading price of the common stock.

11.   Commitments and Contingent Liabilities

The Company is involved in litigation which may relate to issues with customers, employment related matters, class action claims, purported class action claims, and claims brought by governmental authorities. As of December 31, 2007, the Company is not party to any legal proceedings, including class action lawsuits to which it is a party, that, individually or in the aggregate, are reasonably expected to have a material adverse effect on the Company’s results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on the Company’s results of operations, financial condition or cash flows.

The Company is party to a joint venture agreement with respect to one of the Company’s franchises pursuant to which the Company is required to repurchase its partner’s interest in July 2008. The Company expects this payment to be approximately $4.9 million.

The Company leases the majority of its dealership facilities and corporate offices under non-cancelable operating lease agreements with expiration dates through 2062, including all option periods available to the Company. The Company’s lease arrangements typically allow for a base term with options for extension in the Company’s favor and include escalation clauses tied to the Consumer Price Index.

Minimum future rental payments required under non-cancelable operating leases in effect as of December 31, 2007 are as follows:

2008	$	167,640
2009		165,159
2010		162,914
2011		161,755
2012		159,834
2013 and thereafter		3,955,085
	$	4,772,387

Rent expense for the years ended December 31, 2007, 2006 and 2005 amounted to $152,267, $132,569 and $106,892, respectively. A number of the dealership leases are with former owners who continue to operate the dealerships as employees of the Company or with other affiliated entities. Of the total rental payments, $455, $9,860 and $10,200, respectively, were made to related parties during 2007, 2006, and 2005, respectively (See Note 12).

12.   Related Party Transactions

The Company currently is a tenant under a number of non-cancelable lease agreements with Automotive Group Realty, LLC and its subsidiaries (together “AGR”), which are subsidiaries of Penske Corporation. During the years ended December 31, 2007, 2006 and 2005, the Company paid $455, $4,160 and $4,700, respectively, to AGR under these lease agreements. From time to time, we may sell AGR real property and improvements that are subsequently leased by AGR to us. In addition, we may purchase real property or improvements from AGR. Each of these transactions is valued at a price that is independently confirmed. During the years ended December 31, 2006

F-25

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

and 2005, the Company sold AGR real property and/or improvements for $132 and $43,874, respectively, which were subsequently leased by AGR to the Company. There were no gains or losses associated with such sales. During the year ended December 31, 2006, the Company purchased $25,630 of real property and improvements from AGR. There were no purchase or sale transactions with AGR in 2007. The Company is also currently a tenant under a number of non-cancelable lease agreements with former owners who continue to operate the dealerships as employees of the Company or with other affiliated entities.

The Company sometimes pays to and/or receives fees from Penske Corporation and its affiliates for services rendered in the normal course of business, or to reimburse payments made to third parties on each others’ behalf. These transactions and those relating to AGR mentioned above, reflect the provider’s cost or an amount mutually agreed upon by both parties. During the years ended December 31, 2007, 2006 and 2005, Penske Corporation and its affiliates billed the Company $3,989, $5,396 and $6,108, respectively, and the Company billed Penske Corporation and its affiliates $105, $223 and $96 , respectively, for such services. As of December 31, 2007 and 2006, the Company had $4 and $10 of receivables from and $358 and $824 of payables to Penske Corporation and its subsidiaries, respectively.

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

From time to time the Company enters into joint venture relationships in the ordinary course of business, pursuant to which it acquires dealerships together with other investors. The Company may also provide these ventures with working capital and other debt financing at costs that are based on the Company’s incremental borrowing rate. As of December 31, 2007, the Company’s joint venture relationships are as follows:

			Ownership
Location	Dealerships		Interest
Fairfield, Connecticut		Mercedes-Benz, Audi, Porsche, smart		90.00	%(A)(B)
Edison, New Jersey		Ferrari, Maserati		70.00	%(B)
Tysons Corner, Virginia		Aston Martin, Audi, Mercedes-Benz, Porsche, smart		90.00	%(B)(C)
Las Vegas, Nevada		Ferrari, Maserati		50.00	%(D)
Mentor, Ohio		Honda		75.00	%(B)
Munich, Germany		BMW, MINI		50.00	%(D)
Frankfurt, Germany		Lexus, Toyota		50.00	%(D)
Achen, Germany		Audi, Lexus, Toyota, Volkswagen		50.00	%(D)
Mexico		Toyota		48.70	%(D)
Mexico		Toyota		45.00	%(D)

(A)	An entity controlled by one of the Company’s directors (the “Investor”), owns an 10.0% interest in this joint venture which entitles the Investor to 20% of the operating profits of the joint venture. In addition, the Investor has an option to purchase up to a 20% interest in the joint venture for specified amounts.
(B)	Entity is consolidated in the Company’s financial statements.
(C)	Roger S. Penske, Jr. owns a 10% interest in this joint venture.
(D)	Entity is accounted for using the equity method of accounting.

F-26

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

13.   Stock-Based Compensation

Key employees, outside directors, consultants and advisors of the Company are eligible to receive stock-based compensation pursuant to the terms of the Company’s 2002 Equity Compensation Plan (the “Plan”). The Plan originally allowed for the issuance of 4,200 shares for stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and other awards. As of December 31, 2007, 2,630 shares of common stock were available for grant under the Plan. Compensation expense related to the Plan was $5,045, $3,610, and $3,217 during the years ended December 31, 2007, 2006 and 2005, respectively.

Restricted Stock

During 2007, 2006 and 2005, the Company granted 269, 245 and 362 shares, respectively, of restricted common stock at no cost to participants under the Plan. The restricted stock entitles the participants to vote their respective shares and receive dividends. The shares are subject to forfeiture and are non-transferable, which restrictions generally lapse over a four year period from the grant date. The grant date quoted market price of the underlying common stock is amortized to expense over the restriction period. As of December 31, 2007, there was $9,240 of total unrecognized compensation cost related to the restricted stock. That cost is expected to be recognized over the next 3.5 years.

Presented below is a summary of the status of the Company’s restricted stock as of December 31, 2006 and changes during the year ended December 31, 2007:

				Weighted Average
	Shares			Grant-Date Fair Value		Intrinsic Value
January 1, 2007		674		$	17.38	$	15,900
Granted		269			21.54
Vested		(211	)		16.73
Forfeited		(27	)		18.25
December 31, 2007		705		$	19.24	$	12,300

Stock Options

The Company granted options to purchase 30 shares of common stock to participants under the Plan during 2005. The options generally vested over a three year period and had a maximum term of ten years. The Company did not grant any options to purchase shares of common stock during either 2007 or 2006. The fair value of each grant was calculated with the following weighted average assumptions:

Expected dividend yield	1.3	%
Risk free interest rates	4.00	%
Expected life	5.0 years
Expected volatility	33.00	%

The weighted average fair value of options granted was $9.35 per share for the year ended December 31, 2005.

F-27

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

Presented below is a summary of the status of stock options held by participants during 2007, 2006 and 2005:

	2007				2006				2005
			Weighted				Weighted				Weighted
			Average				Average				Average
			Exercise				Exercise				Exercise
Stock Options	Shares		Price		Shares		Price		Shares		Price
Options outstanding at beginning of year		733	$	8.40		1,406	$	8.20		1,884	$	8.17
Granted		—		—		—		—		30		14.86
Exercised		205		7.30		673		7.98		469		8.56
Forfeited		142		8.05		—		—		39		8.14
Options outstanding at end of year		386	$	9.11		733	$	8.40		1,406	$	8.20

The following table summarizes the status of stock options outstanding and exercisable for the year ended December 31, 2007:

			Weighted		Weighted				Weighted
	Stock		Average		Average		Stock		Average
	Options		Remaining		Exercise		Options		Exercise
Range of Exercise Prices	Outstanding		Contractual Life		Price		Exercisable		Price
$3 to $6		96		3.1	$	4.80		96	$	4.80
6 to 16		290		4.2		10.53		290		10.53
		386						386

During 2006, options to purchase 800 shares of common stock with an exercise price of $5.00 per share were exercised that were issued outside of the Plan in 1999. As of December 31, 2007, no options issued outside of the Plan were outstanding.

14.   Stockholders’ Equity

Accumulated Other Comprehensive Income

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

							Accumulated
							Other
	Currency						Comprehensive
	Translation			Other			Income
Balance at December 31, 2004	$	64,349		$	(6,886	)	$	57,463
Change		(39,473	)		3,840			(35,633	)
Balance at December 31, 2005		24,876			(3,046	)		21,830
Change		53,420			4,129			57,549
Balance at December 31, 2006		78,296			1,083			79,379
Change		12,648			7,961			20,609
Balance at December 31, 2007	$	90,944		$	9,044		$	99,988

Other Transactions

On January 26, 2006, the Company repurchased 1,000 shares of our outstanding common stock for $18,960, or $18.96 per share.

F-28

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

15.   Income Taxes

The income tax provision relating to income from continuing operations consisted of the following:

	Year Ended December 31,
	2007		2006		2005
Current:
Federal	$	10,254	$	15,812	$	22,420
State and local		2,961		4,092		4,515
Foreign		24,351		19,055		24,188
Total current		37,566		38,959		51,123
Deferred:
Federal		19,729		22,617		17,321
State and local		3,937		2,903		3,283
Foreign		6,078		4,427		(3,223	)
Total deferred		29,744		29,947		17,381
Income tax provision relating to continuing operations	$	67,310	$	68,906	$	68,504

The income tax provision relating to income from continuing operations varied from the U.S. federal statutory income tax rate due to the following:

	Year Ended December 31,
	2007			2006			2005
Income tax provision relating to continuing operations at federal statutory rate of 35%	$	68,976		$	71,143		$	66,088
State and local income taxes, net of federal benefit		4,358			3,873			4,928
Foreign		(4,553	)		(6,671	)		(3,961	)
Other		(1,471	)		561			1,449
Income tax provision relating to continuing operations	$	67,310		$	68,906		$	68,504

F-29

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

The components of deferred tax assets and liabilities at December 31, 2007 and 2006 were as follows:

	2007			2006
Deferred Tax Assets
Accrued liabilities	$	29,424		$	34,603
Net operating loss carryforwards		8,154			8,615
Interest rate swap		384			1,929
Other		5,508			6,209
Total deferred tax assets		43,470			51,356
Valuation allowance		(2,337	)		(3,943	)
Net deferred tax assets		41,133			47,413
Deferred Tax Liabilities
Depreciation and amortization		(189,595	)		(135,411	)
Partnership investments		(16,412	)		(16,379	)
Other		(16,253	)		(7,484	)
Total deferred tax liabilities		(222,260	)		(159,274	)
Net deferred tax liabilities	$	(181,127	)	$	(111,861	)

During 2007, the Company corrected an immaterial error in deferred tax liabilities to correctly reflect the tax effect of franchise value.

FASB Interpretation (“FIN”) No. 48 “ Accounting for Uncertainty in Income Taxes” clarifies the accounting for uncertain tax positions, prescribing a minimum recognition threshold a tax position is required to meet before being recognized, and providing guidance on the derecognition, measurement, classification and disclosure relating to income taxes. The Company adopted FIN No. 48 as of January 1, 2007, pursuant to which the Company recorded a $4,430 increase in the liability for unrecognized tax benefits, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings.

The movement in uncertain tax positions for the year ended December 31, 2007 was as follows

Uncertain tax positions — January 1, 2007	$	39,339
Gross increase — tax position in prior periods		10,087
Gross decrease — tax position in prior periods		(498	)
Gross increase — current period tax position		433
Settlements		(3,872	)
Lapse in statute of limitations		(2,156	)
Uncertain tax positions — December 31, 2007	$	43,333

The portion of the total amount of uncertain tax positions that, if recognized, would impact the effective tax rate was $25,777. The Company has elected to include interest and penalties in its income tax expense. The total interest and penalties included within uncertain tax positions at December 31, 2007 was $7,947. We do not expect a significant change to the amount of uncertain tax positions within the next twelve months. The Company’s U.S. federal returns remain open to examination from 2004 through 2006. Various foreign and U.S. states jurisdictions are open from 2002 through 2006.

The Company does not provide for U.S. taxes relating to the undistributed earnings or losses of its foreign subsidiaries. Income from continuing operations before income taxes of foreign subsidiaries (which subsidiaries are

F-30

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

predominately in the United Kingdom) was $103,395 $84,635 and $70,468 during the years ended December 31, 2007, 2006 and 2005, respectively. It is the Company’s belief that such earnings will be indefinitely reinvested in

F-30.1

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

the companies that produced them. At December 31, 2007, the Company has not provided U.S. federal income taxes on a total of $373,306 of earnings of individual foreign subsidiaries. If these earnings were remitted as dividends, the Company would be subject to U.S. income taxes and certain foreign withholding taxes.

At December 31, 2007, the Company has $97,768 of state net operating loss carryforwards in the U.S. that expire at various dates through 2026, U.S. state credit carryforwards of $1,526 that will not expire, a U.K. net operating loss carryforward of $8,653 that will not expire, and a U.K. capital loss of $2,361 that will not expire. During 2006, a German net operating loss of $1,865 was fully utilized.

A valuation allowance of $2,308 has been recorded against the state net operating loss carryforwards in the U.S. and a valuation allowance of $29 has been recorded against the U.S. state credit carryforwards. In 2006, a valuation allowance of $692 was removed due to the utilization of a German net operating loss.

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

16.   Segment Information

The Company has two reportable operating segments as defined in SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information”: (i) Retail and (ii) Distribution. The Company’s operations are organized by management by line of business and geography. The Retail segment includes all automotive dealerships, regardless of geography, and includes all departments relevant to the operation of the dealerships. We believe the dealership operations included in the Retail segment are one reportable segment as their operations (i) have similar economic characteristics (all are automotive dealerships having similar margins), (ii) offer similar products and services (all sell new and used vehicles, service, parts and third-party finance and insurance products), (iii) have similar target markets and customers (generally individuals) and (iv) have similar distribution and marketing practices (all distribute products and services through dealership facilities that market to customers in similar fashions.) The Distribution segment includes the distribution of smart vehicles, parts and accessories in the U.S. and Puerto Rico. The accounting policies of both segments are the same and are described in Note 1. At December 31, 2007, the Distribution segment’s financial position and results of operations are immaterial due to the fact that the smart distribution business was being developed during 2007. Vehicles will be distributed in 2008, at which time the Company will disclose additional information about the Distribution segment. During 2007, the Company incurred $5,458 of expenses relating to the establishment of the Distribution segment and has $5,189 invested in the Distribution segment as of December 31, 2007.

The following table presents certain data by geographic area:

	Year Ended December 31,
	2007		2006		2005
Sales to external customers:
United States	$	8,081,687	$	7,526,115	$	6,703,764
Foreign		4,876,052		3,600,604		2,849,174
Total sales to external customers	$	12,957,739	$	11,126,719	$	9,552,938
Long-lived assets, net:
United States	$	460,493	$	466,193
Foreign		242,892		236,177
Total long-lived assets	$	703,385	$	702,370

The Company’s foreign operations are predominantly based in the United Kingdom.

F-31

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

17.   Summary of Quarterly Financial Data (Unaudited)

	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
2007(1)(2)(3)
Total revenues	$	3,092,938	$	3,377,978	$	3,405,685	$	3,081,138
Gross profit		463,847		494,579		502,825		463,958
Net income		14,582		40,349		43,400		29,408
Diluted earnings per share	$	0.15	$	0.43	$	0.46	$	0.31

	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
2006(1)(2)(4)
Total revenues	$	2,521,439	$	2,802,717	$	2,941,790	$	2,860,773
Gross profit		393,139		423,025		438,941		429,159
Net income		23,955		36,693		33,730		30,323
Diluted earnings per share	$	0.25	$	0.39	$	0.36	$	0.32

(1)	As discussed in Note 4, the Company has treated the operations of certain entities as discontinued operations. The results for all periods have been restated to reflect such treatment.
(2)	Per share amounts are calculated independently for each of the quarters presented. The sum of the quarters may not equal the full year per share amounts due to rounding.
(3)	Results for the year ended December 31, 2007 include charges of $18,634 ($12,300 after-tax) relating to the redemption of $300.0 million aggregate principal amount of 9.625% Senior Subordinated Notes during the first quarter and $6,267 ($4,500 after tax) relating to impairment losses during the fourth quarter.
(4)	As discussed in Note 1, the Company adjusted its financial results for the first three quarters of fiscal 2006 in accordance with SAB 108.

F-32

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

18.   Condensed Consolidating Financial Information

The following tables include condensed consolidating financial information as of December 31, 2007 and 2006 and for the years ended December 31, 2007, 2006, and 2005 for Penske Automotive Group, Inc.’s (as the issuer of the Convertible Notes and the 7.75% Notes), guarantor subsidiaries and non-guarantor subsidiaries (primarily representing foreign entities). The condensed consolidating financial information includes certain allocations of balance sheet, income statement and cash flow items which are not necessarily indicative of the financial position, results of operations or cash flows of these entities on a stand-alone basis. The 2006 and 2005 condensed consolidating financial statements have been restated for an immaterial error relating to the presentation of long-term debt.

CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2007

						Penske				Non-
	Total					Automotive		Guarantor		Guarantor
	Company		Eliminations			Group, Inc.		Subsidiaries		Subsidiaries
	(In Thousands)
Cash and cash equivalents	$	10,895	$	—		$	—	$	—	$	10,895
Accounts receivable, net		449,278		(210,645	)		210,945		289,939		159,039
Inventories, net		1,688,286		—			—		924,632		763,654
Other current assets		66,312		—			3,849		27,958		34,505
Assets held for sale		86,838		—			—		75,861		10,977
Total current assets		2,301,609		(210,645	)		214,794		1,318,390		979,070
Property and equipment, net		618,491		—			4,617		345,087		268,787
Intangible assets		1,663,559		—			—		1,062,014		601,545
Other assets		84,894		(1,951,050	)		1,956,788		12,395		66,761
Total assets	$	4,668,553	$	(2,161,695	)	$	2,176,199	$	2,737,886	$	1,916,163
Floor plan notes payable	$	1,074,820	$	—		$	—	$	569,259	$	505,561
Floor plan notes payable — non-trade		478,077		—			—		293,269		184,808
Accounts payable		268,214		—			4,550		96,562		167,102
Accrued expenses		212,601		(210,645	)		190		64,037		359,019
Current portion of long-term debt		14,522		—			—		496		14,026
Liabilities held for sale		47,805		—			—		34,112		13,693
Total current liabilities		2,096,039		(210,645	)		4,740		1,057,735		1,244,209
Long-term debt		830,106		(237,616	)		750,000		2,548		315,174
Other long-term liabilities		320,949		—			—		288,647		32,302
Total liabilities		3,247,094		(448,261	)		754,740		1,348,930		1,591,685
Total stockholders’ equity		1,421,459		(1,713,434	)		1,421,459		1,388,956		324,478
Total liabilities and stockholders’ equity	$	4,668,553	$	(2,161,695	)	$	2,176,199	$	2,737,886	$	1,916,163

F-33

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2006

						Penske				Non-
	Total					Automotive		Guarantor		Guarantor
	Company		Eliminations			Group, Inc.		Subsidiaries		Subsidiaries
	(In Thousands)
Cash and cash equivalents	$	13,147	$	—		$	—	$	2,419	$	10,728
Accounts receivable, net		465,579		(200,621	)		200,621		291,202		174,377
Inventories, net		1,506,237		—			—		773,146		733,091
Other current assets		71,398		—			9,426		23,328		38,644
Assets held for sale		193,026		—			—		178,079		14,947
Total current assets		2,249,387		(200,621	)		210,047		1,268,174		971,787
Property and equipment, net		592,718		—			3,824		329,008		259,886
Intangible assets		1,518,045		—			—		954,120		563,925
Other assets		109,652		(2,128,710	)		2,134,547		42,341		61,474
Total assets	$	4,469,802	$	(2,329,331	)	$	2,348,418	$	2,593,643	$	1,857,072
Floor plan notes payable	$	872,906	$	—		$	—	$	414,648	$	458,258
Floor plan notes payable — non-trade		296,580		—			—		102,810		193,770
Accounts payable		298,066		—			2,738		99,802		195,526
Accrued expenses		213,957		(200,621	)		27		97,803		316,748
Current portion of long-term debt		13,385		—			—		3,057		10,328
Liabilities held for sale		56,972		—			—		37,979		18,993
Total current liabilities		1,751,866		(200,621	)		2,765		756,099		1,193,623
Long-term debt		1,168,666		(259,706	)		1,050,000		931		377,441
Other long-term liabilities		253,617		—			—		238,258		15,359
Total liabilities		3,174,149		(460,327	)		1,052,765		995,288		1,586,423
Total stockholders’ equity		1,295,653		(1,869,004	)		1,295,653		1,598,355		270,649
Total liabilities and stockholders’ equity	$	4,469,802	$	(2,329,331	)	$	2,348,418	$	2,593,643	$	1,857,072

F-34

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

CONDENSED CONSOLIDATING STATEMENT OF INCOME
Year Ended December 31, 2007

							Penske						Non-
	Total						Automotive			Guarantor			Guarantor
	Company			Eliminations			Group, Inc.			Subsidiaries			Subsidiaries
	(In Thousands)
Revenues	$	12,957,739		$	—		$	—		$	7,223,492		$	5,734,247
Cost of sales		11,032,530			—			—			6,113,259			4,919,271
Gross profit		1,925,209			—			—			1,110,233			814,976
Selling, general, and administrative expenses		1,531,628			—			16,529			883,150			631,949
Depreciation and amortization		50,957			—			1,166			26,993			22,798
Operating income (loss)		342,624			—			(17,695	)		200,090			160,229
Floor plan interest expense		(74,749	)		—			—			(43,589	)		(31,160	)
Other interest expense		(56,245	)		—			(31,509	)		—			(24,736	)
Equity in earnings of affiliates		4,084			—			—			—			4,084
Loss on Debt Redemption		(18,634	)		—			(18,634	)		—			—
Equity in earnings of subsidiaries		—			(262,946	)		262,946			—			—
Income (loss) from continuing operations before income taxes and minority interests		197,080			(262,946	)		195,108			156,501			108,417
Income taxes		(67,310	)		90,713			(67,310	)		(56,474	)		(34,239	)
Minority interests		(1,972	)		—			—			—			(1,972	)
Income (loss) from continuing operations		127,798			(172,233	)		127,798			100,027			72,206
Loss from discontinued operations, net of tax		(59	)		59			(59	)		(212	)		153
Net income (loss)	$	127,739		$	(172,174	)	$	127,739		$	99,815		$	72,359

F-35

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

CONDENSED CONSOLIDATING STATEMENT OF INCOME
Year Ended December 31, 2006

							Penske						Non-
	Total						Automotive			Guarantor			Guarantor
	Company			Eliminations			Group, Inc.			Subsidiaries			Subsidiaries
	(In Thousands)
Revenues	$	11,126,719		$	—		$	—		$	6,675,232		$	4,451,487
Cost of sales		9,442,455			—			—			5,639,766			3,802,689
Gross profit		1,684,264			—			—			1,035,466			648,798
Selling, general, and administrative expenses		1,337,019			—			15,153			813,317			508,549
Depreciation and amortization		43,164			—			1,427			23,632			18,105
Operating income (loss)		304,081			—			(16,580	)		198,517			122,144
Floor plan interest expense		(59,806	)		—			—			(39,056	)		(20,750	)
Other interest expense		(49,174	)		—			(29,624	)		—			(19,550	)
Equity in earnings of affiliates		8,201			—			—			—			8,201
Equity in earnings of subsidiaries		—			(247,334	)		247,334			—			—
Income (loss) from continuing operations before income taxes and minority interests		203,302			(247,334	)		201,130			159,461			90,045
Income taxes		(68,906	)		84,735			(68,906	)		(56,314	)		(28,421	)
Minority interests		(2,172	)		—			—			—			(2,172	)
Income (loss) from continuing operations		132,224			(162,599	)		132,224			103,147			59,452
Loss from discontinued operations, net of tax		(7,523	)		7,523			(7,523	)		(6,284	)		(1,239	)
Net income (loss)	$	124,701		$	(155,076	)	$	124,701		$	96,863		$	58,213

F-36

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

CONDENSED CONSOLIDATING STATEMENT OF INCOME
Year Ended December 31, 2005

							Penske						Non-
	Total						Automotive			Guarantor			Guarantor
	Company			Eliminations			Group, Inc.			Subsidiaries			Subsidiaries
	(In Thousands)
Revenues	$	9,552,938		$	—		$	—		$	5,884,845		$	3,668,093
Cost of sales		8,099,950			—			—			4,972,544			3,127,406
Gross profit		1,452,988			—			—			912,301			540,687
Selling, general, and administrative expenses		1,135,814			—			14,128			698,418			423,268
Depreciation and amortization		37,362			—			1,438			21,147			14,777
Operating income (loss)		279,812			—			(15,566	)		192,736			102,642
Floor plan interest expense		(46,266	)		—			—			(29,671	)		(16,595	)
Other interest expense		(49,004	)		—			(30,549	)		—			(18,455	)
Equity in earnings of affiliates		4,271			—			—			—			4,271
Equity in earnings of subsidiaries		—			(233,114	)		233,114			—			—
Income (loss) from continuing operations before income taxes and minority interests		188,813			(233,114	)		186,999			163,065			71,863
Income taxes		(68,504	)		85,397			(68,504	)		(62,464	)		(22,933	)
Minority interests		(1,814	)		—			—			—			(1,814	)
Income (loss) from continuing operations		118,495			(147,717	)		118,495			100,601			47,116
Income (loss) from discontinued operations, net of tax		478			(478	)		478			1,179			(701	)
Net income (loss)	$	118,973		$	(148,195	)	$	118,973		$	101,780		$	46,415

F-37

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

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

				Penske						Non-
	Total			Automotive			Guarantor			Guarantor
	Company			Group, Inc.			Subsidiaries			Subsidiaries
	(In Thousands)
Net cash from continuing operating activities	$	310,075		$	7,634		$	124,942		$	177,499
Investing Activities:
Purchase of equipment and improvements		(194,954	)		(1,959	)		(104,268	)		(88,727	)
Proceeds from sale — leaseback transactions		131,793			—			67,351			64,442
Dealership acquisitions, net		(180,721	)		—			(121,025	)		(59,696	)
Other		15,518			8,764			—			6,754
Net cash from continuing investing activities		(228,364	)		6,805			(157,942	)		(77,227	)
Financing Activities:
Net borrowings (repayments) of long-term debt		(34,190	)		325,833			(287,212	)		(72,811	)
Redemption of 95/8% Senior Subordinated Debt		(314,439	)		(314,439	)		—			—
Floor plan notes payable — non-trade		193,537			—			202,499			(8,962	)
Proceeds from exercise of common stock including excess tax benefit		2,614			2,614			—			—
Distributions from (to) parent		—			—			17,002			(17,002	)
Dividends		(28,447	)		(28,447	)		—			—
Net cash from continuing financing activities		(180,925	)		(14,439	)		(67,711	)		(98,775	)
Net cash from discontinued operations		96,962			—			98,292			(1,330	)
Net change in cash and cash equivalents		(2,252	)		—			(2,419	)		167
Cash and cash equivalents, beginning of period		13,147			—			2,419			10,728
Cash and cash equivalents, end of period	$	10,895		$	—		$	—		$	10,895

F-38

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2006

				Penske						Non-
	Total			Automotive			Guarantor			Guarantor
	Company			Group, Inc.			Subsidiaries			Subsidiaries
	(In Thousands)
Net cash from continuing operating activities	$	116,077		$	954		$	110,769		$	4,354
Investing Activities:
Purchase of equipment and improvements		(223,967	)		(954	)		(54,347	)		(168,666	)
Proceeds from sale — leaseback transactions		106,167			—			26,447			79,720
Dealership acquisitions, net		(370,231	)		—			(136,160	)		(234,071	)
Net cash from continuing investing activities		(488,031	)		(954	)		(164,060	)		(323,017	)
Financing Activities:
Net borrowings (repayments) of long-term debt		(211,072	)		(706,689	)		338,869			156,748
Issuance of subordinated debt		750,000			750,000			—			—
Floor plan notes payable — non-trade		(54,395	)		—			(224,022	)		169,627
Payment of deferred financing costs		(17,210	)		(17,210	)		—			—
Proceeds from exercise of common stock including excess tax benefit		18,069			18,069			—			—
Repurchase of common stock		(18,955	)		(18,955	)		—			—
Distributions from (to) parent		—			—			5,144			(5,144	)
Dividends		(25,215	)		(25,215	)		—			—
Net cash from continuing financing activities		441,222			—			119,991			321,231
Net cash from discontinued operations		(63,770	)		—			(65,183	)		1,413
Net change in cash and cash equivalents		5,498			—			1,517			3,981
Cash and cash equivalents, beginning of period		7,649			—			902			6,747
Cash and cash equivalents, end of period	$	13,147		$	—		$	2,419		$	10,728

F-39

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts) — (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2005

				Penske						Non-
	Total			Automotive			Guarantor			Guarantor
	Company			Group, Inc.			Subsidiaries			Subsidiaries
	(In Thousands)
Net cash from continuing operating activities	$	169,818		$	(17,389	)	$	143,760		$	43,447
Investing Activities:
Purchase of equipment and improvements		(216,125	)		(1,947	)		(132,165	)		(82,013	)
Proceeds from sale — leaseback transactions		118,470			—			65,620			52,850
Dealership acquisitions, net		(125,579	)		—			(103,045	)		(22,534	)
Net cash from continuing investing activities		(223,234	)		(1,947	)		(169,590	)		(51,697	)
Financing Activities:
Net borrowings (repayments) of long-term debt		2,356			16,170			(138	)		(13,676	)
Floor plan notes payable — non-trade		14,900			—			1,910			12,990
Proceeds from exercise of common stock including excess tax benefit		4,674			4,674			—			—
Distributions from (to) parent		—			—			(3,718	)		3,718
Dividends		(20,844	)		(20,844	)		—			—
Net cash from continuing financing activities		1,086			—			(1,946	)		3,032
Net cash from discontinued operations		43,108			—			35,354			7,754
Net change in cash and cash equivalents		(9,222	)		(19,336	)		7,578			2,536
Cash and cash equivalents, beginning of period		16,871			19,336			(6,676	)		4,211
Cash and cash equivalents, end of period	$	7,649		$	—		$	902		$	6,747

F-40

Schedule II

PENSKE AUTOMOTIVE GROUP, INC.

VALUATION AND QUALIFYING ACCOUNTS

	Balance at				Deductions,			Balance
	Beginning				Recoveries			at End
Description	of Year		Additions		& Other			of Year
	(In Thousands)
Year Ended December 31, 2007
Allowance for doubtful accounts		2,735		1,855		(1,641	)		2,949
Tax valuation allowance		3,943		725		(2,331	)		2,337
Year Ended December 31, 2006
Allowance for doubtful accounts		3,710		1,494		(2,469	)		2,735
Tax valuation allowance		4,119		1,456		(1,632	)		3,943
Year Ended December 31, 2005
Allowance for doubtful accounts		3,286		2,689		(2,265	)		3,710
Tax valuation allowance		1,080		3,190		(151	)		4,119

F-41

EX-4.1.2

                                                                   EXHIBIT 4.1.2

                          PENSKE AUTOMOTIVE GROUP, INC.
                                   AS ISSUER,

                           THE GUARANTORS NAMED HEREIN
                                 AS GUARANTORS,

                                       AND

                      BANK OF NEW YORK TRUST COMPANY, N.A.
                                   AS TRUSTEE,

              3.50% SENIOR SUBORDINATED CONVERTIBLE NOTES DUE 2026

                   AMENDED AND RESTATED SUPPLEMENTAL INDENTURE

                          DATED AS OF FEBRUARY 21, 2008

                                       TO

                                    INDENTURE

                          DATED AS OF JANUARY 31, 2006



                   AMENDED AND RESTATED SUPPLEMENTAL INDENTURE

AMENDED AND RESTATED SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"),
dated as of February 21, 2008, among PAG Long Island M1, LLC, PAG Long Island
A1, LLC, PAG Long Island B1, LLC, PAG Long Island L1, LLC, smart USA Distributor
LLC, PAG Turnersville AU, LLC, Turnersville Auto Outlet, LLC, Cycle Holdings,
LLC, PAG Acquisition 15, LLC, PAG Michigan S1, LLC, PAG Austin S1, LLC, PAG
Clovis T1, Inc., Penske Direct, LLC, PAG North Scottsdale BE, LLC, PAG Orlando
Limited, Inc., PAG Orlando General, Inc. and PAG Orlando Partnership, Ltd. (each
a "Guaranteeing Subsidiary"), a subsidiary of Penske Automotive Group, Inc. or
its permitted successor), a Delaware corporation (the "Company"), the Company,
the other Guarantors (as defined in the Indenture referred to herein) and Bank
of New York Trust Company, N.A., successor to J.P. Morgan Trust Company,
National Association, as trustee under the Indenture referred to below (the
"Trustee").

                                   WITNESSETH

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

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

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

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

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

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

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



and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes and this Guarantee.

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

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

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

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

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

Dated as of February 21, 2008

                                        SIGNATURES

                                        PENSKE AUTOMOTIVE GROUP, INC.


                                        By: /s/ Shane M. Spradlin
                                            ------------------------------------
                                        Name: Shane M. Spradlin
                                        Title: Senior Vice President, General
                                               Counsel and Secretary

                                        GUARANTORS:

                                        UAG MINNEAPOLIS B1, LLC
                                        JS IMPORTS, LLC
                                        PALM AUTO PLAZA, LLC
                                        WEST PALM NISSAN, LLC
                                        UAG BOSTON FMM, LLC
                                        UAG BOSTON FMB, LLC
                                        UAG BOSTON FML, LLC
                                        UAG BOSTON FMR, LLC
                                        UAG BOSTON BENTLEY, LLC
                                        WEST PALM S1, LLC



                                        By: /s/ Robert O'Shaughnessy
                                            ------------------------------------
                                        Name: Robert O'Shaughnessy
                                        Title: Assistant Treasurer


                                        SCOTTSDALE 101 MANAGEMENT, LLC
                                        SCOTTSDALE PAINT & BODY, LLC
                                        UAG ACQUISITION 1, LLC
                                        UAG ACQUISITION 2, LLC
                                        UAG ACQUISITION 3, LLC
                                        UAG ACQUISITION 4, LLC
                                        UAG ACQUISITION 5, LLC
                                        TAMBURRO ENTERPRISES, INC.
                                        CLASSIC SPECIAL ADVERSTISING, INC.
                                        CLASSIC SPECIAL, LLC
                                        CLASSIC SPECIAL AUTOMOTIVE GP, LLC


                                        By: /s/ Robert O'Shaughnessy
                                            ------------------------------------
                                        Name: Robert O'Shaughnessy
                                        Title: Assistant Treasurer


                                        CLASSIC OLDSMOBILE-PONTIAC-GMC, LTD.
                                        CLASSIC SPECIAL HYUNDAI, LTD.
                                        HILL COUNTRY IMPORTS, LTD.

                                        By: CLASSIC SPECIAL, LLC
                                        Its: General Partner


                                        By: /s/ Robert O'Shaughnessy
                                            ------------------------------------
                                        Name: Robert O'Shaughnessy
                                        Title: Assistant Treasurer


                                        CLASSIC SPECIAL AUTOMOTIVE, LTD.

                                        By: CLASSIC SPECIAL AUTOMOTIVE GP, LLC
                                        Its: General Partner


                                        By: /s/ Robert O'Shaughnessy
                                            ------------------------------------
                                        Name: Robert O'Shaughnessy
                                        Title: Assistant Treasurer


                                        ADDITIONAL GUARANTORS

                                        PAG LONG ISLAND M1, LLC
                                        PAG LONG ISLAND A1, LLC
                                        PAG LONG ISLAND B1, LLC
                                        PAG LONG ISLAND L1, LLC



                                        TURNERSVILLE AUTO OUTLET, LLC
                                        SMART USA DISTRIBUTOR LLC
                                        PAG NORTH SCOTTSDALE BE, LLC
                                        PENSKE DIRECT, LLC
                                        CYCLE HOLDINGS, LLC
                                        PAG TURNERSVILLE AU, LLC
                                        PAG ACQUISITION 15, LLC
                                        PAG MICHIGAN S1, LLC
                                        PAG AUSTIN S1, LLC
                                        PAG CLOVIS T1, INC.
                                        PAG ORLANDO LIMITED, INC.
                                        PAG ORLANDO GENERAL, INC.


                                        By: /s/ Robert O'Shaughnessy
                                            ------------------------------------
                                        Name: Robert O'Shaughnessy
                                        Title: Assistant Treasurer


                                        PAG ORLANDO PARTNERSHIP, LTD.

                                        By: PAG ORLANDO GENERAL, INC.
                                        Its: General Partner


                                        By: /s/ Robert O'Shaughnessy
                                            ------------------------------------
                                        Name: Robert O'Shaughnessy
                                        Title: Assistant Treasurer



              THE BANK OF NEW YORK TRUST COMPANY, N.A., AS TRUSTEE,
                           AS SUCCESSOR IN INTEREST TO
                         J.P. MORGAN TRUST COMPANY, N.A.


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



                                    GUARANTEE

     For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of January 31, 2006 (the "Indenture") among
Penske Automotive Group, Inc., (the "Company"), the Guarantors party thereto and
The Bank of New York Trust Company, N.A., successor to J.P. Morgan Trust
Company, National Association, as trustee (the "Trustee"), (a) the due and
punctual payment of the principal of, premium and Additional Interest, if any,
and interest (including Contingent Interest, if any) on the 3.50% Senior
Subordinated Convertible Notes due 2026 (the "Notes") whether at the Final
Maturity Date, by acceleration or otherwise, the due and punctual payment of
interest on overdue principal of and interest on the Notes, if any, or a senior
subordinated basis, if lawful, and the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee all in accordance with
the terms of the Indenture and (b) in case of any extension of time of payment
or renewal of any Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at the Final Maturity Date, by acceleration or
otherwise. The obligations of the Guarantors to the Holders of Notes and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth in
Article 12 of the Indenture, including the circumstances under which such
obligations may be released and the terms by which such obligations are
subordinated to Senior Guarantor Indebtedness, and reference is hereby made to
the Indenture for the precise terms of the Guarantee. Each Holder of a Note, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee, on behalf of such Holder, to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such
Holder for such purpose. This Guarantee may be released in accordance with the
Indenture without any further act by any Holder.

     Notwithstanding the foregoing, this guarantee shall be automatically and
unconditionally released and discharged upon (1) any sale, exchange or transfer
to any person not an affiliate of the Company, of all of the capital stock in,
or all or substantially all the assets of, such Guarantor, which transaction is
in compliance with the terms of the Indenture and pursuant to which transaction
such Guarantor is released from all guarantees, if any, by it of other
Indebtedness of the Company or any of its subsidiaries, (2) the release by the
holders of the Indebtedness of the Company of their guarantee by such Guarantor
(including any deemed release upon payment in full of all obligations under such
Indebtedness), at such time as (A) no other Indebtedness of the Company has been
guaranteed by such Guarantor, or (B) the holders of all such other Indebtedness
which is guaranteed by such Guarantor also release their guarantee by such
Guarantor (including any deemed release upon payment in full of all obligations
under such Indebtedness) or (3) such Guarantor ceasing to be a wholly owned
subsidiary of the Company.

     Capitalized terms used but not defined herein have the meanings given to
them in the Indenture.





                                        PAG LONG ISLAND M1, LLC
                                        PAG LONG ISLAND A1, LLC
                                        PAG LONG ISLAND B1, LLC
                                        PAG LONG ISLAND L1, LLC
                                        SMART USA DISTRIBUTOR LLC
                                        TURNERSVILLE AUTO OUTLET, LLC
                                        PAG NORTH SCOTTSDALE BE, LLC
                                        PENSKE DIRECT, LLC
                                        CYCLE HOLDINGS, LLC
                                        PAG TURNERSVILLE AU, LLC
                                        PAG ACQUISITION 15, LLC
                                        PAG MICHIGAN S1, LLC
                                        PAG AUSTIN S1, LLC
                                        PAG FESNO T1, INC.
                                        PAG ORLANDO LIMITED, INC.
                                        PAG ORLANDO GENERAL, INC.


                                        By: /s/ Robert O'Shaughnessy
                                            ------------------------------------
                                        Name: Robert O'Shaughnessy
                                        Title: Assistant Treasurer


                                        PAG ORLANDO PARTNERSHIP, LTD.

                                        By: PAG ORLANDO GENERAL, INC.
                                        Its: General Partner


                                        By: /s/ Robert O'Shaughnessy
                                            ------------------------------------
                                        Name: Robert O'Shaughnessy
                                        Title: Assistant Treasurer

EX-4.2.2

                                                                   EXHIBIT 4.2.2

                   AMENDED AND RESTATED SUPPLEMENTAL INDENTURE

AMENDED AND RESTATED SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"),
dated as of February 21, 2008, among PAG Long Island M1, LLC, PAG Long Island
A1, LLC, PAG Long Island B1, LLC, PAG Long Island L1, LLC, PAG Turnersville AU,
LLC, Turnersville Auto Outlet, LLC, Cycle Holdings, LLC, smart USA Distributor
LLC, PAG Acquisition 15, LLC, PAG Michigan S1, LLC, PAG Austin S1, LLC, PAG
Clovis T1, Inc., Penske Direct, LLC, PAG North Scottsdale BE, LLC, PAG Orlando
Limited, Inc., PAG Orlando General, Inc. and PAG Orlando Partnership, Ltd. (each
a "Guaranteeing Subsidiary"), a subsidiary of Penske Automotive Group, Inc. or
its permitted successor), a Delaware corporation (the "Company"), the Company,
the other Guarantors (as defined in the Indenture referred to herein) and Bank
of New York Trust Company, N.A., successor to J.P. Morgan Trust Company,
National Association, as trustee under the Indenture referred to below (the
"Trustee").

                                   WITNESSETH

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

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

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

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

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

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

4. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer,
employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary(ies), as such, shall have any liability for any obligations of the
Company or any Guaranteeing Subsidiary(ies) under the Notes, any Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes or



any Guarantee by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes and
this Guarantee.

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

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

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

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

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

Dated as of February 21, 2008

                                        SIGNATURES

                                        PAG LONG ISLAND M1, LLC
                                        PAG LONG ISLAND A1, LLC
                                        PAG LONG ISLAND B1, LLC
                                        PAG LONG ISLAND L1, LLC
                                        SMART USA DISTRIBUTOR LLC
                                        TURNERSVILLE AUTO OUTLET, LLC
                                        PAG NORTH SCOTTSDALE BE, LLC
                                        PENSKE DIRECT, LLC
                                        CYCLE HOLDINGS, LLC
                                        PAG TURNERSVILLE AU, LLC
                                        PAG ACQUISITION 15, LLC
                                        PAG MICHIGAN S1, LLC
                                        PAG AUSTIN S1, LLC
                                        PAG CLOVIS T1, INC.
                                        PAG ORLANDO LIMITED, INC.
                                        PAG ORLANDO GENERAL, INC.


                                        By: /s/ Robert O'Shaughnessy
                                            ------------------------------------
                                        Name: Robert O'Shaughnessy
                                        Title: Assistant Treasurer



                                        PAG ORLANDO PARTNERSHIP, LTD.

                                        By: PAG ORLANDO GENERAL, INC.
                                        Its: General Partner


                                        By: /s/ Robert O'Shaughnessy
                                            ------------------------------------
                                        Name: Robert O'Shaughnessy
                                        Title: Assistant Treasurer


                                        PENSKE AUTOMOTIVE GROUP, INC.


                                        By: /s/ Shane M. Spradlin
                                            ------------------------------------
                                        Name: Shane M. Spradlin
                                        Title: Senior Vice President, General
                                               Counsel and Secretary


                                        THE BANK OF NEW YORK TRUST COMPANY,
                                        AS TRUSTEE


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



                                    GUARANTEE

     For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of January 31, 2006 (the "Indenture") among
Penske Automotive Group, Inc., (the "Company"), the Guarantors party thereto and
The Bank of New York Trust Company, NA, as trustee (the "Trustee"), (a) the due
and punctual payment of the principal of, premium and Additional Interest, if
any, and interest (including Contingent Interest, if any) on the 7.750% Senior
Subordinated Notes due 2016 (the "Notes") whether at the Final Maturity Date, by
acceleration or otherwise, the due and punctual payment of interest on overdue
principal of and interest on the Notes, if any, or a senior subordinated basis,
if lawful, and the due and punctual performance of all other obligations of the
Company to the Holders or the Trustee all in accordance with the terms of the
Indenture and (b) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, that the same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, whether at the Final Maturity Date, by acceleration or otherwise. The
obligations of the Guarantors to the Holders of Notes and to the Trustee
pursuant to the Guarantee and the Indenture are expressly set forth in Article
13 of the Indenture, including the circumstances under which such obligations
may be released and the terms by which such obligations are subordinated to
Senior Guarantor Indebtedness, and reference is hereby made to the Indenture for
the precise terms of the Guarantee. Each Holder of a Note, by accepting the
same, (a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee, on behalf of such Holder, to take such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such
purpose. This Guarantee may be released in accordance with the Indenture without
any further act by any Holder.

     Notwithstanding the foregoing, this guarantee shall be automatically and
unconditionally released and discharged upon (1) any sale, exchange or transfer
to any person not an affiliate of the Company, of all of the capital stock in,
or all or substantially all the assets of, such Guarantor, which transaction is
in compliance with the terms of the Indenture and pursuant to which transaction
such Guarantor is released from all guarantees, if any, by it of other
Indebtedness of the Company or any of its subsidiaries, (2) the release by the
holders of the Indebtedness of the Company of their guarantee by such Guarantor
(including any deemed release upon payment in full of all obligations under such
Indebtedness), at such time as (A) no other Indebtedness of the Company has been
guaranteed by such Guarantor, or (B) the holders of all such other Indebtedness
which is guaranteed by such Guarantor also release their guarantee by such
Guarantor (including any deemed release upon payment in full of all obligations
under such Indebtedness) or (3) such Guarantor ceasing to be a wholly owned
subsidiary of the Company.

     Capitalized terms used but not defined herein have the meanings given to
them in the Indenture.



                                        PAG LONG ISLAND M1, LLC
                                        PAG LONG ISLAND A1, LLC
                                        PAG LONG ISLAND B1, LLC
                                        PAG LONG ISLAND L1, LLC
                                        SMART USA DISTRIBUTOR LLC
                                        TURNERSVILLE AUTO OUTLET, LLC
                                        PAG NORTH SCOTTSDALE BE, LLC
                                        PENSKE DIRECT, LLC
                                        CYCLE HOLDINGS, LLC
                                        PAG TURNERSVILLE AU, LLC
                                        PAG ACQUISITION 15, LLC
                                        PAG MICHIGAN S1, LLC
                                        PAG AUSTIN S1, LLC
                                        PAG CLOVIS T1, INC.
                                        PAG ORLANDO LIMITED, INC.
                                        PAG ORLANDO GENERAL, INC.


                                        By: /s/ Robert O'Shaughnessy
                                            ------------------------------------
                                        Name: Robert O'Shaughnessy
                                        Title: Assistant Treasurer


                                        PAG ORLANDO PARTNERSHIP, LTD.

                                        By: PAG ORLANDO GENERAL, INC.
                                        Its: General Partner


                                        By: /s/ Robert O'Shaughnessy
                                            ------------------------------------
                                        Name: Robert O'Shaughnessy
                                        Title: Assistant Treasurer

EX-10.4

                                                                    EXHIBIT 10.4

                          FORM OF DEALERSHIP AGREEMENT

                                BMW (GB) Limited

                                     - and -





THIS AGREEMENT is made BETWEEN BMW (GB) LIMITED whose registered office is at
Ellesfield Avenue Bracknell Berkshire RG12 8TA (hereinafter called "BMW GB") and
the Dealer specified in the Eighth Schedule hereto (hereinafter called "the
Dealer").

Preamble

BMW GB and the Dealer enter into this Agreement with the desire and the
expectation that the business endeavours of the Dealer and the dealer
organisation as a whole and the activities of BMW GB will result in the greatest
success possible.

BMW GB and the Dealer will endeavour through their co-operation in the
distribution and maintenance of Contract Goods to satisfy in every way the
expectations of Customers.

1.   BASIS OF THE AGREEMENT

1.1  Distribution Rights for Contract Goods

          BMW GB hereby appoints the Dealer to be and the Dealer undertakes the
          duty of being a dealer in Contract Goods in the Territory as
          hereinafter defined on the terms and conditions hereinafter appearing
          from the Commencement Date specified in the Eighth Schedule hereto.

1.2  BMW Support

          BMW GB intends that the Dealer will receive all relevant services to
          enable the Dealer to offer to its Customers, as it sees fit, the
          Customer Facilities as defined in Clause 14 hereof, but this Agreement
          does not itself apply to such Customer Facilities.

1.3  Modification of the Contract Goods

          (a)  The Dealer will not, without the prior written consent of BMW GB,
               modify the Contract Goods using other than BMW Parts or offer for
               sale or distribute such modified goods unless such modification
               is the subject of a contract with a final consumer and concerns a
               particular BMW Vehicle purchased by such final consumer.

          b)   The Dealer will use only the model designations applied by the
               Manufacturer from time to time.

1.4  Re-Sale of Contract Goods

          The Dealer will not supply Contract Goods to any reseller not
          authorised by BMW GB or directly or indirectly by the Manufacturer.
          This restriction does not apply to the extent that any such reseller
          purchases any BMW Parts for his own use in effecting repairs or
          maintenance.

          The term "reseller" includes any third party or intermediary not
          authorised as aforesaid who represents himself as an authorised
          reseller of BMW Vehicles or carries on an activity equivalent to that
          of a reseller.

          Sales of BMW Vehicles to final consumers using the services of any
          other intermediary are permitted only if that intermediary has the
          prior written authority of such final consumer to purchase a specific
          BMW Vehicle and, as the case may be, to accept delivery thereof on the
          final consumer's behalf.

          The Dealer must before completing the sale of any BMW Vehicle intended
          for use in the United Kingdom ensure that such BMW Vehicle is
          registered with the appropriate registration authority.

          In the event of any breach by the Dealer of this Clause 1.4, then,
          without prejudice to all other remedies which may be available to BMW
          GB, the Dealer may be required by BMW GB to pay the full recommended
          retail price for the Contract Goods in respect of which the breach
          occurs, and BMW GB may debit the account of the Dealer in accordance
          with the direct debit procedure operated by BMW GB with an amount
          equivalent to the aggregate of the difference between the recommended
          retail price and the wholesale price otherwise payable by the Dealer,
          together with any taxes thereon, and the amount of any bonus, discount
          or rebate received by the Dealer which would not have been given to
          the Dealer but for any sale or supply in breach of this clause 1.4.


                                       -1-



1.5  Independence of Dealer

          The Dealer operates its business in its own name, on its own account
          and at its own risk. It has no power to legally bind BMW GB or the
          Manufacturer and it is understood and agreed between the parties
          hereto that this Agreement shall not be construed as constituting the
          Dealer as agent of BMW GB or the Manufacturer for any purpose
          whatsoever. The Dealer will not describe itself as agent for BMW GB or
          the Manufacturer or in any words indicating any relationship of agency
          existing between the parties.

1.6  Assignment

          The Dealer will not without BMW GB's prior written consent assign or
          purport to assign the benefit of this Agreement either in whole or
          part to any third party.

          In deciding whether or not to grant such consent BMW GB will take into
          account all those matters which it would normally take into account
          when deciding whether or not to appoint a new dealer.

2.   THE TERRITORY

2.1  Description of the Territory

          The Territory is the area described in the Seventh Schedule hereto.

2.2  Responsibility in the Territory

          The Dealer represents the interests of BMW GB in the Territory. It is
          responsible for the sales promotion and full utilisation of the market
          potential for Contract Goods in the Territory.

          It is further responsible for ensuring the provision of the best
          possible customer service.

          The appointment of additional dealers in the Territory or any change
          of the Territory during the term of this Agreement require prior
          consent of the Dealer. This applies without prejudice to the right of
          BMW GB to appoint an additional dealer or to establish branches or
          distribution depots in the Territory if the Territory is served by
          more than one BMW Dealer and any such BMW Dealer ceases to be a BMW
          Dealer.

2.3  Activity Outside the Territory

          The Dealer will not outside the Territory with respect to Contract
          Goods:

          a)   maintain branches or delivery depots; or

          b)   entrust a third party with the distribution or servicing of
               Contract Goods; or

          c)   solicit new Customers by personalised advertising.

2.4  Export

          The Dealer will not supply any Contract Goods, directly or indirectly,
          to any purchaser outside the territory of the European Economic Area
          (EEA) nor will the Dealer modify any Contract Goods for the purpose of
          such supply.

          In the event of any breach by the Dealer of this Clause 2.4, then,
          without prejudice to all other remedies which may be available to BMW
          GB, the Dealer may be required by BMW GB to pay the full recommended
          retail price for the Contract Goods in respect of which the breach
          occurs and, accordingly, BMW GB may debit the account of the Dealer in
          accordance with the direct debit procedure operated by BMW GB with an
          amount equivalent to the aggregate of the difference between the
          recommended retail price and the wholesale price otherwise payable by
          the Dealer, together with any taxes thereon, and the amount of any
          bonus, discount or rebate received by the Dealer which would not have
          been given to the Dealer but for any supply in breach of this clause
          2.4.


                                       -2-



3.   ACTIVITY WITH RESPECT TO OTHER MOTOR VEHICLE PRODUCTS

3.1  Manufacture and Distribution of Third Party Products

          The Dealer will not without the prior written consent of BMW GB
          manufacture, sell, distribute, supply, or promote the distribution of
          any product which competes with Contract Goods or use such products in
          the repair or maintenance of any Contract Goods. The obligation
          contained in this Clause 3.1 applies to the following:

          a)   new cars of other makes, EXCEPT on separate sales premises, under
               separate management, in the form of a distinct legal entity and
               in a manner which avoids confusion between makes

          b)   sale and use of Non-BMW Parts which do not meet the same quality
               standard as BMW Parts

          If the Dealer uses Non-BMW Parts for the repair or maintenance of BMW
          Vehicles the Dealer undertakes to inform Customers, in a general
          manner, of the extent to which such Non-BMW Parts might be so used.

          The Dealer further undertakes to inform Customers in writing whenever
          Non-BMW Parts have been used for the repair or maintenance of BMW
          Vehicles.

          The Dealer will use only BMW Parts in carrying out any warranty or
          goodwill work or any work in connection with a product recall or
          modification campaign concerning Contract Goods.

3.2  Reasons for Release from Obligations

          BMW GB will release the Dealer from the obligations referred to in
          clause 3.1 a) where the Dealer shows that there are objective reasons
          for doing so.

4.   SCOPE OF THE ACTIVITY OF THE DEALER

4.1  Objectives

     4.1.1 Strengthening of the BMW GB Dealer Organisation

          The Dealer will continually endeavour to strengthen the BMW dealer
          organisation in its entirety.

     4.1.2 Responsibility for Sales and Advertising

          In assuming responsibility for the promotion of sales and the full
          utilisation of the market potential for Contract Goods the Dealer will
          use its best endeavours to conduct effective sales promotion and
          advertising making use of the most appropriate advertising media.

     4.1.3 Requirements of BMW GB

          In order to comply with its duties the Dealer will ensure that its
          business operations and representation conform with the reasonable
          requirements of BMW GB in respect of sales, customer and parts
          service, as they are, for example, set forth in the Schedules to this
          Agreement or as otherwise notified from time to time by BMW GB.

4.2  Sale of BMW Vehicles

     4.2.1 Delivery Forecast

          Prior to the beginning of each sales year, which shall be the calendar
          year unless otherwise notified by BMW GB, BMW GB shall propose to the
          Dealer a delivery forecast.

          The delivery forecast shall be based on the production potential of
          the Manufacturer and shall take into account, in particular;

          a)   forecast sales defined by BMW GB on a national level; and

          b)   the market potential resulting from BMW GB's estimate of future
               sales in the Territory and nationally.

     4.2.2 Sales Targets

          The Dealer and BMW GB will annually agree sales targets in respect of
          BMW Vehicles and may also agree other specific targets in respect of
          BMW Vehicles from time to time. As well as the criteria referred to in
          clause 4.2.1 the following aspects shall in particular be taken into
          account:

          a)   Sales previously achieved in the Territory; and

          b)   The business development possibilities of the Dealer.

     4.2.3 Maintenance of Stocks and Demonstration Vehicles

          The Dealer undertakes to maintain an inventory of BMW Vehicles for
          display, demonstration and sale in each model series which is in line
          with the projected sales targets referred to in clause 4.2.2 and which
          is in accordance with the provisions of the Schedules hereto.


                                       -3-



          The Dealer will effect comprehensive insurance with an insurance
          company or underwriter of repute for any vehicle loaned to it by BMW
          GB for any purpose to the current retail price of the vehicle or any
          other value specified by BMW GB and upon request produce to BMW GB
          satisfactory evidence of such insurance.

4.3  Dealer's Parts Responsibilities

     4.3.1 The Dealer and BMW GB will annually agree sales targets in respect of
          BMW Parts and may also agree other specific targets in respect of BMW
          Parts from time to time. There shall be taken into account similar
          considerations to those applying to targets for BMW Vehicles referred
          to in sub-Clauses 4.2.1 and 4.2.2 hereof.

     4.3.2 Supply of Parts

          The Dealer will offer actual and potential Customers a supply of BMW
          Parts which corresponds to such Customers' expectations.

     4.3.3 Maintenance of Stocks

          The Dealer will maintain stocks of BMW Parts which are adequate in
          view of the business, market responsibility and servicing duties of
          the Dealer as well as the actual needs of Customers, in accordance
          with BMW GB's requirements set forth in Section B of the Third
          Schedule hereto, the parts information material published from time to
          time by BMW GB, and as otherwise notified by BMW GB from time to time.

     4.3.4 Storage Space and Outfitting Thereof

          The Dealer will continuously maintain storage space appropriately
          equipped for the storage of BMW Parts, to the standards set forth in
          Section B of the Third Schedule hereto and as otherwise notified by
          BMW GB from time to time.

          To the extent the Dealer offers or uses Non-BMW Parts covered by
          clause 3.1 of this Agreement it will identify these parts separately
          from BMW Parts.

4.4  Dealer's Service Responsibilities

     4.4.1 Servicing of Customers' Vehicles

          The Dealer will provide service for all BMW Vehicles pursuant to the
          provisions of the Fifth Schedule hereto, the conditions for warranty
          and goodwill and the service information material or other
          requirements published by or circulated from time to time by BMW GB
          and/or the Manufacturer.

     4.4.2 Scope of Customer Services

          The Dealer will:

          a)   accept BMW Vehicles from the transport company used for the
               purpose by BMW GB, store them and deliver them to the Customers;

          b)   inspect repair and maintain BMW Vehicles in accordance with any
               instructions of BMW GB and/or the Manufacturer in force from time
               to time;

          c)   on the instructions of BMW GB participate in product recall or
               modification campaigns in which the Dealer will examine and
               modify if necessary all Contract Goods concerned;

          d)   handle warranty and goodwill claims for any Customer provided the
               relevant Contract Goods were delivered by a supplier within the
               territory of the European Economic Area authorised directly or
               indirectly by the Manufacturer.

     4.4.3 Service Facilities

          The Dealer will maintain service facilities which enable it to render
          services in accordance with the requirements of Customers and BMW GB.
          For this purpose the Dealer is required to equip its facility with the
          BMW-prescribed special tools, measuring and test instruments and
          equipment and to conform with the provisions as to Service
          Requirements set forth in the Fifth Schedule hereto and as otherwise
          notified by BMW GB from time to time.

     4.4.4 Service for Third Party Products

          In so far as the Dealer provides service in respect of third party
          products, the Dealer will ensure that a third party cannot benefit
          unduly from investments made by BMW GB and/or the Manufacturer,
          notably in equipment or the training of personnel.


                                       -4-



5.   DIRECT SALES THROUGH BMW GB

5.1  Sales Reservation

     BMW GB may supply Contract Goods directly or indirectly to:

          a)   final consumers, to the extent this occurs through branches or
               distribution subsidiaries,

          b)   fleet users,

          c)   public or local authorities or similar national or international
               organisations,

          d)   foreign public organisations,

          e)   racing drivers and teams recognised by BMW GB or by the
               Manufacturer or any of their Connected Undertakings,

          f)   its employees and their families and those of any Connected
               Undertaking of BMW GB,

          g)   its suppliers or employees thereof, celebrities and media
               representatives where it feels there are special reasons for so
               doing,

          h)   vehicle and original equipment manufacturers, and

          i)   Connected Undertakings of BMW GB.

6.   SUPPLIES AND SALES TO THE DEALER

6.1  Obligations to Deliver and Purchase

     BMW Vehicles will be supplied on consignment to the Dealer by BMW GB upon
     the terms and conditions set out in the First Schedule hereto.

     BMW Vehicles will be sold to the Dealer by BMW GB on the terms and
     conditions set out in the Second Schedule hereto.

     BMW Parts will be sold to the Dealer by BMW GB on the terms and conditions
     set out in the Third Schedule hereto.

6.2  Ordering of Contract Goods

     The Dealer will order Contract Goods according to the BMW GB ordering
     system or such amended procedures as are from time to time notified by BMW
     GB.

6.3  Assumption of Warranty

     a)   BMW GB grants to the Dealer a warranty for Contract Goods according to
          the terms of sale and delivery for BMW Vehicles and Parts as specified
          in the Second and Third Schedules hereto.

     b)   When reselling or supplying Contract Goods to a Customer the Dealer
          will grant to the Customer a warranty which at least corresponds to
          the scope of the warranty granted by BMW GB to the Dealer.

     c)   Warranty claims will be handled and settled in accordance in to the
          Fourth Schedule hereto.

6.4  Liability for Orders

     BMW GB will not be liable for its failure to deliver any orders of the
     Dealer:

     a)   For reasons of Force Majeure as defined in Clause 13.4 of this
          Agreement;
          or

     b)   If the Manufacturer's production series of any Contract Goods ordered
          has been discontinued.

7.   BUSINESS OPERATIONS

7.1  Business Premises and Equipment Thereof

     7.1.1 General Requirements

          The Dealer will maintain business premises which are appropriate in
          terms of size, equipment, facilities, location, internal and external
          appearance (i.e. corporate identity), and in all technical and
          business aspects in such a way as to meet reasonable expectations of
          actual and potential Customers of the BMW brand as well as the
          requirements of BMW GB necessary to fulfil the purpose of this
          Agreement.

     7.1.2 Business Premises and Offices

          The Dealer's business premises, offices and other installations and
          their technical equipment must meet reasonable Customer expectations
          with respect to sales and service of Contract Goods. They must conform
          to the standards and provisions set forth in the Fifth and Sixth
          Schedules hereto and as otherwise notified by BMW GB from time to time
          and must also correspond to the particular business situation of the
          dealership including such considerations as volume of sales, service
          and parts business.


                                       -5-



          The Dealer's obligations hereunder apply in particular, but without
          limitation, to:

          a)   showrooms and space for new cars;

          b)   presentation and sales facilities for the parts business; and

          c)   capacity and equipment of customer service facilities

     7.1.3 Business Expansion - Investment

          The Dealer will expand its business and facilities in line with the
          expansion of business volume, save that, the Dealer will obtain the
          prior written consent of BMW GB if the operations of the Dealer may be
          directly or indirectly affected by any substantial work of
          construction and alterations or other large investment or other major
          commitment which the Dealer intends to carry out or undertake.

7.2  Personnel Requirements

     7.2.1 Key Personnel

          BMW GB enters into this Agreement in reliance upon the fact that the
          Key Personnel specified in the Eighth Schedule will ensure that the
          obligations of the Dealer under this Agreement are properly fulfilled.

     7.2.2 Changes in Key Personnel

          The Dealer will not appoint any person in substitution for or in
          addition to the Key Personnel specified in the Eighth Schedule or
          change any of the functions carried out by the said Key Personnel or
          any of them without the prior written consent of BMW GB. This consent
          may be withheld only if BMW GB consider that the change or its effect
          might impair the performance of this Agreement or other important
          interests of BMW GB.

     7.2.3 Sales and Technical Personnel and Training

          The Dealer will employ in all aspects of its business covered by this
          Agreement sufficiently trained business and technical personnel and
          ensure their ongoing and further training. The Dealer will make use of
          the training facilities and systems offered by BMW GB and, in
          co-operation with BMW GB, enable and encourage the regular attendance
          by its personnel at the appropriate training courses.

7.3  Financing and Equity

     7.3.1 Financial Situation - Equity Holdings

          The financial base of the Dealer's business and the equity holdings
          must correspond to the requirements generally and reasonably approved
          by BMW GB for BMW Dealers for a proper and economically sound
          management of the Dealer's business. BMW GB may verify through
          inspection of the Dealer's relevant business records, and those of any
          Connected Undertaking of the Dealer relevant to the Dealer's business.
          the amount of the share capital, equity holdings and any shareholder

          agreements on profit and loss distribution and, if necessary, require
          measures to be initiated which ensure compliance with this clause.

     7.3.2 Changes in the Ownership and Equity Holdings

          No change in the ownership of, or the composition of shareholdings in,
          the Dealer or any material change in the constitution of the Dealer
          shall be made without the prior written consent of BMW GB.

          This consent may be withheld only if BMW GB consider that the change
          or its effect might impair the performance of this Agreement or other
          important interests of BMW GB.

7.4  Organisational Requirements

     7.4.1 Data Processing - Exchange of information

          In order to ensure the most rational operational procedure possible
          the Dealer will use data processing in all areas of its business to
          the extent economically feasible. The Dealer will create the
          organisational and technical basis necessary to ensure the optimum
          development of its business and the reciprocal flow of data between it
          and BMW GB.

          The Dealer will ensure that its data processing system is compatible
          with that of BMW GB.


                                       -6-



     7.4.2 Accounting

          In the interest of uniformity of the accounting system within the BMW
          GB dealer network the Dealer will operate an accounting system
          compatible with the requirements of BMW GB and will send to BMW GB, at
          the request of BMW GB, an operating report in such form as may be
          specified from time to time by BMW GB to cover the Dealer's
          operations.

8.   ADVERTISING AND TRADEMARKS

8.1  Advertising

     The Dealer will advertise Contract Goods in accordance with recommendations
     made from time to time by BMW GB. The Dealer will give preference to the
     advertising materials recommended by BMW GB.

     The Dealer will not use any advertisement which is inconsistent with the
     public image or corporate identity of BMW GB or the Manufacturer or which
     may in any respect bring the Dealer, BMW GB or the Manufacturer into
     disrepute.

8.2  Business Name

     8.2.1 The Dealer will represent itself to third parties as an officially
          authorised BMW Dealer.

     8.2.2 The Dealer will not use the names Bayerische Motoren Werke or any
          translation or any derivation or abbreviation thereof in its own name
          or address nor will the Dealer without the prior written consent of
          BMW GB change its name.


                                      -7-



8.3  Exhibitions and Fairs

     8.3.1 The Dealer will give BMW GB reasonable notice when it intends to
          participate in an exhibition or trade fair. BMW GB may prohibit the
          Dealer from participating in exhibitions and fairs in relation to the
          Contract Goods when the reputation of BMW GB or the Manufacturer may
          be jeopardised.

     8.3.2 When participating in any exhibitions or fairs in relation to the
          Contract Goods, the Dealer will comply with the requirements of BMW GB
          in respect of any use of the Manufacturer's trademarks.

8.4  Use of Trademarks generally

     8.4.1 The Dealer will use in its business the Manufacturer's trademarks as
          notified by BMW GB to the Dealer in such manner as is specified by BMW
          GB from time to time and without making any additions or change to
          them.

     8.4.2 The Manufacturer's trademarks may not be used for or in connection
          with goods other than Contract Goods.

     8.4.3 Unless specifically authorised by BMW GB in writing, the Dealer has
          no right to license any third party to use any of the Manufacturer's
          trademarks.


                                      -8-



8.5  Trademark Infringement

     8.5.1 The Dealer will immediately inform BMW GB of any infringement of the
          Manufacturer's trademarks by third parties. BMW GB will take
          appropriate action against such trademark infringement and the Dealer
          will support BMW GB in such action or prevention of infringement.

     8.5.2 The Dealer shall not, without the prior written consent of BMW GB,
          permit any of the Manufacturer's trademarks to be used to endorse or
          promote any third party products or services.

8.6  Corporate Identity

     The Dealer will observe in its advertising and its business stationery as
     well as generally in the use of the Manufacturer's trademarks the Corporate
     identity Programme from time to time provided by BMW GB.

9.   SUPPLY OF INFORMATION BY DEALER

9.1  Advice and Information

     BMW GB will at any time and in an appropriate manner advise and counsel the
     Dealer on the basis of data and other information supplied to it by the
     Dealer with regard to business and technical matters. This includes in
     particular, management advice based on BMW GB's experience acquired through
     comparing dealer businesses and balance sheets submitted by BMW Dealers. It
     is therefore necessary that BMW GB and the Dealer mutually inform each
     other on all essential points pursuant to the provisions of the following
     clauses


                                      -9-



     9.2, 9.3 and 9.4 and that the Dealer reports continually and fully to BMW
     GB on its business activity.

     Customer data received by BMW GB from the Dealer will be held by BMW GB
     after as well as during this Agreement and, in the event of the Dealer
     ceasing to be a BMW Dealer, may be shared by BMW GB with other BMW Dealers.

     The Dealer will notify in writing a Director or the Company Secretary of
     BMW GB immediately it becomes aware of any claim or proceedings against it
     or BMW GB or the Manufacturer or another BMW Dealer arising in connection
     with any Contract Goods or otherwise and the Dealer will, where the claim
     or proceedings entail a possible liability of the Dealer for damages in
     respect of which the Dealer may wish to have recourse against BMW GB or the
     Manufacturer, follow BMW GB's instructions.

9.2  Reports on Sales Activity

     The Dealer will report regularly to BMW GB its sales including in
     particular the immediate presentation of new orders and registration
     applications. BMW GB may at any time request reports on the market
     situation, stock in hand and estimated stock requirements of the Dealer
     including estimated customer orders within the scope of the Dealer's
     business.

9.3  Business Data of the Dealer

     The Dealer will if so requested by BMW GB participate regularly in the BMW
     GB comparative dealer study with an integrated accounting plan. The Dealer
     will be informed by BMW GB of the result of the comparative dealer study.


                                      -10-



     The Dealer will submit annually within six months of its financial year end
     for inspection by BMW GB its balance sheet and profit and loss account
     certified by its auditors. In the case of the Dealer having a Connected
     Undertaking, the annual financial statements of the Connected Undertaking
     will be submitted as well as the annual financial statements of the Dealer,
     insofar as BMW GB consider that this is important for the evaluation of the
     Dealer's BMW business.

9.4  Supply of information - Inspection of the Business Records

     In order to review the performance by the Dealer of its obligations under
     this Agreement, BMW GB will be provided by the Dealer with all necessary
     information and documents from time to time requested by BMW GB and the
     Dealer will permit any person authorised by BMW GB to enter any premises of
     the Dealer at any reasonable time for the purpose of obtaining such
     information or inspecting documents including all business and accounting
     records.

10.  CONFIDENTIALITY AND PROTECTION OF DATA

10.1 Confidentiality of the Dealer's Information

     BMW GB will treat all information supplied to it by the Dealer under
     clauses 7.3.1, 7.4.2, 9.3 and 9.4 as confidential between BMW GB the
     Manufacturer and the Dealer, save insofar as such information comes into
     the public domain or into the possession of BMW GB from a source other than
     the Dealer, and save insofar as it is reproduced by BMW GB in the
     comparative dealer study referred to in sub-clause 9.3.


                                      -11-



10.2 Confidentiality of the Manufacturer's and BMW GB's Information

     10.2.1 The Dealer will both during and at any time after the termination of
          this Agreement:

               a)   treat all information supplied to it by BMW GB or the
                    Manufacturer as confidential between the Dealer, BMW GB and
                    the Manufacturer, save insofar as such information comes
                    into the public domain other than as a result of any breach
                    by the Dealer of its obligations hereunder; and

               b)   ensure that any of its employees or agents who come into
                    possession of such information will be informed of and will
                    observe the obligations of this Clause 10.2.

               Without prejudice to the generality of the foregoing, the
               Dealer's obligations under this clause shall apply in particular
               with regard to the know-how provided by the Manufacturer or BMW
               GB for sales and service including any information intended only
               for the internal use of the Dealer.

     10.2.2 The Dealer will not, either during or at any time after the
          termination of this Agreement, make public, use to the detriment or
          prejudice of BMW GB or the Manufacturer, or, except in the proper
          course of the Dealer's duties under this Agreement, divulge to any
          person any information which either expressly or by implication or
          from its context is confidential concerning any aspects of the
          business or affairs of BMW GB or the Manufacturer.


                                      -12-



10.3 Technical Information

     Without prior written consent by BMW GB the Dealer shall not be entitled
     either during or at any time after the termination of this Agreement to
     provide to third parties technical information supplied by BMW GB and/or
     the Manufacturer and/or any of their Connected Undertakings. In the event
     that third parties request the Dealer to provide such information, he shall
     immediately inform BMW GB thereof.

11.  DURATION OF THE AGREEMENT AND TERMINATION

11.1 Duration

     This Agreement contains the whole agreement between the parties and is in
     substitution for and supersedes all previous agreements (if any and whether
     written or oral) between BMW GB and the Dealer relating to Contract Goods.
     It will commence or will be deemed to have commenced on the Commencement
     Date shown in the Eighth Schedule and will continue thereafter unless
     terminated in accordance with me provisions of this Agreement.

11.2 Termination by the Dealer

     The Dealer may terminate this Agreement at any time by giving not less than
     twenty-four months' written notice to expire at the end of any calendar
     month. Any right the Dealer may have to terminate this Agreement for
     fundamental breach is not affected by this clause.


                                      -13-



11.3 Ordinary Notice to Terminate by BMW GB

     BMW GB may terminate this Agreement at any time by giving not less than
     twenty-four months written notice to expire at the end of any calendar
     month.

11.4 Termination for Cause by BMW GB

     BMW GB may terminate this Agreement forthwith and without notice for cause
     where the Dealer fails to perform any of its basic obligations including
     but not limited to:

     a)   The Dealer (including in the case of a firm any partner thereof)
          becoming insolvent by reason of its inability to pay its debts as they
          fall due, or entering into liquidation whether voluntarily or
          compulsorily other than for the purposes of a reconstruction or
          amalgamation, or having a trustee, receiver, administrative receiver
          or similar officer appointed in respect of all or any part of the
          business or assets of the Dealer, or making any arrangement or
          composition with its creditors, or suffering the making of an
          administration order in respect of all or any part of its assets, or
          taking or suffering any similar action in consequence of a debt, or
          ceasing or threatening to cease to trade or, if the Dealer is not
          incorporated, dying.

     b)   Circumstances arising which BMW GB consider impair the
          creditworthiness and/or financial position of the Dealer such that an
          orderly continuation of the business is or may be jeopardised or is no
          longer possible;

     c)   any payments made to BMW GB by the Dealer by any means being
          dishonoured or cancelled otherwise than by reason of a clerical error;


                                      -14-



     d)   the Dealer becoming unable to control its business or any premises
          thereof wholly or in part as is necessary to enable it to fulfil its
          obligations under this Agreement;

     e)   any material information provided by the Dealer to BMW GB in the
          negotiations leading to the formation of this Agreement or required to
          be provided by the Dealer at any time to BMW GB by this Agreement
          being false;

     f)   the Dealer repeatedly and to a substantial extent violating the
          provisions of Clauses 1.4 and 2.4 of this Agreement;

     g)   the Dealer or any Connected Undertaking of the Dealer (including, in
          the case of a firm, any partner thereof) or any of its or their
          Directors or any Key Personnel as specified in the Eighth Schedule
          hereto committing any indictable offence that might bring the Dealer
          or BMW GB or the standing of BMW GB or the Manufacturer into
          disrepute;

     h)   any dispute arising between BMW GB and the owners, shareholders or
          managers of the Dealer or between any of those persons which in the
          opinion of BMW GB impairs the effective management of the Dealer's
          business and the observance by the Dealer of its obligations
          hereunder;

     i)   the Dealer failing to obtain any consent required under this Agreement
          from BMW GB, save where BMW GB would have been obliged to grant the
          relevant consent.

     j)   any circumstance arising which BMW GB considers substantially impairs
          the business reputation of the Dealer;


                                      -15-



     k)   the Dealer committing a serious breach of this Agreement or a breach
          which is similar to a breach previously remedied following notice
          under clause 11.5 of this Agreement; or

     l)   the Dealer taking any action that endangers the status of this
          Agreement under Commission Regulation (EC) No 1475/95 (known more
          generally as the Block Exemption).

11.5 Notice of Termination for Unremedied Breach

     Subject always to Clause 11.4 of this Agreement, if the Dealer commits a
     breach of any of its basic obligations under this Agreement which BMW GB
     considers capable of remedy BMW GB may give to the Dealer notice of such
     breach requiring the same to be remedied within 28 days, or such other
     period as BMW GB considers reasonable in the circumstances, and if the
     Dealer fails to remedy the breach within such period BMW GB may terminate
     this Agreement by not less than three months written notice to expire at
     any time.

11.6 Changes in Connected Undertaking

     Should any change occur or be proposed in the beneficial ownership of any
     Connected Undertaking of the Dealer the Dealer will advise BMW GB as soon
     as possible of such change or proposal.

11.7 Reorganisation of Network

     If BMW GB or the Manufacturer considers it necessary to reorganise the
     whole or a substantial part of its dealer network BMW GB shall be entitled
     to terminate this Agreement by giving not less than twelve months' notice
     in writing to the Dealer to expire at any time.


                                      -16-



12.  CONSEQUENCES OF TERMINATION OF THE AGREEMENT

12.1 Cancellation of Orders

     Upon termination of this Agreement BMW GB reserves the right to cancel all
     or any unexecuted orders accepted by it in respect of Contract Goods. BMW
     GB is not obliged to do so but may fulfil any of the orders to the extent
     BMW GB sees fit provided that they do not exceed the purchase quotas set
     forth in the Dealer Order Objectives already established by BMW GB with the
     Dealer and provided also that the Dealer submits a list within two weeks of
     the termination of this Agreement in which the individual Customers and the
     particular Contract Goods for such Customers are adequately specified and
     to which copy sales contracts are attached.

12.2 Handling of the Warranty Obligations of the Dealer

     BMW GB is not obliged to do so, but may deliver to the Dealer BMW Parts to
     the extent the Dealer needs them to fulfil its warranty obligations to
     Customers which arose prior to the termination of this Agreement within the
     scope of the warranty of BMW GB pursuant to clause 6.3.

12.3 Return of the Contract Goods

     a)   BMW GB will within a period of 60 days after termination of this
          Agreement buy back the stocks of the Dealer's Contract Goods on the
          condition that they:

          (i)  were acquired directly from BMW GB or a BMW Dealer; and


                                      -17-



          (ii) are included in the current sales programme of BMW GB at the time
               of the re-purchase; and

          (iii) are not sold; and

          (iv) are new, unused and undamaged and, where applicable, in their
               original retail packaging; and

          (v)  are clearly identifiable

     b)   BMW GB will be under no obligation to re-purchase Contract Goods if
          the termination of this Agreement is the result of actions of the
          Dealer which entitle or would have entitled BMW GB to terminate the
          agreement under clause 11.4 or 11.5.

     c)   The Dealer will at BMW GB's request sell its entire stock or part of
          its stock of Contract Goods to BMW GB.

     d)   Forthwith upon the termination of this Agreement any BMW Vehicles on
          consignment shall be returned at the expense of the Dealer (or at the
          expense of BMW GB if terminated by BMW GB) to BMW GB or to any place
          or person specified by BMW GB in the same condition as when received
          from BMW GB and on such return of the said Vehicles BMW GB shall repay
          the Dealer any sum deposited under the terms set out in the First
          Schedule hereto in respect of the BMW Vehicles returned less any sum
          considered by BMW GB to be due for loss damage or deterioration to the
          said Vehicles.


                                      -18-



12.4 Re-Purchase Price

     a)   BMW Vehicles will be re-purchased at their cost price to the Dealer.
          The cost of any rectification or repairs necessary to any such BMW
          Vehicles will be deducted from the amount paid to the Dealer.

     b)   The price to be paid by BMW GB for the re-purchase of BMW Parts shall
          be the list price in force for such parts at the date on which the
          offer to repurchase is made by BMW GB less any increase in the price
          of such BMW parts during the period of twelve months prior to the date
          of such offer to repurchase, and less the normal discount granted by
          BMW GB and the average bonus earned by the Dealer in the same period.

12.5 Return Delivery

     Return delivery of the Contract Goods will be effected at the risk and cost
     of the Dealer, save that if the Contract Goods are delivered on the
     instructions of BMW GB to a place other than a Distribution Centre, the
     risk passes to BMW GB when the Contract Goods have been properly
     transferred to the forwarding agent or the carrier or other person
     responsible for the return delivery or a person designated by BMW GB. In
     this case, the transport costs are assumed

     by BMW GB, to the extent they exceed the costs of transport from the
     business premises of the Dealer to the Distribution Centre.

12.6 Removal of Advertising - Trademarks

     a)   Upon termination of this Agreement the Dealer will at its own expense
          immediately remove from its premises all advertising material of BMW
          GB or the Manufacturer and, insofar as it is the property of BMW GB or
          the


                                      -19-



          Manufacturer or any of their Connected Undertakings, return it to BMW
          GB. Furthermore, the Dealer will offer to sell, at BMW GB's request,
          all items within the BMW GB Corporate Identity Programme which are the
          property of the Dealer, at net book value, subject to a maximum price
          of the current market price which, in default of agreement, will be
          specified by BMW GB.

     b)   Within one month of the termination of this Agreement the Dealer will
          at its own expense deliver to BMW GB all records, designs, manuals,
          specifications, handbooks, advertising material, corporate identity
          material, pylons, documents and any property belonging to BMW GB or
          the Manufacturer or any of their Connected Undertakings in its
          possession together with any copies thereof.

     c)   Forthwith upon the termination of this Agreement the Dealer shall at
          its own expense remove from its premises all signs containing the name
          BMW and/or the BMW emblem and/or any other trademark or trade or brand
          name of the Manufacturer and shall cease to use the name BMW and/or
          the BMW emblem and/or any other trademark or trade or brand name of
          the Manufacturer on any stationery, advertisement or other literature
          and will not take any steps that might lead the public to infer that
          it is a BMW Dealer or fail to correct any confusion that the Dealer is
          still a BMW Dealer.

12.7 BMW GB Servicing Equipment

     Within two months of the termination of this Agreement BMW GB may serve
     written notice on the Dealer requiring that the Dealer sell all or part of
     its stock of special tools, including electronic analysis and testing
     equipment, to BMW GB at a price determined by BMW GB as the reasonable
     trade value applicable at


                                      -20-



     the time of such re-purchase. If BMW GB does not serve such notice on the
     Dealer then BMW GB may endeavour to assist the Dealer in selling such stock
     of special tools.

12.8 Rights and Duties Arising from the Termination of the Agreement

     a)   Termination of this Agreement for any reason shall not, unless
          otherwise expressly provided herein, affect any accrued rights of the
          parties hereto arising prior to the date of termination or any
          obligations which either expressly or from the context of this
          Agreement are intended to survive termination of the Agreement and
          without prejudice to the generality of the foregoing, it is expressly
          agreed that Clauses 10.1, 10.2, and 10.3 hereof will continue
          notwithstanding termination of this Agreement.

     b)   To the extent certain rights and duties are fixed in this Agreement
          for the time following the termination thereof, compliance therewith
          does not have the effect of extending the terminated Agreement.

13.  FINAL PROVISIONS

13.1 Incorporation of Schedules

     The following are deemed to be part of this Agreement:

     Schedules 1 to 8 inclusive

13.2 Alterations

     No modifications or alteration to this Agreement shall have effect unless
     the same is agreed in writing between the parties.


                                      -21-


13.3 Law and Jurisdiction

     This Agreement shall be governed by and construed in all respects in
     accordance with the law of England. Subject to clause 13.10, BMW GB and the
     Dealer irrevocably agree that the Courts of England are to have exclusive
     jurisdiction to decide any disputes which may arise out of or in connection
     with this Agreement.

13.4 Force Majeure

     BMW GB shall not be liable to the Dealer for any loss or damage sustained
     by the Dealer as a result of any failure or delay on BMW GB's part in the
     performance of any of its obligations under this Agreement or any agreement
     for the sale of Contract Goods if and to the extent that such failure or
     delay shall be by reason of any matter or thing beyond the reasonable
     control of BMW GB including but not limited to Acts of God, labour
     disputes, transportation failure or delays, riots, delays in production,
     strikes or difficulties of the Manufacturer in proceeding with the
     production of Contract Goods.

13.5 Right of Set-Off

     At any time during or after the termination of this Agreement:

     13.5.1 BMW GB shall be entitled to set off against any claim made by or any
          amount due to the Dealer:

          a)   The Invoice Sum of any Contract Goods, or other goods, delivered
               to or as directed by the Dealer, remaining unpaid by the Dealer
               in whole or in part; and

          b)   the value of any amount due to or any claim by BMW GB from or
               against the Dealer, whether under this Agreement or under any
               other agreement between BMW GB and the Dealer.

     13.5.2 Without prejudice to the provision in Clause 13.5.1 above, BMW GB
          may apply in or towards the payment of any amount due to, or claim by,
          BMW GB from or against the Dealer:-

          a)   any sum of money deposited by the Dealer with BMW GB; and

          b)   any goods or other property whatsoever belonging to the Dealer
               which may be in the possession of BMW GB.

13.6 Headings

     The headings appearing herein are inserted for convenience only and shall
     not affect the construction of this Agreement.

13.7 Restrictive Trade Practices

     Neither party to this Agreement shall give effect to or enforce or purport
     to enforce any provision of this Agreement by virtue of which this
     Agreement is subject to registration under the Restrictive Trade Practices
     Act 1976 until the day after particulars of this Agreement have been
     furnished to the Director General of Fair Trading pursuant to the terms of
     Section 24 of that Act.

13.8 Waiver of Breaches

     Failure by BMW GB or the Dealer to enforce at any time any of the
     provisions of this Agreement shall not be construed as a waiver of any of
     BMW GB's or the Dealer's rights hereunder nor in any way affect the
     validity of this Agreement or any part thereof.

13.9 Notices

     13.9.1 Unless otherwise stated all notices to be served or given under this
          Agreement shall be in writing and for this purpose "writing" shall
          include transmission by facsimile transmission.

     13.9.2 Any notice to be served or given by either of the parties upon the
          other shall be sent by prepaid recorded delivery or registered post or
          (in the case of a notice to be given by BMW GB to the Dealer) may be
          delivered by hand to the address as provided below or by facsimile to
          the correct facsimile number at such address of the party to be served
          and shall be deemed to have been received by the addressee at the time
          of delivery or in the case of service by post 48 hours after posting
          (excluding Saturdays, Sundays and Public Holidays) or in the case of a
          facsimile transmission on the date received by the addressee if
          received on or before 2.00 pm on any day (excluding Saturdays, Sundays
          and Public Holidays) and if received after 2.00 pm it shall subject as
          aforesaid be deemed to have been received on the following day
          (excluding Saturdays, Sundays and Public Holidays).

     13.9.3 Any notice served on the Dealer shall be sent to the Dealer's last
          known address.

     13.9.4 Any notice served on BMW GB shall be sent to its registered office
          for the time being.

          Dealer's rights hereunder nor in any way affect the validity of this
          Agreement or any part thereof.

13.9 Notices

     13.9.1 Unless otherwise stated all notices to be served or given under this
          Agreement shall be in writing and for this purpose "writing" shall
          include transmission by facsimile transmission.

     13.9.2 Any notice to be served or given by either of the parties upon the
          other shall be sent by prepaid recorded delivery or registered post or
          (in the case of a notice to be given by BMW GB to the Dealer) may be
          delivered by hand to the address as provided below or by facsimile to
          the correct facsimile number at such address of the party to be served
          and shall be deemed to have been received by the addressee at the time
          of delivery or in the case of service by post 48 hours after posting
          (excluding Saturdays, Sundays and Public Holidays) or in the case of a
          facsimile transmission on the date received by the addressee if
          received on or before 2.00 pm on any day (excluding Saturdays, Sundays
          and Public Holidays) and if received after 2.00 pm it shall subject as
          aforesaid be deemed to have been received on the following day
          (excluding Saturdays, Sundays and Public Holidays).

     13.9.3 Any notice served on the Dealer shall be sent to the Dealer's last
          known address.

     13.9.4 Any notice served on BMW GB shall be sent to its registered office
          for the time being.

     13.9.5 Each party agrees to notify the other forthwith of any change in its
          registered office or address (as the case may be) or facsimile number.


                                      -22-


13.10 Conciliation Procedure

     13.10.1 If the parties disagree in respect of any matter mentioned in
          13.10.2 below they may use the procedure agreed in 13.10.3 below for
          quick resolution of the dispute.

     13.10.2 The procedure in 13.10.3 applies to any disagreement in respect of:

          a)   a termination of this Agreement pursuant to sub-clauses 11.4,
               11.5, 11.6 or 11.7 of this Agreement; or

          b)   sales targets pursuant to sub-clauses 4.2.2 or 4.3.1; or

          c)   quantities of Contract Goods kept by the Dealer for display
               and/or stock pursuant to sub-clauses 4.2.3 or 4.3.3; or

          d)   BMW Vehicles, or quantity thereof, kept by the Dealer for
               demonstration, pursuant to sub-clause 4.2.3.

     13.10.3 The procedure to resolve the dispute shall be for either party as
          soon as reasonably practicable after the dispute arises to initiate
          reference to the conciliation panel referred to in 13.10.4 below by
          serving written notice on the other party stating the matter about
          which there is disagreement and requesting reference to the
          conciliation canel, providing a copy of such notice to the Company
          Secretary of BMW GB for the time being. Upon service of such a notice
          by either party the Company Secretary of BMW GB shall refer the matter
          to the conciliation panel and notify the Dealer that he has done so.

     13.10.4 The conciliation panel shall be such panel as is established for
          the purpose by separate arrangements from time to time between BMW GB
          and a representative body of the BMW Dealer Network

          ("the Representative Body") to the intent that there shall at all
          times while this Agreement is in force be a standing panel of four
          members, two of whom are nominated by BMW GB and two of whom are
          nominated by the Representative Body, who will receive reference of
          any matter under clause 13.10.3 and will seek to resolve any dispute
          properly so referred to the conciliation panel. The conciliation panel
          will determine its own procedure in all respects, subject to the
          arrangements agreed between BMW GB and the Representative Body. BMW GB
          and the Representative Body may at any time nominate substitutes for
          the persons they have respectively nominated as members of the
          conciliation panel, either permanently or, if a member of the panel is
          unsuitable, unable or unwilling to act in a particular matter, on a
          temporary basis.

     13.10.5 In the event that the above conciliation procedure has not been
          initiated by either party serving written notice under 13.10.3 within
          7 days after a dispute has arisen, or has not led to results accepted
          by both parties within one month of service of a notice under 13.10.3,
          or that at any time the interests of either party may be substantially
          impaired without recourse to a Court, either party shall be at liberty
          to commence any Court proceedings.

13.11 Value added and other Taxes

     To the extent that in any respect sums payable by the Dealer to BMW GB are
     from time to time subject to Value Added Tax or any other taxes, the Dealer
     shall pay such Value Added Tax or other taxes in addition to the sums
     payable.

14.  Definitions

1.   (a)  In this Agreement and in the Schedules hereto (unless the context
          otherwise requires) the words and expressions set out in Column (1)
          below will have the meanings set out opposite them in Column (2)
          below:

     (1)                                            (2)

                        
"BMW Dealer"               a person having a written agreement with BMW GB or
                           any other importer of Contract Goods appointed by the
                           Manufacturer within the territory of the European
                           Economic Area, or with the Manufacturer, to sell
                           Contract Goods;

"BMW Parts"                all parts which are to be installed in or upon a BMW
                           Vehicle so as to replace components of that vehicle
                           which BMW GB offers in its current sales programme
                           for BMW Parts, irrespective of whether those parts
                           are made by the Manufacturer or supplied to the
                           Manufacturer or BMW GB by third parties.




                                      -23-


                        
"BMW Vehicles"             new motor vehicles with three or more road wheels
                           which are included in BMW GB's sales programme as
                           notified by BMW GB from time to time and which bear a
                           trademark of the Manufacturer.

"Connected Undertakings"   (a) undertakings one of which directly or indirectly;

                                (i) holds more than half of the capital or
                                business assets of the other, or

                                (ii) has the power to exercise more than half
                                the voting rights in the other, or

                                (iii) has the power to appoint more than half
                                the members of the supervisory board, board of
                                directors or bodies legally representing the
                                other, or

                                (iv) has the right to manage the affairs of the
                                other;

                      or   (b) undertakings in relation to which a third
                           undertaking is able directly or indirectly to
                           exercise such rights or powers as are mentioned in
                           (a) above;

"Contract Goods"           BMW Vehicles and BMW Parts;

"Customer"                 a person who purchases or acquires, whether by way of
                           lease, hire, hire purchase or otherwise, one or more
                           Contract Goods for his own personal or commercial use
                           and not for re-sale in the course of business;

"Customer Facilities"      a)   finance, leasing, or similar products offered by
                                BMW GB or any of its Connected Undertakings; and

                           b)   BMW GB's Used Car Programme; and

                           c)   BMW GB's Accessories Programme; and

                           d)   Extended warranties

"Distribution Centre"      premises at which Contract Goods are stored by or on
                           behalf of BMW GB following importation into the
                           United Kingdom;

"Invoice Sum"              The Aggregate of:

                           (i) the price payable by the Dealer for the Contract
                           Goods in question (inclusive of any amounts payable
                           for extras and value added tax and any other taxes if
                           applicable);

                     and   (ii) the cost of transport between the Distribution
                           Centre and the place of delivery including all costs
                           of packaging, warehousing, loading, unloading and
                           checking;

"Manufacturer"             Bayerishe Motoren Werke Aktiengesellschaft of Munich,
                           Germany

"Non-BMW Parts"            all parts which are to be installed in or upon a BMW
                           Vehicle so as to replace components of that vehicle
                           which are not BMW Parts.

"Supply" and "Sell"        include other forms of supply such as leasing as well
                           as the ordinary meaning of the words;

"United Kingdom"           The United Kingdom of Great Britain and Northern
                           Ireland but including also for the purpose of this
                           Agreement, where the context admits, the Channel
                           Islands and the Isle of Man, which shall also for the
                           purpose of this Agreement be treated as within the
                           territory of the European Economic Area.

"Year of this Agreement"   the period commencing on 1st January in any year and
                           ending on 31st December in the same year.



     (b)  The masculine shall include the feminine, the singular shall include
          the plural and person shall include a body corporate or partnership
          and vice versa.

     (c)  Any reference in this Agreement or in the Schedules by name to any
          document issued by BMW GB or the Manufacturer shall include any
          document amending or replacing the same from time to time.


                                      -24-


                                 FIRST SCHEDULE

                            CONSIGNMENT - (VEHICLES)

BMW Vehicles will be supplied on consignment to the Dealer by BMW GB on the
terms and conditions set out in this Schedule.

1.   The Dealer will receive from BMW GB Dealer Order Objectives showing the BMW
     Vehicles allocated to it during any Year of this Agreement.

2.   The Dealer will within the time specified in the Dealer Order Objectives
     take delivery, using the forms supplied by BMW GB, of BMW Vehicles
     allocated.

3.   The Dealer will pay or arrange payment to BMW GB by direct debit on taking
     delivery of each BMW Vehicle a sum equal to the Invoice Sum of each BMW
     Vehicle or any lesser sum agreed by BMW GB but excluding the amount
     chargeable by reference to value added tax and any car tax.

4.   (i)  BMW GB will arrange transport of each BMW Vehicle to the Dealer's
          business premises.

     (ii) When a BMW Vehicle is delivered the Dealer will ensure that it is
          inspected for any damage or defects by a responsible person who, when
          such inspection has been carried out, should sign the carrier's
          receipt form. Should any BMW Vehicle have been damaged in transit the
          Dealer should immediately notify the carrier of such damage in
          writing. The Dealer will deal with any claim against the carrier in
          accordance with instructions issued from time to time by BMW GB.

5.   The Dealer will notify BMW GB immediately of the occurrence of any of the
     said events set out in the paragraph 11 of this Schedule stating the date
     and nature of the event.

6.   Forthwith upon the happening of any of the events specified in paragraph 11
     of this Schedule the relevant BMW Vehicle(s) will be deemed to be sold to
     the Dealer by BMW GB on the terms and conditions set out in the Second
     Schedule hereto and the Dealer will forthwith upon receipt of an invoice
     from BMW GB pay to BMW GB by direct debit the amount of value added tax and
     any car tax chargeable on the sale by BMW GB plus any balance due in
     respect of the Invoice Sum.

7.   The Dealer will indemnify BMW GB from and against loss of and all damage
     caused to each of the BMW Vehicles during the period (hereinafter called
     "the Risk Period") commencing at the time on which each of the BMW Vehicles
     arrives at the Dealer's business premises and ending on the earliest to
     occur of the following three events:

     (i)  the date of sale of each such BMW Vehicle; or

     (ii) the date on which each such BMW Vehicle is returned to any premises of
          BMW GB pursuant to paragraph 9 of this Schedule or Clause 12.3 (d) of
          this Agreement; or

     (iii) the date on which each such BMW Vehicle is delivered, with the prior
          written consent of BMW GB, to the premises of another BMW Dealer under
          a so called "swap arrangement";

          and for this purpose will effect with an insurance company or
          underwriter of repute and continue in force during the currency of
          this Agreement at its own expense a policy or policies of insurance on
          each of the BMW Vehicles for the Risk Period against all risks in a
          sum not less than the amount of the Invoice Sum of the BMW Vehicles.

          The Dealer will produce to BMW GB on demand satisfactory evidence of
          such insurance together with proof of payment of the current premiums.

8.   The Dealer undertakes whilst any BMW Vehicle is on consignment:

     (i)  not to alter in any way the specification of or type of equipment
          fitted to any BMW Vehicle without the prior written consent of BMW GB;

     (ii) to keep each BMW Vehicle properly housed in the Dealer's business
          premises or other premises previously approved in writing by BMW GB
          under proper supervision and to take all reasonable precautions for
          the safety thereof;

     (iii) not to remove any BMW Vehicle from the premises referred to in clause
          (ii) without the prior written consent of BMW GB;

     (iv) to allow any BMW Vehicle to be inspected by the servants or agents of
          BMW GB at any reasonable time;

     (v)  to keep accurate records showing the history of each BMW Vehicle from
          the time of receipt hereunder to the happening of any of the events
          specified in paragraph 11 of this Schedule;

     (vi) to make returns to BMW GB of stocks of BMW Vehicles on consignment at
          the close of business on such dates as are specified by BMW GB from
          time to time and on every day preceding the effective date of change
          in the amount chargeable by reference to value added tax and any car
          tax and such other returns as BMW GB may from time to time require;


                                      -25-


     (vii) not to do anything that might cause the insurance policy or policies
          effected pursuant to paragraph 7 of this Schedule to be avoided by the
          insurance company concerned.

9.   (i)  The Dealer may on giving seven days notice in writing to BMW GB and
          within three days of the expiration of such notice return at its own
          expense any BMW Vehicle to BMW GB or to any person nominated by BMW GB
          in the same condition as when received;

     (ii) BMW GB may by notice in writing demand the return of any BMW Vehicle
          on consignment and within seven days of such demand the Dealer will
          either pay for such BMW Vehicle in full or at its own expense return
          to BMW GB or to any person nominated by BMW GB such BMW Vehicle in the
          same condition as when received and in case of default by the Dealer
          BMW GB will either alone or with or by others and without notice be
          entitled to enter at any time upon the premises where BMW Vehicles may
          be and remove them.

10.  Forthwith upon the return of any BMW Vehicle to BMW GB in accordance with
     the provisions of paragraph 9 of this Schedule BMW GB shall repay to the
     order of the Dealer any sum deposited under the provisions of paragraph 3
     of this Schedule in respect of each BMW Vehicle thereby affected less any
     sum considered by BMW GB to be due for loss damage or deterioration to any
     such BMW Vehicle.

11.  Each BMW Vehicle will be deemed to be sold to the Dealer by BMW GB upon the
     terms and conditions set out in the Second Schedule of this Agreement upon
     the happening of any of the following events;

     (i)  the BMW Vehicle is the subject of an offer of sale made by the Dealer
          which is accepted by a person or the subject of an offer to purchase
          made by a person which is accepted by the Dealer;

     (ii) the despatch by hand or by post of an application to the relevant
          registration authority for registration of the BMW Vehicle;

     (iii) the commencement of, or the despatch of the BMW Vehicle to another
          party for, modification adaptation of or addition to the BMW Vehicle
          (other than maintenance repair or the addition of any "slip-on-" type
          of accessory solely for sales promotion and not to the order of a
          Customer) or the giving of written instructions therefor;

     (iv) the BMW Vehicle is let out by the Dealer on hire or made the subject
          of a contract hire agreement;

     (v)  the BMW vehicle is made subject to a hire purchase agreement, credit
          sale agreement, charge, lien, or bill of sale;

     (vi) the BMW Vehicle is used on the road for demonstration purposes;

     (vii) the BMW Vehicle is purchased by the Dealer or applied or appropriated
          by the Dealer to stock or for its own use or that of another person;

     (viii) the specification of or type of equipment fitted to the BMW Vehicle
          is altered without the prior written consent of BMW GB;

     (ix) the BMW Vehicle is transferred to another BMW Dealer otherwise than
          under cover of a valid sale or return agreement or under a "swap
          arrangement" in either case approved by BMW GB; or

     (x)  the Dealer retains the BMW Vehicle for a period of more than 90 days
          or such other period specified by BMW GB from the date of its delivery
          to the Dealer Provided always that the parties hereto may extend such
          period in respect of any one or more of the BMW Vehicles on
          consignment by agreement in writing made before the said period would
          otherwise have expired for such further period (expiring not later
          than 12 months after the date of delivery of such vehicle to the
          Dealer) as they may agree.


                                      -26-


                                 SECOND SCHEDULE

                        CONDITIONS OF SALE: BMW VEHICLES

BMW Vehicles will be sold to the Dealer by BMW GB on the terms and conditions
set out in this Schedule.

1.   Orders

     (i)  BMW GB will not be bound to supply the Dealer with any BMW Vehicle
          ordered until it sends the Dealer written confirmation of its
          acceptance of the Dealer's order which acceptance will not be
          despatched until BMW GB has confirmation from the Manufacturer that it
          will be able to manufacture the BMW Vehicle ordered.

     (ii) Each BMW Vehicle will normally be ready for despatch from the
          Distribution Centre not later than 4 months after the date upon which
          BMW GB has despatched its written acceptance of the Dealer's order.

     (iii) Notwithstanding the foregoing, any delivery date or delivery period
          quoted by BMW GB is a business estimate only and time will not be of
          the essence.

2.   Specifications

     BMW GB reserves the right to alter the design and specification of any BMW
     Vehicle or part thereof.

3.   Prices

     The price payable by the Dealer for each BMW Vehicle will be the price
     published in BMW GB's wholesale price list current at the date on which the
     relevant sale invoice is produced plus value added tax and any car tax.

4.   Delivery

     (i)  BMW GB will arrange transport of each BMW Vehicle to the Dealer's
          business premises.

     (ii) When any BMW Vehicle is delivered the Dealer must ensure that it is
          inspected for any damage or defects by a responsible person who, when
          such inspection has been carried out, should sign the carrier's
          receipt form. Should any BMW Vehicle have been damaged in transit the
          Dealer should immediately notify the carrier of such damage in
          writing. The Dealer will deal with any claim against the carrier in
          accordance with instructions issued from time to time by BMW GB.

     (iii) The Dealer will pay to BMW GB any cost incurred in connection with
          the delivery of each BMW Vehicle from the Distribution Centre to the
          Dealer's business premises.

5.   Risk

     Risk in each BMW Vehicle will pass to the Dealer upon delivery thereof to
     the Dealer's business premises.

6.   Retention of Property

     (i)  The property in and legal and beneficial ownership of each BMW Vehicle
          sold by BMW GB to the Dealer shall remain in BMW GB until the Dealer
          has paid to BMW GB:

          (a)  the full Invoice Sum in respect thereof; and

          (b)  the full Invoice Sum in respect of any other goods the subject of
               any other contract with BMW GB.

          Provided that sub-clauses (a) and (b) shall be construed and receive
          effect each as a separate clause and accordingly in the event of
          either of them being for any reason whatsoever unenforceable according
          to its terms, the other shall remain in full force and effect.

     (ii) So long as the property in and legal and beneficial ownership of any
          BMW Vehicle sold by BMW GB to the Dealer remains in BMW GB, BMW GB
          shall have the right, with or without prior notice to the Dealer, to
          retake possession of any such BMW Vehicle and for that purpose to
          enter upon any premises where any such BMW Vehicle is stored or is
          reasonably thought to be stored in any of the following events:

          (a)  The Dealer is in default of any of its obligations under any
               agreement with BMW GB; or

          (b)  The Dealer (not being a company, but including, in the case of a
               firm, the firm or any partner therein) commits an available act
               of bankruptcy, or becomes apparently insolvent, or (being a
               company) does anything or fails to do anything which would
               entitle any person to present a petition for winding up, or does
               anything or fails to do anything which would enable insolvency
               proceedings to be commenced, or (being a partnership) is
               dissolved; or

          (c)  The Dealer does anything or fails to do anything which would
               entitle a person to appoint a Receiver or entitle a Receiver or a
               person appointed by a Court to take possession of any of its
               assets; or

          (d)  The Dealer makes any assignment, agreement or composition with or
               executes any trust deed for creditors or ceases or threatens to
               cease to trade or dies or repudiates the agreement or is
               otherwise unable to pay its debts as they fall due.


                                      -27-


     (iii) If the Dealer resells any BMW Vehicle before beneficial ownership of
          the BMW Vehicle has vested in it and BMW GB loses title to the BMW
          Vehicle in consequence, BMW GB's beneficial entitlement shall attach
          to the proceeds of sale (which expression includes any right to or
          claim for such proceeds) and the Dealer shall hold such proceeds of
          sale in trust for BMW GB and keep them separate from other money.

     (iv) The Dealer acknowledges that it is in possession of each BMW Vehicle
          sold by BMW GB to the Dealer solely as a fiduciary for BMW GB until
          such time as the Dealer has paid to BMW GB:

          (a)  the full Invoice Sum in respect thereof; and

          (b)  the full Invoice Sum in respect of any other goods the subject of
               any other contract with BMW GB.

          Provided that sub-clauses (a) and (b) shall be construed and receive
          effect each as a separate clause and accordingly in the event of
          either of them being for any reason whatsoever unenforceable according
          to its terms, the other shall remain in full force and effect.

     (v)  The Dealer will advise BMW GB immediately of any action by third
          parties, (for example, creditors of the Dealer), concerning any BMW
          Vehicle the property in which has not passed to the Dealer.

     (vi) BMW GB may maintain an action for the price of each BMW Vehicle sold
          notwithstanding that the property in such BMW Vehicle may not have
          passed to the Dealer.

7.   Payment

     (i)  Unless otherwise agreed the Dealer will make payments to BMW GB in
          accordance with the direct debit procedure operated by BMW GB

     (ii) Should any sum payable under this Agreement by the Dealer to BMW GB be
          overdue BMW GB reserves the right to suspend all further deliveries of
          BMW Vehicles.

8.   Warranty and Exclusion

     (i)  BMW GB warrants to the Dealer that a BMW Vehicle will be free from
          defects in materials and workmanship for one year beginning with the
          date of the first registration.

     (ii) If a valid claim arises in respect of a tyre, the Dealer will make a
          claim against the manufacturer of the tyre or its agent in the United
          Kingdom and in the event that the Dealer shall fail to obtain
          satisfaction in respect thereof, BMW GB will accept responsibility for
          such claim on receipt of satisfactory evidence that the Dealer has
          used its best endeavours in pursuing its claim against such
          manufacturer or agent.

     (iii) No claim under warranty will be considered unless the defect has been
          notified to BMW GB without delay and a warranty claim has been made in
          accordance with the provisions of the Fourth Schedule hereto.

     (iv) BMW GB will deal with any warranty claim in accordance with the
          provisions of the Fourth Schedule hereto.

     (v)  BMW GB warrants to the Dealer that any BMW Part fitted pursuant to a
          warranty claim will be free of defects from the date of installation
          in a BMW Vehicle under warranty until the expiration of the warranty
          period for such vehicle.

     (vi) The warranty does not apply if there is non-compliance with the
          Warranty Guidelines set out in any relevant Warranty and Service
          Handbook issued by BMW GB from time to time.

     (vii) The warranty will not be affected by any change of ownership of the
          BMW vehicle.

     (viii) The warranty given by BMW GB is in substitution for and to the
          entire exclusion of any condition term or warranty relating to the
          quality or fitness of any BMW Vehicle whether express or implied by
          statute common law or otherwise howsoever.


                                      -28-


                                 THIRD SCHEDULE

                                 PARTS BUSINESS

                  A: CONDITIONS OF SALE AND DELIVERY: BMW PARTS

BMW Parts will be sold and delivered to the Dealer by BMW GB on the terms and
conditions set out in this Schedule.

1.   Orders

     (i)  The Dealer will place all orders for BMW Parts in the manner specified
          by BMW GB from time to time.

     (ii) BMW Parts will be despatched to the normal address within the
          Territory used by BMW GB to invoice the Dealer unless otherwise
          requested in writing by the Dealer.

     (iii) BMW GB will endeavour to comply with any delivery time quoted by it
          to the Dealer but any delivery time quoted by BMW GB is a business
          estimate only and time shall not be of the essence.

2.   Specifications

     BMW GB reserves the right to alter the specification of any BMW Part sold
     hereunder from that shown in any of its current price lists or other
     publications provided that the functioning of the BMW Part will not be
     adversely affected thereby.

3.   Prices

     The price payable by the Dealer for any BMW Part will be the recommended
     retail price published in BMW GB's price list current at the date on which
     the relevant invoice is produced subject to any discounts that may have
     been determined by BMW GB at the date of invoice. Any price quoted for the
     BMW Parts will be exclusive of the costs of any special packaging required
     by the Dealer.

4.   Delivery

     (i)  It will be the Dealer's responsibility to examine each BMW Part as
          soon as practicable following delivery and to notify BMW GB whether or
          not the BMW Part has been delivered in a satisfactory condition.
          Should any BMW Part have been damaged in transit or be missing from
          the delivery the Dealer should immediately notify BMW GB of such
          damage or shortfall in the manner specified by BMW GB from time to
          time by 12 midday on the day of delivery unless otherwise agreed by
          BMW GB in writing. The Dealer will handle any claim in accordance with
          instructions issued from time to time by BMW GB. Any BMW Parts
          returned to BMW GB by the Dealer will be at the expense and risk of
          the Dealer unless returned on BMW GB's delivery vehicles.

     (ii) BMW GB will bear the cost of any carriage charges relating to orders
          placed by the Dealer except that the Dealer will pay any charge made
          by BMW GB for orders delivered at the request of the Dealer outside
          the normal delivery schedules of BMW GB from time to time applicable.

5.   Risk

     Risk in each BMW Part will pass to the Dealer upon delivery thereof to the
     Dealer's business premises or to such other destination as may have been
     specified by the Dealer.

6.   Retention of Property

     (i)  The property in and legal and beneficial ownership of each BMW Part
          sold by BMW GB to the Dealer shall remain in BMW GB until the Dealer
          has paid to BMW GB:

          (a)  the full Invoice Sum in respect thereof and

          (b)  the full Invoice Sum in respect of any other goods the subject of
               any other contract with BMW GB.

          Provided that sub-clauses (a) and (b) shall be construed and receive
          effect each as a separate clause and accordingly in the event of
          either of them being for any reason whatsoever unenforceable according
          to its terms, the other shall remain in full force and effect.

     (ii) So long as the property in and legal and beneficial ownership of any
          BMW Part sold by BMW GB to the Dealer remains in BMW GB, BMW GB shall
          have the right, with or without prior notice to the Dealer, to retake
          possession of any such BMW Part and for that purpose to enter upon any
          premises where any such BMW Part is stored or is reasonably thought to
          be stored in any of the following events:

          (a)  The Dealer is in default of any of its obligations under any
               agreement with BMW GB; or

          (b)  The Dealer (not being a company, but including, in the case of a
               firm, the firm or any partner therein) commits an available act
               of bankruptcy or becomes apparently insolvent, or (being a
               company) does anything or fails to do anything which would
               entitle any person to present a petition for winding up, or does
               anything or fails to do anything which would enable insolvency
               proceedings to be commenced, or (being a partnership) is
               dissolved; or

          (c)  The Dealer does anything or fails to do anything which would
               entitle a person to appoint a Receiver or entitle a Receiver or a
               person appointed by a Court to take possession of any of its
               assets; or

          (d)  The Dealer makes any assignment, agreement or composition with or
               executes any trust deed for creditors or ceases or threatens to
               cease to trade or dies or repudiates the Agreement or is
               otherwise unable to pay its debts as they fall due.

     (iii) If the Dealer resells any BMW Part before beneficial ownership of the
          BMW Part has vested in it and BMW GB loses title to the BMW Part in
          consequence, BMW GB's beneficial entitlement shall attach to the
          proceeds of sale (which expression includes any right to or claim for
          such proceeds) and the Dealer shall hold such proceeds of sale in
          trust for BMW GB and keep them separate from other money.


                                      -29-


     (iv) The Dealer acknowledges that it is in possession of each BMW Part sold
          by BMW GB to the Dealer solely as a fiduciary for BMW GB until such
          time as the Dealer has paid to BMW GB:

          (a)  the full Invoice Sum in respect thereof; and

          (b)  the full Invoiced Sum in respect of any other goods the subject
               of any other contract with BMW GB

          Provided that sub-clauses (a) and (b) shall be construed and receive
          effect each as a separate clause and accordingly in the event of
          either of them being for any reason whatsoever unenforceable according
          to its terms, the other shall remain in full force and effect.

     (v)  The Dealer will advise BMW GB immediately of any action by third
          parties, (for example, creditors of the Dealer), concerning any BMW
          Part the property in which has not passed to the Dealer.

     (vi) BMW GB may maintain an action for the price of each BMW Part sold
          notwithstanding that the property in such BMW Part may not have passed
          to the Dealer.

     (vii) Until such time as the Dealer becomes the owner of any BMW Part, the
          Dealer will store such BMW Part on his premises separately from his
          own goods or those of any other person and in a manner which makes the
          BMW Part readily identifiable as the goods of BMW GB, but if the BMW
          Part is not so stored, it shall be assumed that all BMW Parts
          remaining in stock with the Dealer were those BMW Parts most recently
          delivered by BMW GB and that BMW Parts have been sold by the Dealer on
          a first in first out basis.

     (viii) If any BMW Part, the property of BMW GB, is admixed with goods the
          property of the Dealer or is processed with or is incorporated
          therein, the product thereof shall become and/or shall be deemed to be
          the sole and exclusive property of BMW GB. If any BMW Part, the
          property of BMW GB is admixed with goods the property of any person
          other than the Dealer or is processed with or incorporated therein,
          the product thereof shall become and/or shall be deemed to be owned in
          common with the other person.

7.   Payment

     (i)  Unless otherwise agreed the Dealer will make payment to BMW GB in
          accordance with the direct debit procedure operated by BMW GB.

     (ii) Payment for the BMW Parts will be made at the end of the month
          following the month in which BMW GB's invoice is provided.

     (iii) Should any sum payable under this Agreement by the Dealer to BMW GB
          be overdue BMW GB reserves the right to suspend all further deliveries
          of BMW Parts.

8.   Packaging

     Unless otherwise advised BMW GB's packaging material identified as
     returnable (including pallets and roll cages) should be returned to BMW GB
     in accordance with instructions issued by BMW GB from time to time. If such
     packaging materials are returned to BMW GB in a damaged condition the
     Dealer will reimburse BMW GB therefor.

9.   Complaints

     Complaints in respect of incomplete consignments, of consignments which do
     not comply with the type and quantity ordered, or which comprise BMW Parts
     showing recognisable external defects, are to be notified to BMW GB in the
     form and manner specified by BMW GB from time to time. Failing notification
     in the foregoing manner, the consignment will be deemed to have been
     accepted by the Dealer without reservation.

10.  Warranty obligation and Exclusion

     (i)  BMW GB warrants to the Dealer that unless a longer period is specified
          in the Parts Guide a BMW Part will be free from defects in material
          and workmanship for twelve months from sale to a Customer or, if the
          BMW Part is installed by the Dealer into a BMW Vehicle from the date
          of installation, subject to the limitation set out in paragraph 8(v)
          of the Second Schedule.

     (ii) No claim under warranty will be considered unless the defect has been
          notified to BMW GB without delay and a warranty claim has been made in
          accordance with the provisions of the Fourth Schedule hereto.

     (iii) BMW GB will deal with any warranty claim in accordance with the
          provisions of the Fourth Schedule hereto.

     (iv) The warranty does not apply if there is non-compliance with the
          Warranty Guidelines set out in any relevant Warranty and Service
          Handbook, or other warranty document related to BMW Parts, issued by
          BMW GB from time to time.

     (v)  Any warranty will not be affected by any change of ownership of the
          BMW Part in question.

     (vi) The warranty given by BMW GB is in substitution for and to the entire
          exclusion of any condition term or warranty relating to the quality or
          fitness of any BMW Parts whether express or implied by statute common
          law or otherwise howsoever.

11.  BMW GB operates a buyback system in accordance with arrangements and on
     conditions notified by BMW GB from time to time in which the Dealer is free
     to participate.


                                      -30-


                               B: PARTS STANDARDS

The following provisions give details of the standards required of the Dealer in
providing a parts service that meets the standard demanded by BMW Customers.

1.   Inventory-keeping of BMW Parts

     The Dealer will maintain an appropriate stock of BMW Parts to conform to
     Clause 4.3 of this Agreement.

     In addition to the storing guidelines in this Schedule the Dealer will:

     -    accept and store deliveries of BMW Parts which are supplied by BMW GB
          free of charge in connection with recall measures, even though no
          explicit order for them has been placed:

     -    accept and pay for the BMW GB recommended dealer kit of service items
          for new vehicles and revised models of existing vehicles. Advance
          information will be given and costs kept to a minimum.

     The Dealer will install and operate systems to control its stock in
     accordance with reasonable BMW GB requirements.

2.   Parts Exchange Service

     The exchange programme and processing details are detailed in separate
     literature issued by BMW GB

3.   Stock Orders

     Subject to clause 4.3.3 of this Agreement, stock orders will be submitted
     by the Dealer to properly replenish its warehouse with BMW Parts. In this
     connection orders will be placed in accordance with arrangements notified
     by BMW GB to the Dealer which must be strictly maintained.

4.   Emergency Orders

     In the event of an unexpected demand and in unforeseen cases of special
     urgency the Dealer may place an emergency order for the purpose of a
     short-term delivery of BMW Parts. Deliveries made on account of emergency
     orders may be charged with reduced discount determined by BMW GB from time
     to time.

5.   Warehouse Equipment

     Buildings and areas in which BMW Parts are stored and/or sold are to be
     equipped and maintained in a manner to meet the requirements of BMW GB and
     the standard expected by BMW Customers.

     The warehouse is to be set up and equipped in such a manner that:

     -    all categories of BMW Parts may be stored with maximum protection
          against the danger of damage while the available space is being used
          most efficiently;

     -    efficient acceptance of the delivered BMW Parts by the Dealer is
          provided, in accordance with BMW GB requirements notified to the
          Dealer from time to time;

     -    assembly space, special packing material and transportation facilities
          are provided for the shipment of BMW Parts;

     -    the office space from which the storage space is managed is arranged
          adjoining the warehouse if possible.

     -    counter facilities are in accordance with requirements specifed by BMW
          GB from time to time.

6.   Warehouse Size

     The size of the warehouse must be large enough to hold the volume of BMW
     Parts which is required by the volume of the services rendered by the
     Dealer, with consideration of demands by its own workshop, trade and cash
     sales. The standard of the warehouse has to be such that rational,
     economical and functional stock-keeping is facilitated in compliance with
     the Dealer's sales volume.

     Suggested values to determine the size of the warehouse are available from
     BMW GB.

7.   Personnel

     The requirements relating to personnel and training are as notified by BMW
     GB from time to time.


                                      -31-


8.   Obligations to Maintain a Supply of Documentation of Parts

     For the purposes of information and efficiency sufficient quantities of
     technical literature, microfilm reading devices, parts service leaflets,
     electronic data reading devices and any other relevant devices for similar
     purposes should be maintained by the Dealer.

     In case of the new publication of a leaflet one copy will be furnished free
     of charge to the Dealer. The Dealer may obtain additional copies which will
     be charged to the Dealer's account. Microfilms and other film material
     relating to parts service will be delivered to the Dealer and charged to
     its account.

     The Dealer also will receive amendments of the parts literature, which also
     will be charged to its account. The Parts data media updating service
     operates by exchanging new data media against the old. The old data media
     are to be returned to BMW GB at the instruction of BMW GB. All microfilm
     and data media supplied by BMW GB remain confidential to BMW GB who also
     own the copyright therein and the Dealer shall not part with possession
     thereof to any third party or make any copies thereof.

9.   Parts Business Activities

     BMW GB endeavours to assist the Dealer in handling the duties assigned to
     it by BMW GB for the parts business. For this purpose BMW GB will engage
     regional managers. These regional managers will advise and assist the
     Dealer in building up and maintaining an effective organisation of the
     Dealer's parts business to provide the highest level of Customer Service.
     At the request of BMW GB the Dealer will assist BMW GB in carrying out
     parts analyses research and planning operations.

     In order to facilitate effective assistance to the Dealer it will be
     essential that the Dealer provides the regional manager with all required
     information and grants him access to any necessary documentation.

     In this connection the Dealer will regularly and in compliance with the
     wishes of BMW GB pursue and conduct a market analysis with a view to
     competition in the parts business. In addition the Dealer will supply
     statistical information in the form reasonably required by BMW GB from time
     to time.

10.  Architectural and Equipment Consultation

     In the event of major building and equipment projects in respect of the
     Dealer's parts business BMW GB will assist the Dealer as far as possible
     with regard to the planning and organisation of its storage area. In such
     cases the dealer will co-operate closely with the employees of BMW GB.

11.  Publicity and Sales Promotion

     In addition to its own publicity campaigns the Dealer will participate in
     national promotional activities of BMW GB and other promotional activities
     agreed with BMW GB as being suitable for the Dealer. For this purpose BMW
     GB will furnish the Dealer with promotional material which is suitable for
     the appropriate campaign, either free or upon reasonable payment, as
     determined by BMW GB.


                                      -32-


                                 FOURTH SCHEDULE

                         WARRANTY AND CLAIMS PROCEDURES

1.   General

     This Schedule governs the handling of warranty claims resulting from sales
     of Contract Goods to Customers.

2.   Basis for Warranty and Goodwill settlements

     (i)  Grantor of the Warranty

          The Dealer will provide a warranty in respect of any Contract Goods in
          accordance with clause 6.3 (b) of this Agreement. In the case of the
          sale of a BMW Vehicle the giving by the Dealer of a warranty to the
          Customer in accordance with the Warranty and Service Handbook as
          supplied by BMW GB from time to time will constitute compliance by the
          Dealer with its obligation under Clause 6.3 (b) of this Agreement.

     (ii) Goodwill Claims

          BMW GB may in its absolute discretion wholly or partly accept the cost
          of labour and/or materials incurred in the rectification of defects
          appearing after the expiration of any warranty period but this shall
          not imply recognition of any legal liability. Goodwill claims will
          only be considered if the BMW GB inspection and maintenance servicing
          has been carried out regularly and correctly in accordance with the
          service booklet by a BMW Dealer and the Customer has followed the
          instructions for use and care of the Contract Goods in accordance with
          any instructions or handbook issued with the Contract Goods.

3.   Performance of Warranty and Goodwill Work

     (i)  General requirements

          The Dealer will use its best endeavours to ensure that warranty and
          goodwill work is given preference to other services performed by its
          workshop. Customers in transit from the United Kingdom or abroad have
          the right to expect any warranty or goodwill repair work essential to
          the safety and good working order of their BMW Vehicle to be given
          priority by the Dealer.

     (ii) Investigation of Customer's Claim

          All warranty and goodwill claims made by a Customer must be thoroughly
          investigated by the Dealer. Should a claim not be justified the Dealer
          will explain this to the Customer in a suitable manner. The Dealer
          should only forward a claim to BMW GB if it is convinced that the
          claim is justified.

     (iii) Order of the Customer

          The Dealer will only undertake warranty or goodwill work for a
          Customer once the Customer or his authorised agent has signed a formal
          workshop repair order setting out details of the work to be performed.

     (iv) Method of Warranty and Goodwill Work

          Should a defect be of such a nature that it may be rectified by
          alternative methods (i.e. repair or the exchange of a complete unit)
          the most economic method shall be adopted. The interest of the
          Customer must be suitably observed and, if in doubt, the Dealer should
          consult BMW GB for advice as to the best method of handling
          rectification.

     (v)  Authorisation of BMW GB in particular cases

          In deciding whether or not work falls within the terms of the
          warranty, the Dealer shall rely on its own discretion except that
          where the repair or replacement of a major unit (as defined by BMW GB
          from time to time) or paint work the cost of which exceeds the amount
          specified by BMW GB in the warranty manual or any other item that BMW
          GB from time to time may stipulate is concerned, the Dealer shall
          obtain the authorisation of BMW GB before proceeding.

4.   The Handling of Warranty Claims between the Dealer and the Customer.

     The Dealer will perform warranty services free of charge in respect of any
     Contract Goods delivered by a supplier within the territory of the European
     Economic Area authorised directly or indirectly by the Manufacturer to the
     extent that the Dealer will be entitled to reimbursement under the warranty
     given by BMW GB under Clause 6.3 (a) of this Agreement. The Dealer will
     perform the said services irrespective of whether the Contract Goods
     concerned have been purchased from itself or not.


                                      -33-


     Where the Dealer performs services for a Customer otherwise than under
     warranty and makes a goodwill claim in respect thereof to BMW GB the normal
     charge for services and materials may be made to the Customer in the first
     instance. If a goodwill claim is accepted in its entirety by BMW GB no
     costs shall be borne by the Customer and accordingly any sum that has been
     charged to the Customer will be reimbursed to the Customer by the Dealer.

     Where a goodwill claim is accepted only in part, a proportional refund
     should be made by the Dealer immediately to the Customer of any charge made
     to the Customer equivalent to the proportion of the actual cost of
     effecting the repair to the Dealer that is refunded by BMW GB. The
     Customer's refund should be the relevant proportion of the price charged to
     it. The Dealer will inform the Customer immediately if the claim is
     rejected by BMW GB.

5.   Handling of Warranty Claims between the Dealer and BMW GB

     (i)  Claims

          In order to obtain reimbursement of expenditure incurred in carrying
          out warranty or goodwill work, the Dealer must submit a claim to BMW
          GB therefor within the period and in the manner specified by BMW GB
          from time to time.

     (ii) Requirements of Claims

          Where the Dealer submits a request for reimbursement it must retain
          available at its premises a workshop order giving complete details of
          the work carried out together with a mechanically stamped job card to
          show repair time expended and information as to the name and address
          of the owner of the vehicle/part concerned, and other means of
          identifying the vehicle/part. The details set out in the warranty
          claim must be identical to those in the workshop order.

     (iii) Validation of Claims

          In submitting a warranty claim the Dealer is vouching for the claim
          and the complete accuracy of the details stated. The Dealer will make
          a particular effort to supply any details likely to be considered
          relevant by BMW GB in deciding whether or not to reimburse expenditure
          as a goodwill claim. Such details will include, but will not be
          limited to, the mileage, date of registration and details of the
          previous owners of the BMW Vehicle concerned. Where a claim is made in
          relation to parts which have already been replaced, details of the
          original repair will be relevant and must be taken from the relevant
          invoice.

6.   Reimbursement of Dealer's Expenses

     (i)  General Extent of Reimbursement

          Where BMW GB accepts that a Customer has a valid claim under a
          warranty given by the Dealer subject to 6 (v) below BMW GB will
          reimburse the costs of rectifying the defects and will at its option
          repair or replace defective parts and any other parts or components
          damaged thereby at the agreed prices/rates for parts and labour. Parts
          exchanged in this way will become the property of BMW GB and will be
          returned, at the Dealer's expense and risk unless returned on BMW GB's
          delivery vehicles, to BMW GB within the time specified in the BMW
          warranty manual.

     (ii) Reimbursement for Labour

          The Labour costs expended by the Dealer will be paid according to the
          work/time unit allowable for the work performed in accordance with the
          BMW GB work/time schedules. Should the Dealer not provide details of
          the work/time units actually spent on the work performed, costs will
          be reimbursed by BMW GB on the basis of the actual time expended
          (provided this is not unreasonable) converted into work/time units.
          BMW GB will determine the amount to be reimbursed to the Dealer in
          respect of each work/time unit and will from time to time, review the
          rate of such allowance. In deciding what charge should be made in
          respect of each work/time unit, BMW GB will rely upon receiving an
          accurate return, at intervals specified by BMW GB, setting out the
          Dealer's overheads in the provision of servicing.


                                      -34-


     (iii) Reimbursement for Services rendered by Third Parties

          Where warranty services are rendered by a third party to the order or
          at the request of the Dealer with the prior consent of BMW GB, BMW GB
          will reimburse the Dealer the reasonable costs (plus VAT) connected
          therewith.

     (iv) Examination Right of BMW GB

          BMW GB is authorised to have its representatives examine the proper
          processing of the warranty claims at the Dealer's premises at any
          reasonable time. For this purpose the Dealer shall hold ready for
          inspection by the appropriate BMW GB representative his entire records
          and vouchers such as workshop orders, time stamp cards and/or control
          room lists, receipts for parts removed, invoices for replacement parts
          and BMW GB credit notes in case of goodwill settlements, insofar as
          these records are connected with warranty and goodwill settlement
          claims.

          The Dealer shall retain such warranty records in a suitable manner for
          the period specified in the warranty manual in order that an
          inspection on short notice will be possible at any time.

     (v)  Non Refundable Costs

          No refund will be made for costs incurred for carrying out the
          pre-delivery inspection or maintenance or servicing or safety checks
          or for minor adjustment and resetting or unless otherwise specified by
          BMW GB. the time expended on diagnosis of the defect.

          Expenditure incurred by the Dealer as a result of incorrect diagnosis
          of an apparent defect, or inadequate or negligent service work, is not
          recoverable from BMW GB.

          Also excluded are expenses incurred because of non compliance with
          technical information furnished by BMW GB or because of non-compliance
          with recognised rules of servicing and maintenance in the motor trade
          or costs which result from repair work which has been badly performed.


                                      -35-


                                 FIFTH SCHEDULE

                              SERVICE REQUIREMENTS

The following provisions govern the requirements made by BMW GB for Customer
service by authorised BMW Dealers. They have the essential purpose of
guaranteeing to the Customer a service which meets his reasonable expectations.

1.   Acceptance, Storage and Delivery of BMW Vehicles

     (i)  Acceptance

          The Dealer will accept BMW Vehicles from the BMW GB appointed delivery
          company in accordance with the requirements of the First and Second
          Schedules.

     (ii) Storage

          BMW Vehicles stored by the Dealer will be stored in accordance with
          instructions given by BMW GB from time to time.

     (iii) Delivery to Customers

          With the knowledge that the delivery of BMW Vehicles will affect the
          Customer's opinion with regard to the quality of the vehicle and
          customer service, the Dealer will perform the following services
          and/or actions prior to or at the time of the delivery to the
          Customer:

     (a)  Prior to the delivery the Dealer will perform a pre-delivery
          inspection free of charge to the Customer. In compliance with the
          service booklet and/or instructions issued from time to time by BMW GB
          the Dealer will perform the specified works and the Dealer will enter
          this pre-delivery inspection into the service booklet and certify the
          entry with its official stamp, date and signature. In the event that
          the Customer collects the vehicle from BMW GB then BMW GB will perform
          the pre-delivery inspection on behalf of the Dealer and will charge
          the Dealer accordingly;

     (b)  The Dealer will maintain records for all BMW Vehicles serviced
          including details of all pre-delivery inspections undertaken;

     (c)  Prior to the release of the vehicle the Dealer will check whether all
          documents belonging to the vehicle as prescribed by the Manufacturer
          are updated and available, such as the owner's handbook, the service
          booklet, the register of dealers and emergency service locations, any
          directions for use etc. These documents shall be handed to the
          Customer at the time the vehicle is released to him.

     (d)  The Dealer will instruct the Customer in the operation of the BMW
          Vehicle and the regulations and facilities relating to warranty and
          service before or at the time of handover of the BMW Vehicle.

2.   Performance of Maintenance and Repair Works

     (i)  Obligation of the Dealer

          The Dealer will perform all maintenance and repair work prescribed by
          BMW GB in compliance with the instructions valid at the time. For this
          purpose it is necessary that the Dealer uses the special tools and
          workshop equipment prescribed by BMW GB at the time. The Dealer will
          make sure that all orders for maintenance and repair work are accepted
          properly using the repair order forms specified or approved by BMW GB
          and signed by the Customer.

     (ii) Maintenance Works

          The Dealer will perform all maintenance works within the prescribed
          intervals in compliance with the BMW GB work instructions valid at the
          time. The performance of the maintenance work is to be certified in
          the service booklet.

     (iii) Product Modification Campaigns

          The Dealer will participate in all product modification and/or recall
          campaigns initiated by BMW GB, and, if required, the Dealer will
          perform the examination or work prescribed by BMW GB in relation to
          BMW Vehicles the subject of the campaign, regardless of whether the
          BMW Vehicles in question have been purchased from the Dealer or not.


                                      -36-


          The processing of such campaigns will be governed by the instructions
          issued by BMW GB or the Manufacturer on each occasion or, if no other
          arrangements have been made, by the warranty and goodwill-settlement
          provisions then in effect.

          The Dealer will use its best endeavours to ensure that all BMW
          Vehicles subject to the product modification or recall campaign sold
          by it, or serviced by it in accordance with the customer service file,
          will be produced to it or to an authorised BMW Dealer located most
          conveniently to the Customer, in order that the appropriate
          examination and/or modifications may be performed.

          This applies also to affected new BMW Vehicles and vehicles which have
          been resold in the meantime. In this case the Dealer will endeavour to
          locate the vehicle owner and to inform him accordingly. Should such
          efforts remain unsuccessful the Dealer will advise BMW GB in writing.

     (iv) Free Services

          The Dealer will carry out any service specified from time to time by
          BMW GB as being free to the Customer in respect of the labour content
          in accordance with separate instructions issued by BMW GB.

3.   Workshop

     (i)  The size of the workshop and its associated areas will be as
          recommended by BMW GB such that all BMW Vehicles sold by the Dealer
          and all BMW Vehicles being operated in the Territory may be serviced.
          If several BMW Dealers should be operating in the same Territory this
          should be duly considered in the determination of the workshop size.

     (ii) Workshop Appearance

          The appearance of the workshop shall be in keeping with the BMW
          Corporate identity Programme. The Dealer will ensure the workshop and
          its associated areas are kept clean and tidy at all times.

     (iii) Workshop Equipment

          A faultless performance of the maintenance and repair work on BMW
          Vehicles requires that the Dealer has available a sufficient quantity
          of all workshop equipment items prescribed by BMW GB and that these
          are maintained to the highest standard and are operational at all
          times.

          The Dealer will ensure that it is equipped with all special tools
          which are mandatory for the operation of a BMW Dealer service
          department.

     (iv) Workshop Organisation

          In order that a Dealer's workshop may be operated profitably it is
          necessary that a workshop organisation is established and regulated in
          compliance with the best principles of business administration. For
          this purpose the Dealer shall apply in its individual workshop
          organisation the instructions and organisational documentation
          established by BMW GB as notified to the Dealer from time to time. In
          order to guarantee the profitability of the Customer service the
          Dealer will appoint a responsible person for the performance and
          control of suitable business administration measures.

4.   Advice to the Dealer by BMW

     (i)  Architectural and Equipment Advice

          BMW GB and/or its regional manager and other specialists will give
          advice to the Dealer in respect of the design and layout of the
          workshop and the requirements in respect of workshop equipment.

     (ii) Advice in regard to Organisation/Business Administration

          The BMW GB regional manager and other appropriate employees of BMW GB
          will be ready to assist and support the Dealer in regard to all
          organisational and administrative service questions.

     (iii) Provision of Service Statistics

          Every Dealer needs suitable up-to-date aids to decision making to
          control and evaluate its workshop results. For this purpose the Dealer
          will supply service statistical information in the form reasonably
          required by BMW GB from time to time.

5.   Personnel Requirements

     (i)  The Dealer will employ a sufficient number of technically qualified
          service personnel for the performance of maintenance and repair work
          in proportion to the BMW Vehicle volume to be serviced by it.

          The number of the required service employees will be governed by the
          BMW GB recommendations valid at the time.

     (ii) All service employees of the Dealer will wear BMW GB recommended
          working clothes. The attitude, appearance and technical knowledge of
          the management personnel of the workshop as well as that of all
          employees dealing with the Customers (for instance at the service
          reception etc.) have a vital importance to the image of the BMW
          customer service. The Dealer will ensure that the appropriate
          employees are always polite, helpful, efficient, correct and
          product-supportive in their dealings with Customers.

          The Dealer will immediately investigate any complaint made by a
          Customer and use its best endeavours to eliminate the cause of the
          complaint.

     (iii) The Dealer will ensure that the service employees have the required
          knowledge with regard to the Contract Goods, modern repair methods,
          methods of workshop management, discipline and organisation and that
          they know how to react with Customers.

          The Dealer shall assign all service employees to training courses held
          by BMW GB and/or at training locations determined by BMW GB. In
          addition the Dealer will regularly provide training and advanced
          training instructions to its service employees itself.


                                      -37-


6.   Service Documentation - Certifications

     (i)  Customer Service Documentation

          BMW GB supplies the Dealer with customer service documentation which
          must be available to service employees at all times.

          Upon its first appointment as a Dealer BMW GB will supply to the
          Dealer an initial information pack of customer service documentation.
          Future orders should be made in the usual manner of ordering parts.
          The Dealer will stock a sufficient supply of dealer/emergency service
          lists and Aftersales Marketing Literature to serve as handouts for
          customers.

7.   Customer Servicing

     (i)  Customer Service

          It is a prerequisite in offering a high level of service to Customers
          and for the prevention of Customer complaints that the Dealer and its
          personnel do not make any detrimental remarks concerning BMW GB or the
          Manufacturer, the Contract Goods, other contractors of BMW GB or the
          Manufacturer or employees of any of them.

          The Dealer will ensure that the Customer is promptly and correctly
          advised of any defects which become apparent whilst work is being
          carried out.

          Repairs must be guaranteed for specific mileage and time periods.

          Methods of payment for service and repairs should be notified to the
          owner prior to the acceptance of the work.

          Parts replaced during repair or service should be made available for a
          reasonable period for inspection by the Customer.

          Permission of the Customer should always be sought for additional work
          which may present itself during service or repair, and his signed
          approval obtained, if possible.

     (ii) Customer Complaints

          The Dealer will make sure that it satisfactorily clarifies and settles
          any enquiries and complaints presented by Customers. In exceptional
          cases only, BMW GB itself will handle such Customer Enquiries, and if
          it does so, will use reasonable endeavours to ensure that the Dealer
          is consulted before a decision is given to a Customer. The Dealer will
          support BMW GB in this regard and in the clarification of any possible
          questions. BMW GB will counsel and advise the Dealer in a suitable
          manner of the appropriate correspondence or action to be undertaken.

          Provision will be made for a service goodwill budget under the control
          of an appropriate manager to allow for policy adjustments to be made
          to further customer goodwill and retention.

     (iii) Vehicle History and Customer Follow Up File

          In order that the required customer contacts may be maintained it is
          prescribed that the vehicle history and Customer follow up file, in
          the form specified by BMW GB, will be set up, maintained and evaluated
          by an employee of the Dealer responsible therefor.

     (iv) Customer Service Promotion

          The Dealer will carry out all suitable actions to promote Customer
          retention including providing the highest level of service and
          ensuring that the Customer is aware of service available from the
          Dealer, BMW GB and the Manufacturer.

     (v)  Co-operation Between BMW GB and the Dealer

          The BMW GB Aftersales Department is the contact point for all service
          questions between BMW GB and the Dealer. This department will always
          advise and assist the Dealer appropriately.

8.   BMW Service Representatives

     (i)  Task of the Regional Manager

          The regional manager of BMW GB will give advice and support to the
          Dealer in all technical, organisational and administrative customer
          service questions

     (ii) Co-operation with the Dealer

          To facilitate a smooth service operation the Dealer will comply with
          all reasonable instructions given in the name of BMW GB through the
          regional manager.


                                      -38-


                                 SIXTH SCHEDULE

                           CORPORATE IDENTITY DETAILS

BMW is one of the world's outstanding motor vehicle manufacturers and enjoys the
highest reputation in the eyes of its customers, competitors and the public at
large. It is essential that the high standards established in the BMW Identity
Programme are maintained at all times.

This Schedule sets out the requirements relating to the appearance and functions
of the Dealer to ensure that these standards are maintained.

1.   BMW Identity

     (i)  The Dealer will subject to statutory and any other necessary consents
          provide complete exterior corporate identity of the building, in
          accordance with the BMW Identity Programme issued by BMW GB as updated
          from time to time. At all times the highest standards of repair and
          decoration must be in evidence.

     (ii) A showroom will be provided for the display of BMW Vehicles, and new
          cars of other makes may only be displayed in the same sales premises
          if the Dealer has obtained any consents that it is required to obtain
          from BMW GB.

     (iii) The Dealer will provide interior facilities to the requirements of
          the BMW Corporate Identity Programme. This will include the provision
          of a customer contact area in the Dealer's showroom or in a separate
          area if provision in the showroom is agreed to be impractical. This
          customer contact area will include customer reception, service
          reception, parts boutique and retail counter, and customer waiting
          area, including cloakroom facilities. Decorative finishes and
          materials will comply with the BMW Corporate Identity Programme as
          specified by BMW GB from time to time.

     (iv) The Dealer will have BMW Stationery as advised by BMW GB for both
          internal and external documentation.

2.   Customer Facilities

     Unless otherwise agreed by BMW GB the Dealer will provide an adequate
     signed parking area, lined out, for its Customers and visitors.

3.   Dealership Vehicles

     Delivery and other commercial vehicles should be painted in accordance with
     the guidelines provided in the BMW Identity Programme. All vehicles will be
     maintained in a condition which will support the prestigious image of the
     BMW marque.

4.   Architectural Advice

     BMW GB will give or arrange to be provided advice to the Dealer in respect
     of the selection of a suitable site, the preparation of building plans and
     proposals and the equipping of the Dealer's business premises.


                                      -39-


                                   SCHEDULE 7

                                  THE TERRITORY

Dealer Code:

Dealer Name:

Signed by XXXXX
          ---------------------------
for and on behalf of BMW (GB) Limited


Signed by XXXXX
          ---------------------------
for and on behalf of the Dealer

Dated:


                                      -40-


                                 EIGHTH SCHEDULE

                              DETAILS OF THE DEALER

Dealer name         :
Trading as          : SYTNER
Registered office   : WOODCOTE HOUSE
                      HARCOURT WAY
                      MERIDIAN
Authorised Premises :
Type of organisation: Private limited company



SHAREHOLDER        OWNERSHIP   PERCENTAGE
- -----------        ---------   ----------
                         
SYTNER GROUP LTD                   100




                                                    THE DEALER'S
                              THE DEALER           PARENT COMPANY
                         --------------------   --------------------
                                          
Authorised s/capital :
Issued share capital :
Date of incorporation:
Commenced trading    :
Banker               :




OTHER DEALERSHIPS                       DATE    CATEGORY
- -----------------                    ---------  --------
                                          
KEY PERSONNEL
Dealer Principal   :
Managing Director  :
Sales Director     :
Service Director   :
Parts Director     :
Accountant         :
Company Secretary  :
General Manager    :
Sales Manager      :
Service Manager    :
Parts Manager      :
Commencement date of this Agreement :
Date of this Schedule               :



                                      -41-


SIGNED BY                               ) XXXXX
for and on behalf
of BMW (GB) LIMITED                     ) XXXXX
in the presence of:                     )

SIGNED BY                               ) XXXXX
for and on behalf of THE DEALER in the  )
presence of:                            )

XXXXX


                                      -42-

EX-10.8

                                                                    Exhibit 10.8

                                      This

                              DISTRIBUTOR AGREEMENT

                               ("this Agreement")

                                  is made as of

                               OCTOBER 31ST, 2006

                                 by and between

                                   SMART GMBH,
a limited liability company organized and existing under the laws of the Federal
Republic of Germany, having its principal place of business at Leibnizstrasse 2,
                            71032 Boblingen, Germany

                                 ("SMART GMBH")

                                       and

                           SMART USA DISTRIBUTOR LLC,
a limited liability company organized and existing under the laws of Delaware,
having its principal place of business at 2555 Telegraph Road, Bloomfield Hills,
                                 Michigan 48302

                                ("DISTRIBUTOR").

      smart gmbh and DISTRIBUTOR are referred to Individually as "Party" and
                           collectively as "Parties".


                                                                    Page 1 of 86



                                TABLE OF CONTENTS

                                                                          
ARTICLE 1  APPOINTMENT OF DISTRIBUTOR AND RIGHTS OF DISTRIBUTION..........     4
   1.1     Appointment of DISTRIBUTOR.....................................     4
   1.2     Limitation on Appointment......................................     4
   1.3     Retained Rights................................................     4
   1.4     Related Activities.............................................     5

ARTICLE 2  CONTRACT GOODS ................................................     5

ARTICLE 3  CONTRACT TERRITORY.............................................     6
   3.1     Contract Territory.............................................     6
   3.2     Activities Outside of the Contract Territory...................     6

ARTICLE 4  TARGET AGREEMENTS..............................................     6
   4.1     Sales Period...................................................     6
   4.2     Objectives.....................................................     6
   4.3     Minimum Sales Volume, Minimum Objectives.......................     7

ARTICLE 5  SALES AND SERVICE ACTIVITIES...................................     7
   5.1     Sales and Service Organization.................................     7
   5.2     smart Dealership Standards.....................................     7
   5.3     Authorized Resellers...........................................     8
   5.4     Facilities.....................................................     9
   5.5     Business Systems...............................................     9
   5.6     Management Personnel...........................................    11
   5.7     Training.......................................................    11

ARTICLE 6  SERVICE AND WARRANTY...........................................    12
   6.1     Service of Contract Goods......................................    12
   6.2     Authorized Reseller's Warranty.................................    12
   6.3     Distributor's Warranty.........................................    13
   6.4     Alteration and Equipment Installation..........................    14
   6.5     Parts..........................................................    14
   6.6     Technical Publications.........................................    14

ARTICLE 7  PROMOTION, ADVERTISING AND SIGNAGE.............................    14
   7.1     Promotion and Advertising......................................    14
   7.2     Signage........................................................    15

ARTICLE 8  ORDERS, PRICING AND PAYMENT....................................    16
   8.1     Orders.........................................................    16
   8.2     Pricing and Payment............................................    17

ARTICLE 9  LIABILITY AND INDEMNIFICATION..................................    17
   9.1     Limitation of Liability........................................    17
   9.2     Product Liability..............................................    18
   9.3     Force Majeure..................................................    19

ARTICLE 10 DESIGNATION AND MARKS..........................................    20
   10.1    Designation....................................................    20
   10.2    Use of smart Marks.............................................    20
   10.3    Company Name...................................................    20




                                                                    Page 2 of 86



                                                                          
   10.4    Term of Use....................................................    21

ARTICLE 11 STATUS AND OWNERSHIP OF DISTRIBUTOR............................    21
   11.1    Status of DISTRIBUTOR..........................................    21
   11.2    DISTRIBUTOR'S Authority and Ownership..........................    21

ARTICLE 12 FINANCIAL STRUCTURE, BOOKS, RECORDS AND ACCOUNTS, STATEMENTS
           AND AUDIT......................................................    22
   12.1    Financial Structure, Books, Records and Accounts and
           Statements.....................................................    22
   12.1    Audit..........................................................    22

ARTICLE 13 OTHER OBLIGATIONS OF DISTRIBUTOR...............................    23
   13.1    Deal Information and Assistance................................    23
   13.2    Customer Data...............................................       23
   13.3    Customer Satisfaction Policies.................................    23
   13.4    Other Goods....................................................    24
   13.5    Compliance with Laws...........................................    24
   13.6    Execution of Related Agreements................................    26
   13.7    Emissions Credits..............................................    27

ARTICLE 14 TERM AND TERMINATION...........................................    27
   14.1    Term of this Agreement.........................................    27
   14.2    Termination with Immediate Effect..............................    28
   14.3    Notification...................................................    30
   14.4    Rights and Obligations on Termination..........................    30

ARTICLE 15 GENERAL PROVISIONS.............................................    32
   15.1    Payments to DISTRIBUTOR........................................    32
   15.2    Entire Agreement, Modification, Consent, Waiver, Rights and
           Assignment.....................................................    32
   15.3    Registration...................................................    33
   15.4    Confidential Information.......................................    33
   15.5    Counterparts and Photocopies...................................    33
   15.6    Interpretation and Discrepancy with Other Documents............    34
   15.7    Severability...................................................    34

ARTICLE 16 NOTICES........................................................    34

ARTICLE 17 GOVERNING LAW AND DISPUTE RESOLUTION...........................    35

ARTICLE 18 PLACE OF PERFORMANCE...........................................    35

ARTICLE 19 SIGNATURE......................................................    35



ANNEXES:

Annex 1    Vehicles
Annex 2    Contract Specifications
Annex 3.1  Target Agreement
Annex 3.2  Parts
Annex 4    Format Types, Corporate Identity (CI) and Standards
Annex 5    Distributor's Warranty
Annex 6    Sales Conditions
Annex 7    Trade and Service Marks Licensing Clauses
Annex 8    Allocation of Functions
Annex 9    TREAD Act Information
Annex 10   Field Actions, Service Campaigns and Recalls


                                                                    Page 3 of 86


ARTICLE 1 - APPOINTMENT OF DISTRIBUTOR AND RIGHTS OF DISTRIBUTION

1.1  APPOINTMENT OF DISTRIBUTOR

smart gmbh hereby appoints DISTRIBUTOR and DISTRIBUTOR hereby accepts, subject
to the terms and conditions of this Agreement, to be the exclusive distributor
for the sale and service of Contract Goods (as defined below) in the Contract
Territory (as defined below).

1.2  LIMITATION ON APPOINTMENT

(1)  DISTRIBUTOR shall sell Contract Goods only to:

     (i)  its Authorized Resellers (as defined below); and

     (ii) end users of Contract Goods,

     whose place of residence or business domicile is within the Contract
     Territory.

(2)  DISTRIBUTOR shall not sell any Contract Goods unless those Contract Goods
     are purchased under this Agreement or otherwise with smart gmbh's consent,
     nor shall DISTRIBUTOR acquire or assist others in acquiring Contract Goods
     from any source other than smart gmbh.

1.3  RETAINED RIGHTS

     (1)  smart gmbh may be required by certain of its multinational fleet
          customers or certain multinational fleet customers of a
          DaimlerChrysler Group Company, while smart gmbh is a DaimlerChrysler
          Group Company, to enter into agreements with customers [other than a
          DaimlerChrysler Group Company). Prior to doing SD, smart gmbh shall
          promptly inform DISTRIBUTOR and, thereafter, smart gmbh and
          DISTRIBUTOR shall consult to respond, if possible, to the needs of the
          customer and agree in advance as to the terms and conditions under
          which the customer will acquire the Vehicles from DISTRIBUTOR and its
          Authorized Resellers for the customer's operation within the Contract
          Territory. If DISTRIBUTOR and smart gmbh fail to agree upon such terms
          and conditions, smart gmbh may then require DISTRIBUTOR, and
          DISTRIBUTOR is obliged to implement the sale, but only in accordance
          with the following conditions:

          A. smart gmbh will ensure that DISTRIBUTOR will in any such case
          retain a margin of at least *% of Vehicle's MSRP (as defined below)
          to cover DISTRIBUTOR'S expenses relating to such meal (for example
          customer information, test drives, invoicing, vehicle arrangement, pre
          delivery inspection, delivery).

          B. smart gmbh shall ensure that DISTRIBUTOR and its Authorized
          Reseller receive payment from the fleet customer for the sold Vehicles
          or another mutually agreeable solution.

          C. The maximum number of Vehicles which smart gmbh may directly or
          indirectly offer and sell to multinational fleet customers pursuant to
          this Article 1.3 is agreed to be:



Time Frame                           Volume Limitation
- ----------------------------------   --------------------------------------
                                  
January 1,2008 - December 31, 2009   *% on top of the mutually agreed to
                                     annual Vehicle planning volume for the
                                     calendar year

January 1,2010 - December 31, 2021   *% on top of the mutually agreed to
                                     annual Vehicle planning volume for the
                                     calendar year


     (2)  Prior to any offer of any special condition to any DaimlerChrysler
          Group Company's employees, which differ from the market conditions
          (the conditions offered to the general public), DISTRIBUTOR shall
          obtain smart gmbh's written approval if smart gmbh is at that point in
          time a DaimlerChrysler Group Company.

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.



                                                                    Page 4 of 86



     (3)  Vehicles for the use of a DaimlerChrysler Group Company (e.g. as
          Company cars for corporate fleet, with or without registration and as
          management cars) should be ordered via DISTRIBUTOR. In that case the
          Parties will agree in advance on a processing fee and the applying
          conditions during the yearly negotiation process. If the Parties
          should not agree, smart gmbh may, if smart gmbh is at that point in
          time a DaimlerChrysler Group Company, transfer Vehicles in the
          Contract Territory to any DaimlerChrysler Group Company, whereas
          DISTRIBUTOR, shall be involved and will be reimbursed for incurred
          costs (max. *% basis Vehicle's MSRP as defined in Clause 1.3(1)(A).

1.4  RELATED ACTIVITIES

(1)  With respect to financing and leasing of Contract Goods, DISTRIBUTOR and
     its Authorized Resellers shall, albeit not exclusively, offer the range of
     services provided by any DaimlerChrysler Group Company active in the field
     of financing or leasing provided such services can be lawfully offered.

(2)  DISTRIBUTOR and its Authorized Resellers shall offer and process service
     products provided by any DaimlerChrysler Group Company in accordance with
     the relevant guidelines.

ARTICLE 2 - CONTRACT GOODS

(1)  Contract Goods are:

     (i)  completely built-up new motor vehicles (including chassis)
          manufactured by or under license of smart gmbh or any DaimlerChrysler
          Group Company, as identified in ANNEX 1 ("Vehicles") and in the
          versions intended for the Contract Territory, as offered to
          DISTRIBUTOR, from time to time, hereunder; and

     (ii) new genuine parts, accessories for installation on or attachment to
          Vehicles, components, aggregates, assemblies, as well as genuine
          remanufactured parts, components, aggregates and assemblies, which are
          supplied by smart gmbh, a DaimlerChrysler Group Company or authorized
          licensee ("Parts").

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                                    Page 5 of 86



(2)  Successor and supplementary models within existing model series will become
     Contract Goods upon their official launching in the Contract Territory with
     the consent of smart gmbh.

ARTICLE 3 - CONTRACT TERRITORY

3.1  CONTRACT TERRITORY

The Contract Territory is as set forth in ANNEX 2, under the heading "Contract
Territory".

3.2  ACTIVITIES OUTSIDE OF THE CONTRACT TERRITORY

DISTRIBUTOR and its Authorized Resellers shall not. directly or indirectly,
outside of the Contract Territory:

(i)  maintain sales or distribution branches or depots for Contract Goods;

(ii) solicit customers for Contract Goods in any manner and, in particular,
     through the internet, it being recognized that prospective customers
     located outside of the Contract Territory may access DISTRIBUTOR'S and/or
     its Authorized Resellers, Contract Territory-based internet sites and such
     accessing shell not be deemed to be a violation of this Article; or

(iii) appoint sub-distributors, dealers, outlets or workshops to sell,
     distribute or service Contract Goods.

ARTICLE 4 - TARGET AGREEMENTS

4.1 SALES PERIOD

(1)  Prior to each Sales Period, the Parties shall agree upon quantitative
     and/or qualitative objectives to be reached by DISTRIBUTOR and its
     Authorized Resellers in a Target Agreement. The Target Agreement for the
     first Sales Period is set forth in ANNEX 3.1.

(2)  "Sales Period" means the calendar year or, for this Agreement's first and
     last years, the partial calendar year during which this Agreement is in
     effect,

4.2  OBJECTIVES

(1)  The quantitative objectives may Include, but are not limited to, the
     following:

     (i)  a minimum or a specific number of Vehicles to be sold by DISTRIBUTOR
          and its Authorized Resellers to end users in the Contract Territory;

     (ii) a minimum or a specific market share in defined vehicle segments in
          the Contract Territory;

     (iii) a minimum or a specific turnover of Parts;

     (iv) a specific inventory of Contract Goods [although, in any case,
          DISTRIBUTOR and its Authorized Resellers shall keep a balanced
          inventory of Contract Goods in quantity and assortment sufficient to
          meet customer demand in the Contract Territory); and

     (v)  a specific number of demonstration vehicles (although, in any case,
          DISTRIBUTOR and its Authorized Resellers shall keep in stock such
          number of demonstration Vehicles appropriate for the volume of
          business).

(2)  The qualitative objectives may include, but are not limited to, the
     following:

     (i)  measures which ensure the achievement of smart Dealership Standards
          (as defined below) by DISTRIBUTOR'S Authorized Resellers as well as
          smart gmbh's other requirements; and

     (ii) the implementation of organizational structures, new facilities or
          processes,


                                                                    Page 6 of 86



4.3 MINIMUM SALES VOLUME, MINIMUM OBJECTIVES

(1)  DISTRIBUTOR is obliged to take delivery of and pay for the yearly agreed
     volume of Contract Goods as set forth in ANNEX 3.1.

(2)  The Minimum Sales Volume is, for each category of Contract Goods, as the
     case may be, a number of Vehicles that DISTRIBUTOR and its Authorized
     Resellers must sell, as a minimum, to end-users in the Contract Territory,
     or a turnover of Parts, that DISTRIBUTOR and its Authorized Resellers must
     make at a minimum.

ARTICLE 5 - SALES AND SERVICE ACTIVITIES

5.1  SALES AND SERVICE ORGANIZATION

(1)  DISTRIBUTOR shall directly and/or through Authorized Resellers develop and
     maintain a sales and service network that in terms of quality and capacity
     ensures the balanced and thorough distribution of Contract Goods, the
     supply of the market demand for Contract Goods and expert service that
     enhances the high-quality image, reputation and acceptability of Contract
     Goods. smart gmbh assumes that the sales and service network set up by the
     DISTRIBUTOR will consist of United Auto Group, Inc. ("UAG") dealers and of
     Penske Automotive dealers and others. DISTRIBUTOR shall consult with smart
     gmbh prior to establishing or adjusting its sales and service network.

     DISTRIBUTOR will ensure an initial investment by each Authorized Reseller
     of approximate * US$ for the set up of all sales and service facilities
     (including IT systems, tools and all necessary equipment), for the purchase
     of corporate identity and signage, and for carrying out initial staff
     training (sales, service, management personnel), if a higher investment
     becomes necessary the Parties shall agree thereon prior to this investment.

(2)  "Authorized Resellers" means all persons appointed by DISTRIBUTOR in
     accordance with this Agreement to maintain sales and/or service facilities
     in the Contract Territory for any Contract Goods.

5.2  SMART DEALERSHIP STANDARDS

(1)  DISTRIBUTOR and its Authorized Resellers shall strive to comply with those
     standards as may be from lime to time implemented and amended or updated by
     smart gmbh ("smart Dealership Standards"). The current smart Dealership
     Standards are set forth in ANNEX 4. The implementation or any amendment or
     update of smart Dealership Standards requires one year's notice to
     DISTRIBUTOR.

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                                    Page 7 of 86



(2)  In any event, DISTRIBUTOR and its Authorized Resellers are obliged to
     comply with those of the smart Dealership Standards that are identified by
     smart gmbh to be binding on DISTRIBUTOR and/or its Authorized Resellers
     ("smart Dealership Must Standards"). The fulfillment of all smart
     Dealership Must Standards by DISTRIBUTOR and its Authorized Resellers is a
     condition precedent for DISTRIBUTOR's appointment as a distributor of
     Contract Goods in the Contract Territory, and their continued fulfillment
     is a condition for this Agreement being upheld. Likewise, the fulfillment
     of all smart Dealership Must Standards by each of DISTRIBUTOR's Authorized
     Resellers must be a condition precedent for the relevant Authorized
     Reseller's appointment by DISTRIBUTOR, and their continued fulfillment must
     be a condition for the relevant agreement being upheld.

(3)  In addition, DISTRIBUTOR and its Authorized Resellers shall comply with
     smart gmbh's requirements or such other manuals, guidelines or materials
     as may be from time to time implemented and amended or updated by smart
     gmbh.

5.3  AUTHORIZED RESELLERS

(1)  DISTRIBUTOR's Authorized Resellers must:

     (i)  be duly organized, validly existing and in good standing under
          Applicable Laws, and have, now and forthwith, full authority and all
          permits, authorizations and licenses necessary or advisable to enter
          into or perform their obligations under the agreement with
          DISTRIBUTOR;

     (ii) show a sound financial structure with a working capital level and
          financing capability that satisfy their operating requirements. In
          particular, the working capital level and financing capability must be
          sufficient for meeting the smart Dealership Standards and smart
          gmbh's requirements, and must be acceptable to smart gmbh;

     (iii) not have been subject to any voluntary or involuntary bankruptcy or
          insolvency proceedings;

     (iv) not engage in or be charged with practices that constitute an offense
          under any anti-bribery, export control, competition, tax, stock
          exchange or corporate governance legislation or that jeopardize smart
          gmbh's good name and goodwill, or act in a manner which substantially
          and adversely affects the reputation, distribution and promotion of
          smart gmbh's or, for as long as smart gmbh is a DaimlerChrysler Group
          Company, any DaimlerChrysler Group Company's goods and services; and

     (v)  not be charged with or convicted of any offense punishable by
          imprisonment for more than one year, or a crime involving dishonesty,
          false statement or theft.

(2)  Prior to appointing an Authorized Reseller, DISTRIBUTOR shall:

     (i)  provide to smart gmbh all information relevant to the financial
          condition, management, ownership, business practices and corporate
          reputation and to such person's qualifications and ability to perform
          as an Authorized Reseller;

     (ii) obtain the Authorized Reseller's representation that it meets all
          conditions set forth in Clause 5.3 (1);

     (iii) obtain smart gmbh's confirmation, acting reasonably, as to the
          acceptability of such person; and

     (iv) obtain smart gmbh's approval of the agreement between DISTRIBUTOR and
          the Authorized Reseller including the smart Dealership Standards and
          the Authorized Reseller's margin.

     smart gmbh may, in its sole discretion, exercised reasonably, reject any
     proposed appointment. Final decision of Authorized Reseller appointment is
     with DISTRIBUTOR.

(3)  DISTRIBUTOR shall have a written agreement with each Authorized Reseller
     and such agreement must be consistent with this Agreement. In particular,
     such agreement:

     (i)  must oblige the Authorized Reseller to observe and perform the duties
          and obligations set forth in this Agreement (in particular the smart
          Dealership Must Standards) as far as any may be applicable to the
          Authorized Reseller; and

     (ii) must not grant to the Authorized Reseller rights that go beyond those
          which smart gmbh has granted to DISTRIBUTOR, thus restricting or
          jeopardizing any right or position of smart


                                                                    Page 8 of 86



          gmbh or excluding or impeding the enforcement of any such right or
          position or damaging or jeopardizing the image of smart gmbh or, as
          long as smart gmbh is a DaimlerChrysler Group Company, any
          DaimlerChrysler Group Company or Contract Goods, unless so required by
          Applicable Law.

(4)  Upon the appointment of an Authorized Reseller, DISTRIBUTOR shall provide
     smart gmbh without delay with a copy of that agreement and, if so requested
     by smart gmbh, with a certified translation of that agreement.

(5)  Upon smart gmbh's request from time to time, DISTRIBUTOR shall provide
     smart gmbh without delay with a copy of all relevant agreements with any or
     all of its Authorized Resellers and, if so requested by smart gmbh, with
     certified translations thereof, and all information relevant to the
     financial condition, management, ownership, business practices and
     corporate reputation of any or all of its Authorized Resellers. DISTRIBUTOR
     shall at all times promptly comply with smart gmbh's instructions to
     modify or alter all or any of the agreements with its Authorized Resellers
     in order to comply with Clause 5.2 (3) above, or to enforce any right under
     those agreements.

(6)  DISTRIBUTOR shall:

     (i)  provide its Authorized Resellers with appropriate supervision and
          training;

     (ii) actively monitor the performance by each Authorized Reseller of its
          agreements with DISTRIBUTOR and enforce each Authorized Reseller's
          obligations under such agreements; and

     (iii) use its best efforts to put into place and maintain, and to assist
          its Authorized Resellers in putting into place and maintaining,
          effective inventory and retail sale financing programs.

5.4  FACILITIES

(1)  DISTRIBUTOR shall directly and/or through its Authorized Resellers maintain
     offices, sales and service facilities (including vehicle and parts storage
     and display facilities) sufficient to represent Contract Goods
     appropriately in the Contract Territory consistent with the Parties' Target
     Agreement and enhance the image of Contract Goods.

(2)  Each retail sales outlet, showroom and service facility must:

     (i)  be at a location approved by smart gmbh and comply with applicable
          smart Dealership Must Standards and smart gmbh's requirements; and

     (ii) unless otherwise agreed to by smart gmbh, be continuously used for the
          sale or servicing of Contract Goods during the term of the agreement
          with the Authorized Reseller.

5.5  BUSINESS SYSTEMS

(1)  DISTRIBUTOR and its Authorized Resellers shall maintain accounting, order,
     inventory control, and warranty claim processing systems and records in a
     manner acceptable to smart gmbh. DISTRIBUTOR and its Authorized Resellers
     (through DISTRIBUTOR) shall provide to smart gmbh business management
     reports at the times and in the form smart gmbh requests, including but not
     limited to sales, service, and warranty claims reports, financial reports
     and operating statements, Parts sales and stock reports as well as customer
     databases and information. Unless otherwise instructed by smart gmbh.
     DISTRIBUTOR and its Authorized Resellers shall retain all books and records
     for at least six years or such longer period as may be required under
     Applicable Law.

(2)  DISTRIBUTOR and its Authorized Resellers shall maintain an electronic data
     storage, transmission and communication system ("Systems") in the manner
     and form smart gmbh recommends from time to time, smart gmbh may provide
     DISTRIBUTOR and its Authorized Resellers with system equipment, hardware
     and/or software or may require DISTRIBUTOR and its Authorized Resellers to
     purchase or lease such equipment, hardware and/or software. If smart gmbh
     provides DISTRIBUTOR and its Authorized Resellers with equipment, hardware
     or software, DISTRIBUTOR and its Authorized Resellers shall:


                                                                    Page 9 of 86



     (i)  safeguard such equipment, hardware or software, and will not allow its
          use for any purpose other than that authorized by smart gmbh;

     (ii) not copy, disassemble, transmit, modify, use or take any action (or
          allow any other person to do any of these things) that may violate any
          license for the software (or firmware contained in the hardware) that
          smart gmbh may have been granted or which smart gmbh may grant to
          DISTRIBUTOR and its Authorized Resellers; and

     (iii) not transfer or allow the transfer of the equipment, hardware or
          software to anyone without the consent of smart gmbh.

(3)  DISTRIBUTOR and its Authorized Resellers shall observe the rules, terms and
     conditions relating to the use of Systems and related equipment, hardware
     and software from time to time implemented by smart gmbh. All
     communications, including orders for Contract Goods, claims, and notices
     submitted through the Systems using DISTRIBUTOR's numbers, codes and
     passwords are valid and legally binding upon DISTRIBUTOR, and all such
     orders, notices or communications are valid and legally binding orders,
     notices and communications, as the case may be, as if DISTRIBUTOR had
     submitted such order, notice or communication to smart gmbh in writing, and
     is deemed to be "signed" or "sealed" by DISTRIBUTOR as if in writing and
     signed or sealed by or on behalf of DISTRIBUTOR by hand, for purposes of
     any law requiring an order for goods or services, notices or communications
     to be in writing and to be signed or sealed. All uses of identification
     numbers, codes and passwords for the Systems shall be presumed to be
     authorized by DISTRIBUTOR until DISTRIBUTOR notifies smart gmbh that the
     number, code or password a compromised, smart gmbh will cancel and will
     issue a new password to DISTRIBUTOR whenever DISTRIBUTOR indicates the
     password is compromised, smart gmbh is not liable for any delays or lack of
     access to any System arising from such cancellation.

(4)  DISTRIBUTOR shall maintain electronic data and communication systems
     necessary for compliance with the Transportation Recall, Enhancement,
     Accountability and Documentation (TREAD) Act of 2000 (The "TREAD Act"
     (which term shall include any successor Federal statute)) and all
     regulations implementing the TREAD Act, DISTRIBUTOR shall establish and
     maintain in a manner acceptable to smart gmbh systems capable of
     communicating with the electronic data and communication systems maintained
     by smart gmbh and with those established by the National Highway Traffic
     Safely Administration (or any successor government agency) for submissions
     required of DISTRIBUTOR as an importer (and, thus, considered the
     manufacturer) or distributor of vehicles in the US, pursuant to the TREAD
     Act.

     To the extent information necessary for submission under the TREAD Act is
     in the exclusive control of smart gmbh or another DaimlerChrysler Group
     Company, smart gmbh shall make such information available to DISTRIBUTOR
     through smart gmbh's existing electronic data and communication systems.
     DISTRIBUTOR shall be responsible for establishing connection to smart
     gmbh's electronic data and communication systems through a single smart
     gmbh source sufficient to ensure receipt of all information required to be
     submitted under the TREAD Act. The systems must be capable of receiving all
     communications relating to the information listed in the ANNEX 9.

(5)  DISTRIBUTOR shall establish and maintain in a manner acceptable to smart
     gmbh systems sufficient to ensure full compliance by DISTRIBUTOR with all
     record-keeping and administrative requirements of vehicle safety and
     emissions laws and regulations applicable to DISTRIBUTOR as an importer or
     distributor of vehicles in the United States, including but not limited to
     systems necessary to track warranty claims for emissions and safety
     compliance and respond to all inquiries from any government entity that
     oversees and/or implements those laws and regulations.

(6)  DISTRIBUTOR shall establish and at all times maintain electronic data and
     communication systems in a manner acceptable to smart gmbh capable of
     receiving information from smart gmbh in any way relating to field actions,
     service campaigns or recalls relating to the Contract Goods, as set forth
     in ANNEX 10.


                                                                   Page 10 of 86



5.6  MANAGEMENT PERSONNEL

(1)  DISTRIBUTOR and its Authorized Resellers shall employ qualified personnel,
     including a General Manager, a Finance Manager, a Sales Manager, a Parts
     Manager and a Service Manager. These positions may be combined with the
     prior consent of smart gmbh. Such employees of DISTRIBUTOR and its
     Authorized Resellers shall not, without the prior consent of smart gmbh,
     engage or participate in operating, selling or servicing, as the case may
     be, of any brand of vehicles or parts other than Contract Goods.

(2)  DISTRIBUTOR represents and warrants that each individual listed in ANNEX 2,
     under the heading "Management and Signatory Authority", holds the position
     indicated and has authority to execute agreements and other documents
     relating to this Agreement for DISTRIBUTOR, either jointly or severally, as
     indicated. DISTRIBUTOR authorizes smart gmbh to rely on any writing signed
     by these individuals, either jointly or severally, as indicated.

(3)  DISTRIBUTOR represents and warrants that each individual designated as key
     personnel in ANNEX 2, under the heading "Key Personnel", will participate
     actively, substantially and continuously in DISTRIBUTOR's business
     operations relating to this Agreement and that DISTRIBUTOR will notify
     smart gmbh immediately if any key personnel stops participating actively,
     substantially and continuously in such operations, obtain smart gmbh's
     prior approval of any replacement for such key personnel, and appoint a
     replacement approved by smart gmbh within reasonable time.

5.7  TRAINING

DISTRIBUTOR shall keep its own personnel and its Authorized Resellers advised of
all information received from smart gmbh. Furthermore, DISTRIBUTOR and its
Authorized Resellers shall participate in sales, service, parts, technical,
business systems and other training courses smart gmbh offers or organizes from
time to time as smart gmbh may direct. DISTRIBUTOR and its Authorized Resellers
shall pay the direct costs of such training as may be assessed by smart gmbh,
and the indirect costs of such training that smart gmbh may reasonably incur
(including travel expenses) for such training.


                                                                   Page 11 of 86



ARTICLE 6 - SERVICE AND WARRANTY

6.1  SERVICE OR CONTRACT GOODS

(1)  DISTRIBUTOR and its Authorized Resellers shall provide service (servicing,
     maintenance and repair work) for all Contract Goods including versions of
     equal goods not intended for safe in the Contract Territory. The preceding
     sentence shall apply in each case, regardless of whether the goods are in
     the Contract Territory temporarily or permanently, or where or by whom the
     goods were acquired, or whether they are new or used. All customers and
     their Vehicles shall be treated with equal care. The service must conform
     to the applicable smart Dealership Must Standards as well as smart gmbh's
     requirements and other manuals, guidelines or materials.

(2)  DISTRIBUTOR shall establish a Service Coordination Center in conformity
     with the requirements of smart gmbh, if so required by smart gmbh. Such
     Service Coordination Center will be responsible for coordinating service
     related tasks, implementing service related smart Dealership Standards as
     well as smart gmbh's requirements and such other tasks as may be from time
     to time assigned by smart gmbh.

(3)  DISTRIBUTOR and its Authorized Resellers shall acquire and maintain
     equipment and tools required for properly servicing Contract Goods as
     determined by smart gmbh.

6.2  AUTHORIZED RESELLER'S WARRANTY

(1)  DISTRIBUTOR and its Authorized Resellers shall at their respective facility
     locations perform warranty work for Contract Goods including versions of
     equal goods not intended for sale in the Contract Territory. The preceding
     sentence shall apply in each case, regardless of whether the goods are in
     the Contract Territory temporarily or permanently, or where or by whom the
     goods were acquired.

(2)  Warranty operations and processes shall be in accordance with the
     DaimlerChrysler Warranty Procedure Manual or other manual established by
     smart gmbh ("Warranty Manual") in effect at the time that a warranty case
     occurs. The Warranty Manual will be made available for DISTRIBUTOR online.
     smart gmbh may at any time, with immediate effect, modify the Warranty
     Manual or implement new procedures for approving, verifying, and
     controlling the quality of warranty service and for warranty claim
     preparation. DISTRIBUTOR and its Authorized Resellers shall allow smart
     gmbh access to their respective facilities to observe the performance or
     administration of warranty service.

(3)  Warranty obligations shall follow the warranty terms provided by smart gmbh
     for the Contract Territory. If DISTRIBUTOR or its Authorized Resellers are
     obliged by Applicable Law to provide more extensive warranty, they shall
     notify smart gmbh. If DISTRIBUTOR or its Authorized Resellers feel that
     more extensive warranty should be provided in the Contract Territory for
     other reasons, they shall only provide that warranty with smart gmbh's
     prior consent. Warranty obligations for equal goods purchased outside the
     Contract Territory shall follow the warranty terms that apply in the place
     of purchase outside the Contract Territory if DISTRIBUTOR is made aware of
     them in writing. In all of the cases referred to in this Clause (3), smart
     gmbh (or the DaimlerChrysler Group Company or licensee selling the goods)
     shall only be liable for the warranty coverage provided by it to the first
     purchaser.

(4)  DISTRIBUTOR shall ensure that all warranty claims are settled in accordance
     with the Warranty Manual and without delay. Depending on the technical
     requirements, warranty work shall consist either of replacement or repair,
     without any charge to the customer for labor, parts, freight and customs
     duty.

(5)  DISTRIBUTOR and its Authorized Resellers shall use only Parts for warranty
     work.

(6)  smart gmbh (or the DaimlerChrysler Group Company or the smart gmbh approved
     licensee selling the Contract Goods to DISTRIBUTOR) will reimburse
     DISTRIBUTOR for approved warranty


                                                                   Page 12 of 86


     service required under this Agreement at the rates and time allowances
     smart gmbh establishes from time to time as defined in Annex 5.

(7)  DISTRIBUTOR shall submit defective parts within warranty or other claims
     for reimbursements no later than 30 days after date of repair to smart gmbh
     as determined in the process defined by smart gmbh in accordance with the
     procedures specified in the Warranty Manual and other materials in effect
     at the time of such submission.

(8)  The terms of Clauses(1) through (6) above apply with equal force to free
     servicing, goodwill repairs and vehicle recall activities paid for by smart
     gmbh in whole or In part.

(9)  If DISTRIBUTOR or its Authorized Resellers gain knowledge of any defect
     that may impair the safety of smart gmbh's products or that may otherwise
     be required to be notified by laws applicable to smart gmbh or any
     DaimlerChrysler Group Company, they shall immediately inform smart gmbh,
     irrespective of whether the defect occurred during or after expiration of
     the warranty period. The same shall apply to defects which are frequent or
     costly.

(10) DISTRIBUTOR shall implement a system for localization, blocking and
     registration of vehicles with definite defects in vehicles with VIN
     notified by smart gmbh, and for realization of rework measures.

(11) DISTRIBUTOR and its Authorized Resellers will conduct all field actions,
     service campaigns and recalls in a manner consistent with the policies and
     procedures established by smart gmbh from time to time, as set forth in
     ANNEX 10.

(12) Notwithstanding any other provision of this agreement, smart gmbh will not
     reimburse DISTRIBUTOR for any expenses related to field actions or recalls
     undertaken to address vehicle deficiencies, including any field actions or
     recalls initiated by DISTRIBUTOR to comply with safety or emissions laws
     and regulations, unless DISTRIBUTOR provides smart gmbh with prior written
     description of the intended action prior to communicating the action to
     customers or government agencies or otherwise initiating the field action
     or recall.

(13) DISTRIBUTOR and its Authorized Resellers shall not alter or modify any
     Contract Good without smart gmbh's prior written approval and then only in
     a manner smart gmbh authorizes, unless such authorization or modification
     has been ordered by an end user and concerns a particular Vehicle purchased
     by that end user, provided, that such alteration or modification shall not
     under any circumstances impair the roadworthiness, operating safety, or
     emissions compliance of the Vehicle. However, smart gmbh does not warrant
     or guarantee any alteration or modifications to, or the effect of such
     alterations or modifications on, Contract Goods.

6.3 DISTRIBUTOR'S WARRANTY

In addition to the warranty set forth in Article 6.2 above, DISTRIBUTOR shall
grant to customers a warranty fulfilling, as a minimum, the criteria defined in
ANNEX 5. In addition to the warranty, DISTRIBUTOR plans to offer a 24 hours/ 7
days Roadside Assistance Program to its Authorized Resellers' new Vehicles
retail customers. The terms of this Program will be provided by DISTRIBUTOR to
smart gmbh prior to the commencement of the Program and annually thereafter,
smart gmbh will reimburse DISTRIBUTOR for its accrued coats of the conduct of
the Program for the prior year in total up to a maximum of * US$ multiplied by
the number of Vehicles sold to an end-customer during that same prior year by
DISTRIBUTOR, DISTRIBUTOR's Authorized Resellers and by others as permitted by
Section 1.3 of this Agreement ("Formula Vehicles"). Such reimbursement shall
continue during this Agreement, including for accrued costs of the Program
during the last year of this Agreement. Should the DISTRIBUTOR's accrued costs
of the conduct of the Program for the year which are not reimbursable by smart
gmbh exceed * US$ multiplied by the number of the Formula Vehicles, the Parties
shall discuss and agree upon a new maximum amount during the period March 1st to
May 1st of the year or years following the year that such excess costs were
accrued by DISTRIBUTOR.

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                                   Page 13 of 86



6.4 ALTERATION AND EQUIPMENT INSTALLATION

DISTRIBUTOR and its Authorized Resellers shall not alter or modify any Contract
Good without smart gmbh's prior written approval and then only in the manner
smart gmbh authorizes, unless such alteration or modification has been ordered
by an end user and concerns a particular Vehicle purchased by that end user,
provided, that such alteration or modification shall not under any circumstances
impair the roadworthiness, emissions compliance, as operating safety of the
Vehicle. However, smart gmbh does not warrant nor guarantee any alteration or
modification to or the effect of such alteration or modification on, Contract
Goods.

6.5 PARTS

DISTRIBUTOR and its Authorized Resellers shall only sell or use Parts in
repairing and maintaining Contract Goods or those approved by smart gmbh.

6.6 TECHNICAL PUBLICATIONS

(1)  DISTRIBUTOR and its Authorized Resellers shall each maintain on organized
     library of smart gmbh's technical service publications (including, without
     limitation, service and diagnostic manuals, service and recall bulletins
     and applicable labor time schedules) for Contract Goods as may be from time
     to time supplied by smart gmbh. DISTRIBUTOR and its Authorized Resellers
     shall at all times utilize all lawful methods to access those of smart
     gmbh's databases, electronic media information services and websites that
     have been opened for them. DISTRIBUTOR and its Authorized Resellers shall
     observe the rules, terms and conditions relating to the use of the Systems
     from time to time implemented by smart gmbh.

(2)  If DISTRIBUTOR or any of its Authorized Resellers undertakes to translate
     any of the publications into any language other than the language of the
     publications as provided by smart gmbh, the copyright therein is owned by
     smart gmbh (or other appropriate DaimlerChrysler Group Company) in its
     entirety. To the extent DISTRIBUTOR and its Authorized Resellers have any
     interest in that copyright, whether by means of the work of their employees
     in translating such publications or otherwise, DISTRIBUTOR shall (and shall
     cause its Authorized Resellers to) transfer to smart gmbh (or other
     appropriate DaimlerChrysler Group Company), without charge, fee or cost,
     all their respective rights, title and interest relating to any copyright
     rights they may acquire in the translation. All those translations must
     bear a valid copyright notice designating smart gmbh (or the appropriate
     DaimlerChrysler Group Company) as the copyright owner.

(3)  DISTRIBUTOR is responsible for ensuring that all publications conform to
     Applicable Law. If DISTRIBUTOR believes that any publication may not
     conform to Applicable Law, DISTRIBUTOR shall notify smart gmbh of the part
     that may not so conform and any proposed revisions. DISTRIBUTOR shall not
     make any revisions to any publication without the consent of smart gmbh.

ARTICLE 7- PROMOTION, ADVERTISING AND SIGNAGE

7.1 PROMOTION AND ADVERTISING

(1)  DISTRIBUTOR and its Authorized Resellers shall actively market Contract
     Goods (as well as used cars and other services) throughout the Contract
     Territory through advertising, promotion and other activities in order to
     fulfill the potential of the market and to ensure the continued growth,
     awareness and positive regard for Contract Goods.

(2)  DISTRIBUTOR's and its Authorized Resellers' marketing strategy and
     advertising and promotional materials, including their internet activities,
     must:

     (i)  be consistent with the applicable smart Dealership Must Standards as
          well as smart gmbh's brand representation and identification standards
          and smart gmbh's product claims (including attributes and
          performance); and


                                                                   Page 14 of 86



     (ii) comply with smart gmbh's directives, standards and processes as may be
          issued by smart gmbh from time to time (including any standards from
          time to time set out in marketing standards manuals and product
          information bulletins).

(3)  Upon smart gmbh's request, DISTRIBUTOR shall submit, at least three months
     prior to the commencement of each Sales Period, its comprehensive
     advertising and marketing plan for each Sales Period to smart gmbh for its
     review and approval. DISTRIBUTOR shall provide smart gmbh with updates as
     from time to time requested by smart gmbh.

(4)  DISTRIBUTOR and its Authorized Resellers shall neither use, nor allow any
     person or entity it controls to use, any advertising or promotional
     materials that may injure smart gmbh's or any DaimlerChrysler Group
     Company's or a Contract Good's reputation or mislead the public. Upon smart
     gmbh's request, DISTRIBUTOR and its Authorized Resellers shall immediately
     stop advertising, promotion or other marketing activities - unless
     previously approved by smart gmbh - which (In the sole opinion of smart
     gmbh) do not comply with smart gmbh's guidelines or standards, are
     injurious to smart gmbh's or any DaimlerChrysler Group Company's business,
     or are likely to deceive the public, or violate any Applicable Law or
     regulation, DISTRIBUTOR and its Authorized Resellers are responsible for
     compliance with applicable laws and rules regulating marketing, advertising
     and promotional matters.

(5)  DISTRIBUTOR shall keep smart gmbh informed of all marketing, advertising
     and promotional activities implemented by DISTRIBUTOR and its Authorized
     Resellers as well as the results of such activities. DISTRIBUTOR agrees
     that smart gmbh may provide to other authorized members of the global
     DaimlerChrysler sales and service network, as an exchange of information,
     any marketing, advertising or promotional materials used by DISTRIBUTOR or
     its Authorized Resellers, subject to any Applicable Law or regulation
     governing privacy of consumers, confidentiality of information or other
     laws or regulations.

(6)  DISTRIBUTOR and its Authorized Resellers, upon smart gmbh's request, shall
     continuously coordinate and participate in:

     (i)  any dealer advertising program or association for any of the Vehicles;
          and

     (ii) any Parts merchandising programs.

(7)  DISTRIBUTOR and its Authorized Resellers shall not distribute or sell
     merchandise (other than Contract Goods) or promotional materials bearing or
     using in any way any smart Mark or otherwise relating in any way to
     Contract Goods or any DaimlerChrysler Group Company except from a physical
     dealership or other physical location of DISTRIBUTOR or any Authorized
     Reseller within the Contract Territory. The foregoing prohibits, among
     other matters, DISTRIBUTOR and any Authorized Reseller from distributing or
     selling such merchandise or promotional materials over or using the
     internet for such purposes.

7.2 SIGNAGE

(1)  On terms approved by smart gmbh and at DISTRIBUTOR's fir its Authorized
     Reseller's expense, DISTRIBUTOR and its Authorized Resellers shall display
     at all times appropriate signs and fascia to identify its facility as an
     authorized facility for Contract Goods. These signs and fascia must comply
     with the applicable smart Dealership Must Standards and smart gmbh's
     requirements. Smart gmbh reserves the right to approve or disapprove of
     each sign's type, design and size.

(2)  smart gmbh may implement a signage program under which smart gmbh or a
     DaimlerChrysler Group Company designs, acquires and arranges for the
     installation of pre-approved signs at DISTRIBUTOR's or its Authorized
     Reseller's facilities under signage lease agreements.

(3)  Upon smart gmbh's request, DISTRIBUTOR and its Authorized Resellers shall
     sell any signage owned by them to smart gmbh or its designee at a price
     equal to the residual value of such signage determined by smart gmbh after
     allowing for all damage and wear and tear or a nominal price if no residual
     value exists.


                                                                   Page 15 of 86



ARTICLE 8 - ORDERS, PRICING AND PAYMENT

8.1  ORDERS

(1)  DISTRIBUTOR shall place orders for Contract Goods through any Systems and
     in accordance with any procedures that smart gmbh may require or implement
     from time to time. All orders will be subject to terms and conditions
     (issued from time to time by smart gmbh) valid at the time of the order.
     Copies of the current terms and conditions of smart gmbh are attached
     hereto as ANNEX 6. In the event of any conflict, the provisions of this
     Agreement prevail over the terms and conditions.

(2)  smart gmbh will use its best efforts to fill all orders made by
     DISTRIBUTOR, subject to availability and production and logistic
     capacities. However, smart gmbh is free, in its sole discretion, to accept
     or reject any orders made by DISTRIBUTOR. Particularly, if demand for any
     Contract Good exceeds supply, smart gmbh may allocate supply in any manner
     it sees fit. This provision is subject to the terms of any other written
     agreement among DISTRIBUTOR and smart gmbh regarding orders of Contract
     Goods.

(3)  smart gmbh may declare any Contract Good obsolete and discontinue its
     manufacture, distribution or sale with six months written notice. This will
     not affect orders for Contract Goods accepted by smart gmbh, smart gmbh is
     not obliged to accept orders for obsolete Contract Goods except for Parts
     needed for warranty work or as replacement parts to the extent as required
     by Applicable Law. This is not intended to permit a de facto termination of
     this Agreement by smart gmbh.

(4)  smart gmbh may forward orders received from DISTRIBUTOR to another
     DaimlerChrysler Group Company or licensee which will sell the Contract
     Goods directly to DISTRIBUTOR. Unless otherwise agreed in writing with
     DISTRIBUTOR, those sales (including warranty) will be governed by the terms
     and conditions issued from time to time by the DaimlerChrysler Group
     Company or licensee selling the Contract Goods, provided such terms will
     not differ from the terms and conditions agreed upon by smart gmbh and
     DISTRIBUTOR. Those sales will not create any distributor, dealer or service
     center relationship between that DaimlerChrysler Group Company or licensee
     and DISTRIBUTOR, smart gmbh may process any claim arising from a sale by
     that DaimlerChrysler Group Company or licensee as if the sale had been made
     directly between smart gmbh and DISTRIBUTOR. DISTRIBUTOR shall process any
     right or claim arising from a sale made by that DaimlerChrysler Group
     Company or licensee to that DaimlerChrysler Group Company or licensee, and
     smart gmbh will not have any obligation, responsibility or liability in
     connection with that sale but such procedures shall not cause any higher
     IT-costs to DISTRIBUTOR.


                                                                   Page 16 of 86



8.2 PRICING AND PAYMENT

*

(2)  The prices of Parts delivered by smart gmbh to DISTRIBUTOR will be
     calculated as defined in ANNEX 3.2.

(3)  Commencing 2008, the Parties will yearly, during the period January 1st
     to October 31st review and define volumes and prices (MSRP) applicable to
     Vehicles and spare parts and accessories ordered and delivered during the
     following year. Commencing 2010, the Parties will in addition yearly,
     during the period April 1st to October 31st, review and define discounts
     applicable to Vehicles and Parts ordered and delivered during the following
     year, smart gmbh (or the DaimlerChrysler Group Company or licensee selling
     the Contract Goods) may change prices or the charges for Contract Goods
     (including packing, handling and delivery charges included in prices) at
     any time, and make the changes effective immediately *

(4)  Upon smart gmbh's request, DISTRIBUTOR shall inform smart gmbh of
     DISTRIBUTOR's prices for Contract Goods to its Authorized Resellers and to
     retail customers and modify such prices based on consultations with smart
     gmbh subject to any limitations of Applicable Laws. DISTRIBUTOR and its
     Authorized Resellers shall comply with any pricing policies as may be from
     time to time established by smart gmbh, subject to any limitations of
     Applicable Laws.

(5)  DISTRIBUTOR shall promptly obtain and continuously maintain any United
     States governmental approvals required to effect any payment to smart gmbh.

ARTICLE 9 - LIABILITY AND INDEMNIFICATION

9.1 LIMITATION OR LIABILITY

(1)  Except as otherwise provided in this Agreement, either Party's liability
     for slight negligence is limited to a breach of duties essential to this
     Agreement and to typical damage foreseeable at the time of execution of
     this Agreement. This limitation does not apply to damage to life, body or
     health. As far as any damage is covered by insurance, either Party is only
     liable for costs or losses of the other Party in connection with that
     insurance.

(2)  Nothing in this Agreement, expressed or implied, is intended to give to any
     person other than the Parties any right, remedy or claim under or by reason
     of this Agreement. All covenants, stipulations, promises or agreements in
     this Agreement shall be for the sole and exclusive benefit of the Parties.

(3)  Any personal liability of either Party's legal representatives, directors,
     officers, employees and vicarious agents for slight negligence is excluded.

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                                   Page 17 of 86



9.2 PRODUCT LIABILITY

(1)  DISTRIBUTOR shall comply with smart gmbh's rules and procedures as amended
     from time to time with respect to the analysis, determination, reporting,
     handling, and resolution of customer complaints, alleged defects, product
     liability claims, and all other product quality or safety- relevant issues.

(2)  smart gmbh shall indemnify DISTRIBUTOR or its Authorized Resellers
     (hereinafter "Indemnitees") from all Idemnifiable Costs that the
     Indemnitees may incur, become liable for, or that may be asserted or
     claimed against the Indemnitees as a result of alleged bodily injury or
     property damage claimed in a product liability claim or lawsuit, if and to
     the extent that a court of competent jurisdiction determines after trial
     and exhaustion of all appeals that:

     a)   a purported design defect or defect (including in materials or
          workmanship) created by the manufacturer (or manufacturer's suppliers,
          but not Distributor's supplier (other than smart GmbH or its
          affiliates)) in the relevant Vehicle (or its systems or components)
          manufacture or assembly allegedly caused the bodily injury or property
          damage beyond that to the relevant Vehicle themselves;

     b)   DISTRIBUTOR or its Authorized Resellers could not reasonably have
          discovered the defect during the Vehicle preparation or subsequent
          required servicing, maintenance and repair work (including service and
          recall action service measures) and could not reasonably have taken
          action to effectively remedy the defect; and

     c)   DISTRIBUTOR or its Authorized Resellers did not negligently fail to
          otherwise prevent the occurrence of the alleged bodily injury or
          property damage.

(3)  "Idemnifiable Costs" means in relation to any particular matter:

     (i)  all claims, penalties, fines, judgments or administrative actions
          made, imposed, rendered or taken against an Indemnitee with respect to
          that matter, and all settlements to resolve an Indemnitee's alleged
          liability for that matter;

     (ii) all reasonable costs and expenses (including the fees and
          disbursements of counsel or other advisors} incurred by an Indemnitee
          in assessing and defending against any alleged liability which would,
          if successfully asserted, be indemnifiable under clause (i); and

     (iii) all losses and direct damages incurred by an Indemnitee by reason of
          that matter.

(4)  To qualify for indemnification, DISTRIBUTOR and its Authorized Resellers
     shall assist and provide support to smart gmbh where necessary to resolve
     all product liability matters. The assistance and support of DISTRIBUTOR
     and its Authorized Resellers shall include, but not be limited to, the
     following:

     (i)  comply with the rules and procedures referenced in section 9.2.1 and
          promptly report to smart gmbh any discovered design defect or defect
          created by the manufacturer;

     (ii) immediately report to smart gmbh any actual or threatened product
          liability claim or lawsuit, and provide all information about the
          circumstances that gave rise to the claim or lawsuit, including an
          identification of the particular Relevant Vehicle at issue;

     (iii) secure evidence that is in the possession of, or that can be
          reasonably obtained by, DISTRIBUTOR or its Authorized Resellers that
          relates to the product liability claim, including a copy of any claim
          letter, complaint, court notice or other legal documents relating to
          the claim or lawsuit as well as a copy of any police or accident
          reports or pertinent photographs;

     (iv) notify smart gmbh in writing of its intent to seek indemnification
          within 10 business days of service of a complaint, claim letter, or
          other document identifying an actual or threatened claim or lawsuit;


                                                                   Page 18 of 86



     (v)  refrain from any action or omission that could substantially impair
          the defense of the claim or lawsuit and shall fully cooperate with
          smart gmbh in defending the claim or lawsuit; and

     (vii) provide smart gmbh with any information, requested by smart gmbh,
          that is in the possession of DISTRIBUTOR or its Authorized Resellers.

(5)  smart gmbh or its designee can assume the defense of or intervene in the
     lawsuit at any time, including during appellate proceedings.

     (i) In the event that smart gmbh assumes the defense of a claim or lawsuit,
     smart gmbh shall maintain control of such defense, including the selection
     of legal counsel, the formulation of legal strategy, and any decision as to
     settlement. To the extent that Indemnitees incur any attorney's fees or
     costs in defending against a claim or lawsuit following smart gmbh's
     assumption of the defense of such claim or lawsuit, smart gmbh shall be
     under no obligation to reimburse the Indemnitees for such attorney's fees
     or costs, smart gmbh shall not be liable for any compromise or settlement
     made by one or more Indemnitees without the consent of smart gmbh.

     (ii) In agreeing to defend, smart gmbh may make its agreement conditional
     on the continued existence of the state of facts as then known to such
     parties, and may provide for the withdrawal of such defense at such time as
     facts arise which, if known at the time of the original request for a
     defense, would have caused smart gmbh to refuse such a request. If smart
     gmbh withdraws from its agreement to defend, in whole or in part, It shall
     give timely notice of its intent to so withdraw. Such notice shall be in
     writing and shall be effective upon receipt.

(6)  If DISTRIBUTOR or any of its Authorized Resellers falls to comply with the
     requirements specified in this Article 9, then smart gmbh shall have no
     obligation to indemnify DISTRIBUTOR or such Authorized Reseller.

9.3 FORCE MAJEURE

(1)  A Party's failure or delay in performing any of its obligations under this
     Agreement will not be deemed a breach of this Agreement to the extent that
     such failure or delay is directly due to any Force Majeure Event.

(2)  "Force Majeure Event" means any event:

     (i)  that is beyond the affected Party's reasonable control;

     (ii) the occurrence of which the affected Party could not reasonably be
          expected to take into account at the time of entering into this
          Agreement; and

     (iii) the effects of which the affected Party could not reasonably have
          avoided or overcome.

(3)  A default or delay by a third party whom the affected Party has engaged to
     perform the whole or part Of this Agreement will be deemed a Force Majeure
     Event if and to the extent that:

     (i)  the affected Party establishes the requirements set out in Clause (1);
          and

     (ii) the affected Party proves that the same requirements apply to the
          third party.

(4)  In the absence of proof to the contrary and unless otherwise agreed in this
     Agreement expressly or impliedly, a Party invoking a Force Majeure Event
     shall be presumed to have established the conditions described in Clauses
     (2) (i) and (ii) in case of the occurrence of one or more of the following
     events:

     (i)  war (whether declared or not), armed conflict or the serious threat of
          same (including but not limited to hostile attack, blockade, military
          embargo) hostilities, invasion, act of a foreign enemy, extensive
          military mobilization;

     (ii) civil war, riot, rebellion and revolution, military or usurped power,
          insurrection, civil


                                                                   Page 19 of 86



          commotion or disorder, mob violence, act of civil disobedience;

     (iii) act of terrorism, sabotage or piracy;

     (iv) act of authority whether lawful or unlawful, compliance with any law
          or governmental order, rule, regulation or direction, curfew
          restriction, expropriation, compulsory acquisition, seizure of works,
          requisition, nationalization;

     (v)  act of God, plague, epidemic, natural disaster such as but not limited
          to violent storm, cyclone, typhoon, hurricane, tornado, blizzard,
          earthquake, volcanic activity, landslide, tidal wave, tsunami, flood,
          damage or destruction by lightning, drought;

     (vi) explosion, fire, destruction of machines, equipment, factories and of
          any kind of installation, prolonged break-down of transport,
          telecommunication or electric current; and

     (vii) general labor disturbance such as but not limited to boycott, strike
          and lock-out, go-slow, occupation of factories and premises.

          Adverse economic conditions or general financial or operational
          constraints are not deemed to be a Force Majeure Event.

(5)  The consequences set out in Clause (1) apply from the time at which the
     Force Majeure Event causes the failure to perform or the delay, if the
     affected Party has given notice thereof without delay, or, if the affected
     Party has not given notice thereof without delay, from the time at which
     notice thereof reaches the other Party.

(6)  Where the effect of the Force Majeure Event is temporary, the consequences
     set out under Clause (1) shall apply only to the extent that and as long as
     the Force Majeure Event impedes performance by the affected Party of its
     contractual duties. Where this Clause applies, the affected Party shall
     notify the other Party as soon as the Force Majeure Event ceases to impede
     performance of its contractual duties.

(7)  The affected Party shall:

     (i)  consult with the other Party concerning suitable interim arrangements
          and exercise due diligence to eliminate or remedy the Force Majeure
          Event; and

     (ii) continue performance as soon as reasonably possible after such cause
          of failure is removed.

ARTICLE 10 - DESIGNATION AND MARKS

10.1 DESIGNATION

DISTRIBUTOR has the right and the duty during the term of and for activities in
connection with this Agreement to style itself in all documents, notices and
advertisements as set forth in ANNEX 2, under the heading "Designation".

10.2 USE OF SMART MARKS

Within the scope of the activities under this Agreement, DISTRIBUTOR and its
Authorized Resellers may use certain marks of smart gmbh in accordance with the
Trade and Service Marks Licensing Clauses set forth in ANNEX 7, which are an
integral part of this Agreement.

10.3 COMPANY NAME

DISTRIBUTOR is permitted to use the smart word Mark in the combination "smart
USA" as an integral part of its company name while distributing the Contract
Goods. All such uses of the smart word Mark shall inure to the benefit of smart
gmbh, DISTRIBUTOR hereby assigns and transfers to smart gmbh any and all rights
arising of such uses except the rights granted by smart gmbh to DISTRIBUTOR
under this Agreement. ANNEX 7 applies accordingly.


                                                                   Page 20 of 86



10.4 TERM OF USE

DISTRIBUTOR's right to use the smart word Mark in this way shall automatically
terminate upon the expiration or termination of this Agreement. Notwithstanding,
in case the Contract Goods are, upon termination of the Distributor Agreement,
not resold to smart gmbh, but remain with DISTRIBUTOR according to article 14.4
(viii) and 14.4 (ix) of the Distributor Agreement, it may have a limited right
to use the smart Marks as defined in Annex 7.

ARTICLE 11 - STATUS AND OWNERSHIP OF DISTRIBUTOR

11.1 STATUS OF DISTRIBUTOR

(1)  DISTRIBUTOR and its Authorized Resellers are independent contractors and
     shall buy and sell Contract Goods under this Agreement as an independent
     business for their own account. This Agreement does not make DISTRIBUTOR or
     any of its Authorized Resellers a general or special agent, partner, joint
     venturer or employee of any DaimlerChrysler Group Company and does not
     create any fiduciary relationship or any other relationship of trust or
     confidence.

(2)  DISTRIBUTOR and its Authorized Resellers have no authority to make binding
     obligations for or act on behalf of any DaimlerChrysler Group Company.
     DISTRIBUTOR and its Authorized Resellers shall not represent, directly or
     by implication, to their customers or other third parties that they have
     such authority.

(3)  DISTRIBUTOR shall maintain a financial structure and sufficient
     capitalization to act as a Vehicle importer and distributor in the United
     States, as further described in Article 12.1. As a Vehicle importer and
     distributor in the United States, DISTRIBUTOR and its Authorized Resellers
     shall comply with all U.S. (i) motor vehicle importation requirements, (ii)
     Vehicle Safety Requirements, (iii) Environmental Protection Agency
     Requirements, and (iv) the emission requirements for the states of
     California, New York, New Jersey, Connecticut, Massachusetts, Maine, Rhode
     Island, and Vermont; provided that smart gmbh shall provide DISTRIBUTOR
     with Vehicles prior to importation that are in compliance with all
     applicable emissions and safety laws.

11.2 DISTRIBUTOR'S AUTHORITY AND OWNERSHIP

(1)  DISTRIBUTOR represents, warrants and covenants that:

     (i)  it is duly organized, validly existing and in good standing under
          Applicable Laws, and has and will always have full authority and all
          permits, authorizations and licenses necessary or advisable to enter
          into or perform its obligations under this Agreement;

     (ii) the individuals or entities listed in ANNEX 2, under the heading
          "Ownership Interests", own all of DISTRIBUTOR's voting securities or
          other ownership interests in the percentages shown in ANNEX 2; and

     (iii) the individuals and entities listed in Annex 2, under the headings
          "Ownership Interests" and "Key Personnel", have not been subject to
          any voluntary or involuntary bankruptcy or insolvency proceedings, or
          engage in or are charged with practices that constitute an offense
          under any anti-bribery, anti-corruption, export control, competition,
          tax, stock exchange or corporate governance legislation or that
          jeopardize smart gmbh's good name and goodwill, or act in a manner
          which substantially and adversely affects the reputation, distribution
          and promotion of smart gmbh's or any DaimlerChrysler Group Company's
          goods and services, and those individuals are, in addition, not
          charged with or convicted of any offense punishable by imprisonment
          for more than one year, or a crime involving dishonesty, false
          statement or theft.

(2)  DISTRIBUTOR shall notify and request the approval of smart gmbh at least
     sixty days prior to any proposed change in:


                                                                   Page 21 of 86


     (i)  the senior management of DISTRIBUTOR or the legal or beneficial
          ownership of any of DISTRIBUTOR's voting securities or other ownership
          interests;

     (ii) the name or form of DISTRIBUTOR's legal entity; or

     (iii) the location of DISTRIBUTOR's principle place of business.

(3)  No such changes may be made without smart gmbh's prior consent. DISTRIBUTOR
     shall provide smart gmbh complete and accurate information as to any voting
     trusts, shareholders' agreements or other agreements or undertakings
     affecting the voting of DISTRIBUTOR's voting securities or other ownership
     interests and their beneficial ownership.

(4)  If DISTRIBUTOR has owners other than natural persons. DISTRIBUTOR shall
     promptly provide smart gmbh complete and accurate information as to such
     owners, including their ownership percentages and ultimate controlling
     parties. If any ultimate controlling party is a publicly-traded
     corporation, DISTRIBUTOR shall also promptly provide any information
     disseminated publicly to its or such controlling party's shareholders, or
     disclosed to governmental regulatory agencies, as smart gmbh may from time
     to time request.

ARTICLE 12 - FINANCIAL STRUCTURE, BOOKS, RECORDS AND ACCOUNTS, STATEMENTS AND
AUDIT

12.1 FINANCIAL STRUCTURE, BOOKS, RECORDS AND ACCOUNTS, AND STATEMENTS

(1)  DISTRIBUTOR and its Authorized Resellers shall maintain a sound financial
     structure with a working capital level and financing capability that
     satisfy the operating requirements of DISTRIBUTOR or its Authorized
     Resellers, as the case may be. In particular, the working capital level and
     financing capability must be sufficient for meeting the smart Dealership
     Standards, smart gmbh's requirements as well as any Minimum Sales Volumes
     and other targets as per the Target Agreements under this Agreement, and
     must be acceptable to smart gmbh. At no time may DISTRIBUTOR's working
     capital dedicated to its operations related to Contract Goods be less than
     the amount specified by smart gmbh from time to time.

(2)  DISTRIBUTOR represents, warrants and covenants that it will not create,
     grant or issue any security, charge or rights over or affecting any
     substantial part or the whole of the business, assets or undertakings of
     DISTRIBUTOR (other than liens in the nature of "floor plan" or inventory
     financing liens and others in the ordinary course of business) without or
     in violation of the terms of smart gmbh's prior consent. DISTRIBUTOR shall
     notify smart gmbh of its intent to take any such measure at least thirty
     (30) days prior to the intended date of that measure.

(3)  DISTRIBUTOR and its Authorized Resellers shall maintain books, records and
     accounts which, in reasonable detail, accurately and fairly reflect the
     transactions and dispositions of their assets.

(4)  DISTRIBUTOR shall send to smart gmbh a balance sheet and profit and loss
     statement for its operations relating to the sale, distribution and service
     of Contract Goods within ninety days after each fiscal year-end. These
     statements shall be prepared in accordance with international accounting
     standards applicable to the DISTRIBUTOR in the United States of America
     (US-GAAP) and, if requested by smart gmbh, certified by a public auditor
     retained by DISTRIBUTOR. If requested by smart gmbh, DISTRIBUTOR shall
     submit an unaudited interim balance sheet and profit and loss statement for
     each fiscal quarter or such other period as smart gmbh may specify within
     thirty days in preliminary version and within sixty days in final version
     after each quarter or such period, as appropriate. If requested by smart
     gmbh, DISTRIBUTOR shall provide the same financial reporting for any entity
     or group of entities that, directly or indirectly, owns 50% or more of
     DISTRIBUTOR's voting securities or other ownership interests.

12.2 AUDIT

(1)  DISTRIBUTOR and its Authorized Resellers shall permit smart gmbh and its
     representatives during normal office hours to examine and make copies of
     DISTRIBUTOR's and its Authorized Resellers' books and records relating to
     the purchase, sale, distribution and servicing of Contract


                                                                   Page 22 of 86



     Goods (including, warranty services or claims and sales and incentive
     programs), to verify compliance by DISTRIBUTOR and its Authorized Resellers
     with the terms of this Agreement and the smart Dealership Standards as well
     as smart gmbh's requirement, and to assess DISTRIBUTOR's and its Authorized
     Resellers' rating in any customer satisfaction program.

(2)  DISTRIBUTOR and its Authorized Resellers shall assist smart gmbh and its
     representatives in every way to carry out their tasks, in particular by
     promptly providing all information and materials and by permitting
     unhindered access and inspection of the books and records. If duplicating
     facilities are not available on DISTRIBUTOR's or its Authorized Resellers'
     premises, smart gmbh or its representatives may remove the books and
     records from the premises for purposes of making copies.

(3)  All payments made by smart gmbh to DISTRIBUTOR or its Authorized Resellers
     deriving from warranty, sales incentive or other claims are subject to the
     results of possible audits that may be performed at any time by or at the
     request of smart gmbh. Any discrepancies between the information provided
     by DISTRIBUTOR or its Authorized Resellers and the results of any such
     audit may result in non-payment or chargeback of the claims, smart gmbh
     may chargeback DISTRIBUTOR on any credit account DISTRIBUTOR may have at
     smart gmbh or by direct billing for all or any part of the payments
     deriving from warranty, sales incentive and or any sums that may be
     otherwise due and owing to smart gmbh related to smart gmbh's programs or
     other claims that have been paid by smart gmbh and for which the required
     evidence is lacking. In addition, smart gmbh may take other action either
     under this Agreement or otherwise as it deems appropriate in the event that
     it reasonably believes that DISTRIBUTOR or its Authorized Resellers have
     failed to comply with the procedures required to make claims for payment
     under smart gmbh's programs, including set-off against any amounts that may
     be owed by smart gmbh. If there will be a set-off, smart gmbh will document
     the reasons for the set-off prior to taking such action and provide such
     documentation to DISTRIBUTOR or its Authorized Reseller prior to the
     set-off.

ARTICLE 13 - OTHER OBLIGATIONS OF DISTRIBUTOR

13.1 DEAL INFORMATION AND ASSISTANCE

(1)  DISTRIBUTOR and its Authorized Resellers (through DISTRIBUTOR) shall
     promptly notify smart gmbh of any potential offer to sell or sale of
     Contract Goods that they, for any reasons whatsoever, are unable to make.

(2)  DISTRIBUTOR shall provide such general information, cooperation and
     assistance as may be from time to time requested by smart gmbh in
     connection with the business of distribution of Contract Goods (including,
     but not limited to, direct offers or sales by smart gmbh in the Contract
     Territory) and any vehicle homologation and related issues, subject to the
     provision of Clause 1.3.

13.2 CUSTOMER DATA

DISTRIBUTOR and its Authorized Resellers shall collect all customer data suited
for identifying existing and potential customers of Contract Goods and for
developing marketing concepts and such other customer information as required by
smart gmbh. DISTRIBUTOR and its Authorized Resellers shall provide any and all
of this date and information to smart gmbh in a form and manner as requested by
smart gmbh from time to time. Collection of customer data by DISTRIBUTOR and
its Authorized Resellers, and use by smart gmbh, shall comply with applicable
legal requirements.

13.3 CUSTOMER SATISFACTION POLICIES

DISTRIBUTOR end its Authorized Resellers, upon smart gmbh's request, shall
continuously participate in any program and rating scheme with regard to
customer satisfaction policies smart gmbh may institute with regard to all
aspects of DISTRIBUTOR's and/or its Authorized Resellers' business in the
Contract


                                                                   Page 23 of 86



Territory from time to time.

13.4 OTHER GOODS

DISTRIBUTOR and its Authorized Resellers shall not, without smart gmbh's prior
consent, directly or indirectly through subsidiaries:

(i)  manufacture motor vehicles, chassis or parts thereof;

(ii) sell or offer or arrange for sale of any new vehicles of a brand other than
     the Vehicles except the vehicles specified in ANNEX 2, under the heading
     "Other Goods";

(iii) sell or offer or arrange for the sale of any parts, including, without
     limitation, counterfeit parts that bear marks confusingly similar to smart
     Marks or that may otherwise mislead the public and/or injure the reputation
     of any DaimlerChrysler Group Company or any of its products; or

(iv) conclude with third parties agreements on the distribution and/or servicing
     of motor vehicles or chassis other than Vehicles, including Vehicles that
     have been modified technically or visually as well as parts kits offered by
     third parties for this purpose unless prior agreed with smart gmbh.

13.5 COMPLIANCE WITH LAWS

(1)  DISTRIBUTOR, for itself and on behalf of its Affiliated Persons,
     represents, warrants and covenants that:

     (i)  DISTRIBUTOR and its Affiliated Persons are solely responsible for
          complying, have to their best knowledge complied, and will comply,
          with Applicable Laws and have to their best knowledge not taken and
          will not take or fail to take any action, which act or omission would
          subject smart gmbh or any DaimlerChrysler Group Company to liability
          under Applicable Laws;

     (ii) neither DISTRIBUTOR nor any of its Affiliated Persons has, to its or
          their best knowledge, offered, paid, given or loaned or promised to'
          pay, give or loan, or will offer, pay, give or loan or promise to pay,
          give or loan, directly or indirectly, money or any other thing of
          value to or for the benefit of any Government Official, for the
          purposes of corruptly (a) influencing any act or decision of such
          Government Official in his official capacity, (b) inducing such
          Government Official to do or omit to do any act in violation of his
          lawful duty, (c) securing any improper advantage or (d) inducing such
          Government Official to use his influence with a Government Entity to
          affect or influence any act or decision of that Government Entity, in
          each instance to direct business to DISTRIBUTOR, its Authorized
          Resellers, smart gmbh or any DaimlerChrysler Group Company; and

     (iii) neither DISTRIBUTOR nor any of its Affiliated Persons is or will
          become a Government Entity or a Government Official whose official
          duties include decisions to direct business to DISTRIBUTOR, its
          Authorized Resellers, smart gmbh or any DaimlerChrysler Group Company
          or to supervise, or otherwise control or direct the actions of,
          Government Officials who are in a position to direct business to
          DISTRIBUTOR, its Authorized Resellers, smart gmbh or any
          DaimlerChrysler Group Company.

(2)  DISTRIBUTOR is obliged to inform smart gmbh about state and local laws and
     regulations and federal laws and regulations of the United States of
     America that smart gmbh, as "manufacturer" of Vehicles, shall be required
     to comply with. It is of high relevance to smart gmbh to obtain information
     about potential and actual modifications and/ or additions to theses
     regulations as early as possible. DISTRIBUTOR shall, and shall cause its
     Authorized Resellers to, assist and cooperate fully with the efforts of
     smart gmbh and any DeimierChrysler Group Company to comply with Applicable
     Laws, including providing smart gmbh with all necessary information about
     warranty defects and field defects with emissions and/or safety related
     component involved, in order to allow smart gmbh to carry out all relevant
     defect reporting tasks as provided by applicable law in this matter, and
     vice versa.

(3)  smart gmbh for itself and on behalf of its Affiliated Persons, represents,
     warrants and covenants that smart gmbh and its Affiliated Persons are
     solely responsible for complying, and will comply with Applicable Laws, and
     will not take or fail to take any action, which act or omission would


                                                                   Page 24 of 86



     subject DISTRIBUTOR and its Authorized Resellers and its Affiliated Persons
     to liability under Applicable Law.

(4)  In no event will a party be obligated to another under or in connection
     with this Agreement to act or refrain from acting if that party believes
     that such act or omission would cause it to be in violation of Applicable
     Laws. In no event will a party be liable to the other for any act or
     omission which the party believes is necessary to comply with Applicable
     Laws.

(5)  If a party or any of its Affiliated Persons breaches any of the
     representations, warranties or covenants in this Article 13.5, each of
     which is deemed to be material and continuously made throughout the term of
     this Agreement, then, in addition to any other rights the other may have
     under this Agreement, the other may:

     (i)  declare a forfeit of any unpaid amounts owing to the party and will be
          entitled to repayment of any amounts paid or credited to the party, in
          each case, which are prohibited by Applicable Laws; and

     (ii) withhold delivery of Contract Goods to the party without liability to
          the party for any claims, losses or damages related to such decision.

(6)  DISTRIBUTOR shall comply with smart gmbh's rules and procedures with
     respect to the implementation of all product recalls or field measures
     internationally and in the United States of America (Annex 10), consistent
     with the laws and regulations of the United States of America. Upon smart
     gmbh's request, DISTRIBUTOR shall implement a recall or field measure, in
     the manner set out in the recall or field measure plan as determined by
     smart gmbh, smart gmbh shall provide necessary assistance to DISTRIBUTOR
     for the conduct of such recall or field measure. The costs of such recall
     or field measure shall be borne by either smart gmbh or DISTRIBUTOR or both
     Parties jointly, depending on which Party is responsible for the product
     issue giving rise to the recall or field measure under the terms of this
     Agreement. In the event the Parties cannot agree on the degree of
     responsibility of each Party for such defect, either Party may demand a
     final and binding decision by an arbitrator in accordance with Article 17.2
     of this Agreement.

(7)  From the date DISTRIBUTOR becomes subject to the reporting requirements
     under the laws and regulations of the United States of America, including
     the Transportation Recall Enhancement Accountability And Documentation
     (TREAD) Act of 2000 (the "TREAD Act", which term shall include any
     successor federal statute), DISTRIBUTOR shall comply with DISTRIBUTOR's
     reporting requirements.

(8) Prior to releasing to a governmental authority any documents relating to
     the relevant Vehicles, including reports needed to comply with
     DISTRIBUTOR's reporting requirements under the laws of the United States of
     America, DISTRIBUTOR shall consult with smart gmbh, DISTRIBUTOR shall
     provide such documents sufficiently in advance of such release to permit
     smart gmbh an adequate amount of time to review such documents and consult
     with DISTRIBUTOR regarding such documents. Prior to and subsequent to the
     release of such documents, DISTRIBUTOR shall cooperate with smart gmbh at
     all times with respect to such documents, smart gmbh shall timely respond
     to DISTRIBUTOR to enable DISTRIBUTOR to comply with the governmental
     requirements. Distributor will ask far time extensions or other
     administrative relief from the applicable government agencies, as requested
     by smart gmbh. The failure by smart gmbh to timely respond to DISTRIBUTOR
     shall not prevent DISTRIBUTOR from complying with DISTRIBUTOR's reporting
     requirements under the laws of the United States of America.


                                                                   Page 25 of 86



(6)  For purposes of this Article 13.5, the following terms have the meanings
     set forth below:

     (i)  "Applicable Laws" means the U.S. Foreign Corrupt Practices Act and
          German anti- corruption laws, without regard to their jurisdictional
          limitations, U.S. and German export control laws to the extent
          applicable to Contract Goods, and all other laws, regulations, rules,
          orders, decrees or other directives carrying the force of law
          applicable to any activities engaged in by a party or any of its
          Affiliated Persons in connection with this Agreement or any other
          business matters involving a party or any of its Affiliated Persons,
          in each case as the same may be amended from time to time;

     (ii) "Affiliated Persons" means the party's officers, directors, employees,
          or agents, or any of its stockholders, principals or owners acting on
          its behalf or in its interests;

     (iii) "Government Entity" means a government or any department, agency or
          instrumentality thereof (including any company or other entity
          controlled by a government), a political party or a public
          international organization; and

     (iv) "Government Official" means any officeholder, employee or other
          official (including any immediate family member thereof) of a
          Government Entity, any person acting in an official capacity for a
          Government Entity or any candidate for political office.

13.6 EXECUTION OF RELATED AGREEMENTS

(1)  Upon smart gmbh's request from time to time, DISTRIBUTOR and its Authorized
     Resellers shall execute any agreement relating to the Allocation of
     Functions is use of smart Marks or Systems or any other matter related to
     this Agreement in the form from time to time adopted by smart gmbh;
     provided, that the terms and conditions of such agreements do not impose an
     unreasonable burden on DISTRIBUTOR or its Authorized Resellers or are
     inconsistent with this Agreement or change the relationship of the Parties
     set forth in this Agreement. The final version of the Allocations of
     Functions will be attached by the Parties as Annex 8 by December 31st,
     2006.

(2)  DISTRIBUTOR shall comply with all laws and regulations applicable to motor
     vehicle importers, of Contract Goods in the United States including without
     limitation all safety and/or emissions related laws and regulations;
     provided that smart gmbh shall provide DISTRIBUTOR with (i) Contract Goods
     prior to importation that are in compliance with all applicable laws, (ii)
     all information within the control of smart gmbh necessary for the Monroney
     label, (iii) cooperation necessary to enable DISTRIBUTOR to file all
     necessary reports and documentation with US and state regulatory agencies,
     (iv) field retrofits and/or other modifications to the Contract Goods to
     remain in compliance. DISTRIBUTOR represents that it shall within 10 day of
     signing this agreement make all filings with United States government
     agencies necessary to be registered as the importer of record for the
     Contract Goods.

(3)  DISTRIBUTOR shall be solely and exclusively responsible for compliance with
     all U.S. safety and/or emissions laws and regulations, including without
     limitation all submissions required by the TREAD Act, Title II of the Clean
     Air Act, Title 13 of the California Code of Regulations and the provisions
     therein adopted by the states of New York, New Jersey, Connecticut, Rhode
     Island, Massachusetts, Maine, and Vermont provided that smart gmbh shall
     provide DISTRIBUTOR with (i) Contract Goods prior to importation that are
     in compliance with all applicable laws, (ii) all information within the
     control of smart gmbh necessary for the Monroney label, (iii) cooperation
     necessary to enable DISTRIBUTOR to file all necessary reports and
     documentation with US and state regulatory agencies, (iv) field retrofits
     and/or other modifications to the Contract Goods to remain in compliance.
     DISTRIBUTOR shall file on its own behalf all reports relating to recalls,
     service campaigns or field actions relating to the Contract Goods, or any
     submission in response to formal or informal inquiries from the National
     Highway Traffic Safety Administration (NHTSA), the Environmental Protection
     Agency (EPA), or the California Air Resources Board and the equivalent
     agencies in states adopting California standards pursuant to other
     statutory authorities. DISTRIBUTOR shall immediately inform smart gmbh
     about any formal or informal government inquiry relating to the safety
     and/or emissions of the Contract Goods and smart gmbh will immediately
     inform DISTRIBUTOR of any formal or informal government inquiry relating to
     the safety and/or emissions of the Contract Goods (in the versions intended
     for the Contract Territory, as offered to DISTRIBUTOR).


                                                                   Page 26 of 86



(4)  The Contract Goods shall be accounted for and included within
     DAIMLERCHRYSLER Group's vehicle fleet for purposes of compliance with the
     Corporate Average Fuel Economy program pursuant to 49 U.S.C. Chapter 329.
     DISTRIBUTOR shall promptly execute a separate CAFE agreement implementing
     the aforesaid, smart gmbh will submit such CAFE agreement to the National
     Highway Traffic Safety Administration, as required by regulation, in order
     to effectuate this intention.

(5)  The Contract Goods shall be accounted for and included within
     DAIMLERCHRYSLER Group's vehicle fleet for purposes of compliance with all
     regulatory phase-in requirements relating to federal motor vehicle safety
     standards promulgated under 49 U.S.C. Chapter 301. smart gmbh will submit
     this contract to the National Highway Traffic Safety Administration, as
     required by regulation, in order to effectuate this intention.

(6)  smart gmbh agrees that the Contract Goods shall meet the specifications,
     technical publications, manuals, bulletins or written official
     representations made by smart gmbh.

13.7 EMISSIONS CREDITS

The Parties agree that all emissions credits generated in connection with the
manufacture, certification, distribution, and sale of Vehicles are the property
of smart gmbh and DaimlerChrysler AG, 'Emissions credits' include, but are not
limited to, zero emission vehicle credits, partial zero emissions credits, and
non-methane organic gas credits, NOx Credits. If and to the extent DISTRIBUTOR
has any rights, DISTRIBUTOR promptly will take all actions necessary to ensure
that smart gmbh and DaimlerChrysler AG obtain the full benefit of all such
emission credits, at smart GmbH's expense, if any gmbh and DaimlerChrysler AG
will not pay any compensation to DISTRIBUTOR in connection with the emissions
credits. DISTRIBUTOR makes no representation that DISTRIBUTOR has any rights in
such credits to begin with or that credits can be assigned / transferred. The
Parties understand that such credits already accrue for the benefit of smart
GmbH / DaimlerChrysler AG based on DaimlerChrysler AG certifying the Vehicles.
If and to the extent DISTRIBUTOR has any rights and as permitted by applicable
law, emission credits received by DISTRIBUTOR as result of this Agreement shall
be transferred / assigned to smart GmbH and DaimlerChrysler AG by DISTRIBUTOR
without recourse to DISTRIBUTOR.

ARTICLE 14 - TERM AND TERMINATION

14.1 TERM OF THIS AGREEMENT

(1)  This Agreement will become effective on the date set out in ANNEX 2, under
     the heading "Effective Date".

(2)  This Agreement has a term until December 31st, 2021. DISTRIBUTOR or its
     Authorized Resellers will not have any claims of compensation against smart
     gmbh as a result of the expiration of the Distributor Agreement on this
     date.

(3)  A termination of production of Vehicles for the USA before end of 2011 (at
     sole discretion of smart gmbh) or smart gmbh's decision to not pursue this
     business intention before end of 2011 or smart gmbh's decision to not
     develop a successor model for the USA of Vehicles or to not commercialize
     this successor model in the USA shall constitute a good cause for
     termination of the business relationship (except for the continued supply
     of spare parts and accessories as required by Applicable Law and this
     Agreement) and respectively this Agreement, upon proper notice six months
     prior to the termination of production of Vehicles for the USA or upon
     notice in writing from smart gmbh to DISTRIBUTOR by December 31st, 2012
     effective December 31st 2014 if the decision is not to develop a successor
     model for the USA of Vehicles or not commercialize this successor model in
     the USA.

     In case smart gmbh decides to not pursue this business intention before the
     retail sales activities have been started by DISTRIBUTOR (i.e. first
     Authorized Reseller has opened and is selling


                                                                   Page 27 of 86



     Vehicles) or in case of a termination of production of Vehicles for the USA
     after start of retail activities but before end of 2011, smart gmbh shall
     pay the following to DISTRIBUTOR or UAG, as applicable:

     (i)  no compensation but only refund of the not yet depreciated investment
          of DISTRIBUTOR, originally amounting to no more than * US$ based upon
          current envisioned strategy and

     (ii) cancellation/termination costs incurred by UAG or DISTRIBUTOR,
          including payments of damages owed under Applicable Law to terminated
          Authorized Resellers of DISTRIBUTORS, in any and all cases * according
          to Clause 5.1 (1), 2nd paragraph, if not been depreciated yet and
          under the condition that the number of Authorized Resellers has been
          agreed by the Parties before execution of the investments. It is
          estimated that a maximum of 70 Authorized Resellers will be appointed
          by 2010.

          DISTRIBUTOR is obliged to provide evidence of its and Authorized
          Reseller's investments, depreciation and profits already generated and
          costs being incurred. Before the DISTRIBUTOR makes material additional
          investments in excess of * DISTRIBUTOR will agree these plans with
          smart gmbh.

          In case smart gmbh decides to terminate production of Vehicles for the
          USA after start of retail sales activities from beginning 2012 onward
          compensation and reimbursement shall be paid by smart gmbh to UAG and
          DISTRIBUTOR as applicable, as provided in the previous paragraphs.

          In case smart gmbh decides to not develop a successor model for the
          USA of Vehicles and/or decides to not commercialize this successor
          model in USA, no compensation nor cost refund shall be paid by smart
          gmbh to UAG nor to DISTRIBUTOR because of those reasons if the
          termination of this Agreement by smart gmbh for those reasons is
          effective December 31st, 2014. By December 31st, 2012 smart gmbh shall
          inform DISTRIBUTOR whether they will develop a successor model or not
          or if so whether it will be commercialized or not.

          In the event of such a termination of production of Vehicles for the
          USA, smart gmbh may exercise its option to purchase all of the
          outstanding voting rights of the DISTRIBUTOR in accordance with the
          methodology specified in the "Option Agreement".

14.2 TERMINATION WITH IMMEDIATE EFFECT

(1)  Either Party may terminate this Agreement by notice to the other Party with
     immediate effect for good cause.

(2)  Good cause exists, without limitation and as examples only, in the events
     expressly set forth in this Agreement or if:

     (i)  a Party is in breach of an obligation under this Agreement despite
          having been given due warning by the other Party and despite having
          had sufficient opportunity and time to remedy that breach. No warning
          is necessary if the violation of material obligations under this
          Agreement is so grave that the other Party cannot reasonably be
          expected to continue the contractual relationship any longer,

     (ii) a Party is in breach of any representations or warranties expressly
          set forth in this Agreement;

     (iii) a Party makes any fraudulent statement or submission, or any material
          misrepresentation to the other;

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                                   Page 28 of 86



     (iv) a Party or any of its officers, employees, agents or representatives
          has misrepresented any material facts which were relied upon by the
          other Party in entering into this Agreement and that other Party would
          not have entered into this Agreement, had it known of that
          misrepresentation;

     (v)  voluntary or involuntary proceedings are filed by or against a Party
          under bankruptcy or insolvency laws or under laws for arrangement,
          composition, judicial management, liquidation, dissolution,
          receivership or similar procedures, or either Party seeks or consents
          to similar relief or remedies without proceedings and, in the case of
          involuntary proceedings, they are not dismissed within forty-five
          days;

     (vi) a court, arbitral tribunal or government authority having jurisdiction
          declares invalid or refuses to enforce any provision of this
          Agreement, that provision is a material term of this Agreement to the
          terminating Party and the Parties cannot reach an agreement in good
          faith on a replacement provision for the void or non-enforceable
          provision;

     (vii) a Force Majeure Event prevents a Party from performing its
          obligations under this Agreement for more than one hundred eighty
          (180) days and such failure to perform is continuing when notice of
          termination is given; or

     (viii) any existing or future agreement between DISTRIBUTOR or UAG and
          smart gmbh or a DaimlerChrysler Group Company (for as long as smart
          gmbh is a subsidiary of DaimlerChrysler AG) is terminated for reasons
          equal or similar to those set forth in Clause (2) and (3) which have
          an impact on the contractual relationship under this Agreement; or

     (ix) a Party, for any reason whatsoever, cannot reasonably be expected to
          continue the contractual relationship until ordinary termination
          becomes effective.

(3)  In addition to the events described in Clause (2) above and anywhere else
     in this Agreement, either party may terminate this Agreement by notice to
     the other party with immediate effect upon the occurrence of the following
     events:

     (i)

          a.   As to smart gmbh, if DISTRIBUTOR fails to pay smart gmbh or any
               DaimlerChrysler Group Company or licensee any amount due under
               this Agreement or any sales agreement for Contract Goods when
               due, if such payment default is not cured within thirty (30) days
               of the date the amount in question became due and payable to
               smart gmbh; and

          b.   As to DISTRIBUTOR, if smart gmbh or any DaimlerChrysler Group
               Company fails to pay DISTRIBUTOR any amount due under this
               Agreement or any sales agreement For Contract Goods when due, if
               such payment default is not cured within thirty (30) days of the
               date the amount in question became due and payable to
               DISTRIBUTOR;

     (ii) DISTRIBUTOR substantially ends its sales and service activities under
          this Agreement;

     (iii) DISTRIBUTOR is merged into another entity, dissolved, expropriated,
          sequestered or nationalized, or DISTRIBUTOR's legal existence is
          suspended or revoked;

     (iv) DISTRIBUTOR has not notified and requested the approval of smart gmbh
          at least sixty days prior to any proposed change in management control
          of DISTRIBUTOR or the legal or beneficial ownership of any of
          DISTRIBUTOR's voting securities or other ownership interests, the name
          or form of DISTRIBUTOR's legal entity, or the location of
          DISTRIBUTOR's place of business;

     (v)  an individual named in ANNEX 2, under the heading "key Personnel",
          stops participating actively, substantially and continuously in
          DISTRIBUTOR's business operations under this Agreement and either a
          replacement is appointed without smart gmbh's prior consent or a
          replacement acceptable to smart gmbh is not appointed within a
          reasonable time;

     (vi) DISTRIBUTOR's legal and/or beneficial shareholders or owners or its or
          their officers or managers, or any individual or entity named in ANNEX
          2, under the headings "Management and Signatory Authority", "Key
          Personnel' and "Ownership Interests', are in repeated disagreement
          among each other and those disagreements seriously endanger the
          fulfillment Of this Agreement; or

     (vii) DISTRIBUTOR or any of its Authorized Resellers is in breach Of its
          obligations under the Trade and Service Marks Licensing Clauses as per
          ANNEX 7.

(4)  In addition to the events described in Clauses (2) and (3)above and
     anywhere else in this Agreement, smart gmbh or DaimlerChrysler AG may
     terminate this Agreement by notice to


                                                                   Page 29 of 86



     DISTRIBUTOR with immediate effect if DISTRIBUTOR is in breach of its
     obligations under the Option Agreement Clauses.

14.3 NOTIFICATION

Either Party shall notify the other Party immediately, if any event entitling
the other Party to terminate this Agreement occurs.

14.4 RIGHTS AND OBLIGATIONS ON TERMINATION

Upon this Agreement's termination:

(i)  DISTRIBUTOR or its Authorized Resellers will not have any claims of
     compensation for loss of clientele against smart gmbh except as provided
     for in Clause 14.1 (3).

(ii) smart gmbh will not be obliged to compensate DISTRIBUTOR or its Authorized
     Resellers for any other kind of goodwill created by DISTRIBUTOR or its
     Authorized Resellers.

(iii) Except as provided for in Clause 14.1 (3) and in any other agreement in
     writing signed by DISTRIBUTOR and smart gmbh, smart gmbh will not be liable
     to DISTRIBUTOR or to its Authorized Resellers for any other damages by
     reason of smart gmbh exercising any of its rights hereunder, including the
     termination of this Agreement, including statutory or other indemnities,
     irrespective whether the damages result from loss of commitments on leases
     or Other obligations, from loss of investment or present or prospective
     profits, from severance or termination payments to employees or others,
     from inability to meet obligations, or from any other cause.

(iv) DISTRIBUTOR shall immediately, following the effective date of termination,
     stop holding itself out as an authorized distributor of smart gmbh. With
     respect to the use of smart Marks, the regulations of the Trade and Service
     Marks Licensing Clauses as per ANNEX 7 apply.

(v)  As to a termination by smart gmbh under Clause 14.2 DISTRIBUTOR's unfilled
     orders are automatically canceled, unless payment has been made before
     effectiveness of termination or unless smart gmbh specifies otherwise. In
     any case of smart gmbh's termination under Clause 14.2, orders made
     during the last four months of this Agreement will only be accepted upon
     payment of the total order volume in advance. If smart gmbh accepts orders
     or transacts other business with DISTRIBUTOR after termination, the terms
     and conditions of this Agreement will govern such purchases, but smart
     gmbh's acceptance of orders or other business will not renew the Agreement
     or waive its termination, and smart gmbh may at any time after
     effectiveness of termination stop that business with immediate effect.
     Termination does not modify either Party's payment obligations.

(vi) All amounts owed by either Party to the other will be immediately due and
     payable without need for notice, other formality or court order.

(vii) DISTRIBUTOR and its Authorized Resellers shall return to smart gmbh, at
     DISTRIBUTOR's expense to a location mutually agreed upon reasonably
     convenient to both parties, all property and other materials or equipment
     owned by smart gmbh immediately upon termination of this Agreement,
     including any copyrighted materials. In any case DISTRIBUTOR and its
     Authorized Resellers shall grant access to smart gmbh or any of smart
     gmbh's subcontractors to remove without delay all such property and other
     materials or equipment owned by smart gmbh.

(viii) DISTRIBUTOR shall resell to smart gmbh, if so requested by smart gmbh,
     some or all of the Vehicles delivered to DISTRIBUTOR, regardless of the
     circumstances of termination of this Agreement. The repurchase price for
     those Vehicles will their landed cost to DISTRIBUTOR (smart gmbh's invoice
     price plus unrebated duties, taxes and inland transportation costs) less an
     adjustment to reflect any damage other diminution in value not normal for
     new Vehicles being offered for sale at retail at the date of the
     repurchase. In addition, DISTRIBUTOR shall represent and warrant that the
     Vehicles are in its property and that DISTRIBUTOR has all ownership rights


                                                                   Page 30 of 86


     without any restrictions or limitations, smart gmbh is entitled to inspect
     the Vehicles at its discretion. In case of any dispute on the condition or
     the price of any Vehicle, smart gmbh is entitled to call an independent
     expert in order to determine the condition of the Vehicle and, if
     necessary, any damage or diminution of its value. The expert's fees shall
     be borne by smart gmbh and DISTRIBUTOR equally.

(ix) smart gmbh shall repurchase from DISTRIBUTOR, if so requested by
     DISTRIBUTOR in writing within a reasonable period, however not later than
     six months after termination of this Agreement, all Parts delivered by
     smart gmbh to DISTRIBUTOR, provided that smart gmbh will not be obliged to
     repurchase Parts from DISTRIBUTOR in case smart gmbh has terminated this
     Agreement in accordance with Article 14.2. smart gmbh will only be obliged
     to repurchase Parts that are unsold, undamaged, unused, in their original
     packaging and stored in a state of the art manner, and appear on smart
     gmbh's then-current Parts' listing. The repurchase price for such Parts
     will be their landed cost to DISTRIBUTOR (smart gmbh's invoice price plus
     unrelated duties, taxes and inland transportation (including transportation
     and insurance) costs) less *% of such cost and less an adjustment to
     reflect any damage or other diminution in value not normal for current
     Parts being offered for sale at retail at the date of the repurchase.
     Together with the request to smart gmbh to repurchase Parts, DISTRIBUTOR
     shall provide a complete list of Parts to be repurchased. The list shall
     contain the relevant Parts number, the invoice number, the dale of invoice
     and the amount of invoice for each of the Parts to be repurchased. In
     addition, DISTRIBUTOR shall represent and warrant that the Parts are in its
     property and that DISTRIBUTOR has all ownership rights without any
     restrictions or limitations, smart gmbh is entitled to inspect the Parts at
     its discretion. In case of any dispute on the condition or the price of any
     Part, smart gmbh shall call an independent expert in order to determine the
     condition of the Part and, if necessary, any damage or diminution of its
     value. The expert's fees shall be borne by smart gmbh and DISTRIBUTOR
     equally.

(x)  smart gmbh may purchase (in which event, DISTRIBUTOR shall sell to smart
     gmbh) some or all of DISTRIBUTOR's special tools and equipment for repair
     or service of Contract Goods and smart gmbh signage owned by DISTRIBUTOR at
     the fair market value of such special tools, equipment and signage.

(xi) DISTRIBUTOR and its Authorized Resellers shall remove all registrations or
     filings of this Agreement and related documents in any public or
     governmental record and must cancel or assign to smart gmbh or its
     designee, as smart gmbh requests, to the extent it can do so by Applicable
     Law, any governmental licenses, permits or authorizations for importation,
     sale or servicing of Contract Goods. DISTRIBUTOR also grants smart gmbh an
     irrevocable power of attorney to take these actions on DISTRIBUTOR's behalf
     if DISTRIBUTOR wrongfully refuses to do so and shall, to the extent it can
     do so by Applicable Law, do any and all things and acts which may be deemed
     necessary or appropriate by smart gmbh in such actions, including
     executing, or making available to smart gmbh, as the case may be, any and
     all relevant documents, instruments, materials or certificates.

(xii) DISTRIBUTOR has no right of retention against any claim of smart gmbh
     under this Article 14, unless the claim on which the right of retention is
     based is uncontested or established by final judgment or arbitral award.

(xiii) In case of termination of this Agreement by smart gmbh, DISTRIBUTOR or
     its Authorized Resellers will not have any claims of compensation against
     smart gmbh except as provided for in this Agreement.

(xiv) The following provisions of this Agreement shall survive termination of
     all or part of this Agreement, and shall continue to be enforceable
     obligations: Articles 1,2 (2), 1.3,3.2, 5.3 (3) (ii), 5.3 (4), 5.5 (2)
     (i), (ii) and (iii), 5.5 (3), 6.2 (9), 6.3, 6.4, 6.6 (2), 6.6 (3), 7.1
     (4), 7.2 (3), 8,2 (4), 9, 11.1, 12.2,13,4 (for a period of five years after
     effectiveness of termination), 13.5,14,15, 16,17, as well as Clauses
     1.1,1.2, 6.1 and 8 of the Trade and Service Marks Licensing Clauses as per
     ANNEX 7. The termination of this Agreement will not affect any rights of
     smart gmbh or any DaimlerChrysler Group Company under any other agreement
     between DISTRIBUTOR and smart gmbh or any DaimlerChrysler Group Company or
     vice versa, except in accordance with the terms

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                                   Page 31 of 86



     of such agreement.

ARTICLE 15-GENERAL PROVISIONS

15.1 PAYMENTS TO DISTRIBUTOR

     Any payment to DISTRIBUTOR under this Agreement will be made by wire
     transfer to DISTRIBUTOR's bank account (confirmed in writing by the
     relevant bank) in the Contract Territory;

(1)  In addition, payment will only be made under the condition and to the
     extent that, in the sole discretion of smart gmbh;

     (i)  smart gmbh, at its option, has issued a credit note or has received
          from DISTRIBUTOR a complete, accurate and comprehensible invoice;

     (ii) DISTRIBUTOR has furnished sufficient proof That all preconditions for
          payment have been met;

     (iii) payment is due and legally and practically possible; and

     (iv) DISTRIBUTOR's representations end warranties under Article 13.5 have
          been fulfilled.

(2)  Partial payments will not be made, smart gmbh may combine several payments
     into one single payment.

15.2 ENTIRE AGREEMENT, MODIFICATION, CONSENT, WAIVER, RIGHTS AND ASSIGNMENT

(1)  This Agreement constitutes the Parties' entire agreement for selling and
     servicing Contract Goods in the Contract Territory. It supersedes all prior
     negotiations, understandings and agreements, written or oral, relating to
     its subject matter among DISTRIBUTOR and smart gmbh. Each Party
     acknowledges that no representations or statements other than those
     expressly set forth herein were made by the other or any of its officers,
     employees, agents or representatives, or were relied upon by either Party
     in entering into this Agreement.

(2)  Any modification or supplement to or extension of this Agreement must be in
     writing and signed by authorized officers or representatives of both
     Parties.

(3)  When the consent or approval of a Party is required under this Agreement,
     that consent or approval may be based on such factors, considerations or
     economic interests deemed by that Party to be relevant, regardless of any
     prior exercise of that Party's discretion in similar circumstances, and
     without any duty to justify its exercise of discretion in giving or
     withholding its consent or approval, or in subjecting its consent or
     approval to particular conditions.

(4)  No waiver of a default or other nonperformance or consent will be valid
     unless set forth in writing signed by authorized officers or
     representatives of the Party making the waiver or giving the consent. Any
     such waiver will be applicable solely to that particular default and will
     not be a continuing waiver nor will it excuse any later default, and any
     such consent will be applicable solely to the particular situation for
     which the consent was granted. No failure or delay by any Party in
     exercising any right under this Agreement will operate as or be deemed to
     be a waiver of or limitation on any such right or an implied consent, and
     no single or partial exercise of any such right will preclude any other or
     further exercise of that right or the exercise of any other right.


                                                                   Page 32 of 86



(5)  Every right and remedy granted by this Agreement is cumulative and in
     addition to every other right and remedy under this Agreement or available
     under any applicable addition to every other right and remedy under this
     Agreement under any Applicable Law.

(6)  Neither Party may assign this Agreement or any of their rights or
     obligations without or in violation of the terms of the other's prior
     consent, and unless the consent states otherwise the assigning Party will
     remain legally obliged, jointly and severally, with its assignee for the
     performance of this Agreement, in the event of any breach of this Clause by
     either Party, the other Party may terminate this Agreement in accordance
     with Article 14.2,

(7)  As an exception to Clause (6) above, smart gmbh may assign this Agreement
     or any other of its rights or obligations and may delegate its performance
     to any DaimlerChrysler Group Company and each Party may assign any of its
     rights to payments due under this Agreement to any entity providing
     factoring or other financing related services. In the event that smart gmbh
     assigns any of its rights or obligations or delegates their performance to
     any DaimlerChrysler Group Company, smart gmbh and such DaimlerChrysler
     Group Company may invoice DISTRIBUTOR separately for Contract Goods and
     related services but smart gmbh shall also remain liable hereunder.

15.3 REGISTRATION

Other than as absolutely required by Applicable Law, DISTRIBUTOR will not
register or file this Agreement or any related documents in any public or
governmental record without the prior consent of smart gmbh.

15.4 CONFIDENTIAL INFORMATION

(1)  Other than as absolutely required by Applicable Law or as consented to by
     smart gmbh in writing, DISTRIBUTOR and its Authorized Resellers, and their
     respective officers, employees and agents shall keep confidential all
     non-public business or technical information relating to smart gmbh, any
     DaimlerChrysler Group Company or any of their respective suppliers or
     customers of which they become aware in connection with this Agreement and
     shall not disclose it except to DISTRIBUTOR's professional advisors.

(2)  smart gmbh will treat as confidential all non-public information concerning
     DISTRIBUTOR which is obtained under this Agreement and will not disclose
     such information to third parties, other than smart gmbh's professional
     advisors.

(3)  This confidentiality obligation under Clauses 15.4 (1) and 15.4 (2),
     however, will not apply to:

     (i)  information that is lawfully known to the other at the time of
          disclosure;

     (ii) Information that is or becomes available in the public domain through
          no fault of the non-disclosing person;

     (iii) information that is or becomes available to the non-disclosing person
          from any third party who was not in breech of any confidentiality
          obligation to the disclosing person or of whose breach of any
          confidentiality obligation to the disclosing person the non-disclosing
          person was not aware; or

     (iv) information that a person is required to disclose by law or court or
          governmental order or request from regulatory authorities.

(4)  Should DISTRIBUTOR receive a request from any person other than an
     authorized service center, dealer or distributor of smart gmbh for
     technical information relating to the repair and maintenance of Contract
     Goods, such request shall be forwarded to smart gmbh for consideration. No
     such information may be disclosed without the prior consent of smart gmbh
     except as required by Applicable Law.

15.5 COUNTERPARTS AND PHOTOCOPIES

This Agreement may be executed in counterparts, each of which will be deemed to
be an original of this Agreement with the same force and effect. A facsimile or
photocopy of a fully executed counterpart of


                                                                   Page 33 of 86



this Agreement, or of a set of identical versions separately executed by the
Parties, will be valid evidence of the existence and the terms of this
Agreement.

15.6 INTERPRETATION AND DISCREPANCY WITH OTHER DOCUMENTS

(1)  In interpreting this Agreement, the following rules of interpretation will
     apply unless the context requires otherwise:

     (i)  The singular includes the plural, and conversely;

     (ii) A reference to a person includes a company, an unincorporated body or
          other legal entity, and conversely;

     (iii) A reference to a Party to this Agreement or any other agreement or
          document includes that Party's successors and permitted assigns (if
          any);

     (iv) A reference to this Agreement or any other agreement or document is to
          that agreement or document be amended, novated, supplemented, varied
          or replaced from time to time, except to the extent prohibited by this
          Agreement or by that other agreement or document; and

     (v)  "Includes", "including", "in particular" and similar expressions are
          intended to signify examples, and not an exclusive listing, in each
          case as if the words "but not limited to" were part of that
          expression.

(2)  This Agreement was negotiated and concluded in the English language, and
     the English text of this Agreement will be controlling in all events. Both
     Parties have had the opportunity to consult with legal counsel in the
     negotiation of this Agreement, and the fact that smart gmbh prepared the
     initial draft of this Agreement shall not be taken into account in
     interpreting its provisions.

(3)  In the event of any discrepancy or conflict between the terms of this
     Agreement and the terms of any Annex hereto or any document referred to in
     this Agreement or in any Annex hereto, the terms of this Agreement shall
     prevail.

15.7 SEVERABILITY

If a court, arbitral tribunal or government authority having jurisdiction
declares invalid or unenforceable any provision of this Agreement, this
Agreement will be considered divisible as to that provision, and that provision
will be deemed deleted from this Agreement or to be inapplicable, and the
remainder of this Agreement will be valid and binding as if that provision were
not included herein or as if it were included herein only with respect to those
parts of the Contract Territory, if any, where that provision is not invalid or
unenforceable.

ARTICLE 16 -NOTICES

(1)  All notices, applications, requests, approvals, consents, confirmations and
     waivers given under or in connection with this Agreement shall be in
     English, in writing and will be deemed properly given if hand delivered or
     delivered by:

     (i)  prepaid registered or certified mail, return receipt requested;

     (ii) by commercial courier or messenger service; or

     (iii) by facsimile.

(2)  Notices will be deemed given on the first to occur of the following:

     (i)  when actually delivered;

     (ii) if sent by facsimile, when the sender receives an electronic
          confirmation of receipt if promptly followed by a confirmation copy
          given by another permitted method, unless the recipient acknowledges
          receipt of the facsimile; or

     (iii) if sent by mail, five business days after mailing, unless the
          declaration is of particular relevance and unless the addressee proves
          that it has not received the notice.

(3)  Notices shall be delivered to the addresses or facsimile numbers (or to any
     other address or


                                                                  Pages 34 of 86



     facsimile number that either Party may designate, at any time, to the other
     by notice given in accordance with this Article 16) as set out in ANNEX 2
     under the heading "Notices".

ARTICLE 17 - GOVERNING LAW AND DISPUTE RESOLUTION

(1)  This Agreement is made in and will be construed and governed in all
     respects in accordance with the laws of Germany and without regard to any
     conflicts of law doctrines or principles of German law. If the English
     legal meaning of any term or stipulation in this Agreement or its Annexes
     differs from the German legal meaning, the German legal meaning will
     prevail.

[2)  All disputes, controversies or claims arising from the interpretation,
     performance or non - performance of this Agreement or any and all
     transactions related to this Agreement (including, but not limited to, the
     validity, scope and enforceability of this provision, or disputes under
     rights granted pursuant to law) shall be finally and completely resolved by
     arbitration in accordance with the Rules of Arbitration of the
     International Chamber of Commerce in force at the time of commencement of
     the arbitration. The place of arbitration is Zurich, Switzerland. The
     language to be used in the arbitral proceedings is English.

ARTICLE 18 - PLACE OF PERFORMANCE

With respect to smart gmbh and any other DaimlerChrysler Group Company, place of
performance (as well as place of delivery and place of origination of payment by
smart gmbh) for any and all obligations under this Agreement is Stuttgart,
Germany or Hambach, France.

ARTICLE 19-SIGNATURE

This Agreement has been signed by authorized representatives of smart gmbh and
DISTRIBUTOR effective as of the Effective Date set forth in ANNEX 2 to this
Agreement, under the heading "Effective Date".

SMART GMBH                               SMART USA DISTRIBUTOR LLC


/s/ Ulrich Walker                        /s/ Roger S. Penske
- -------------------------------------    ---------------------------------------
Ulrich Walker, President & CEO           Roger S. Penske, Chairman of the Board


/s/ Anders S. Jensen                     /s/ David Schembri
- -------------------------------------    ---------------------------------------
Anders S. Jensen,                        David Schembri, President
Vice President Marketing & Sales


                                                                   Page 35 of 86



                                                                         ANNEX 1

                                    VEHICLES

smart fortwo coupe (C451)
smart fortwo cabrio (A451)

Successor and supplementary models within existing model series will become
Contract Goods upon their official launching in the Contract Territory with the
consent of smart gmbh.


                                                                   Page 36 of 86



                                                                         ANNEX 2

                    CONTRACT SPECIFICATIONS

I.   CONTRACT TERRITORY

     United States of America and Puerto Rico.

II.  MANAGEMENT AND SIGNATORY AUTHORITY



     NAME         POSITION   JOINT/SEVERAL AUTHORITY
     ----        ---------   -----------------------
                       
Roger Penske     Chairman    Several Authority
David Schembri   President   Several Authority


III. KEY PERSONNEL

     Roger Penske and David Schembri.

IV.  DESIGNATION

     Distributor for smart gmbh of smart Vehicles in USA and Puerto Rico.

V.   OWNERSHIP INTERESTS



         NAME            PERCENT OWNERSHIP
         ----            -----------------
                      
United Auto Group Inc.         100%


VI.  OTHER GOODS

VII. EFFECTIVE DATE

     October 31st, 2006.

VIII. NOTICES

If to smart gmbh:                     with duplicate copy to:
smart gmbh                            DaimlerChrysler AG
HPC H100                              L/DS
P.O. Box 20 60                        HPC 096/0431
71010 Boblingen                       70546 Stuttgart
Germany                               Germany
Attention: Vice President Marketing   Attention: International Counsel USA
           & Sales
Facsimile: *                          Facsimile: *

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                                   Page 37 of 86



If to DISTRIBUTOR:                    with a duplicate copy to:
smart USA Distributor LLC             United Auto Group, Inc.
2555 Telegraph Road                   2555 Telegraph Road
Bloomfield Hills, Michigan 48302      Bloomfield Hills, Michigan 48302

Attention: President                  Attention: General Counsel
Facsimile: *                          Facsimile: *

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                                   Page 38 of 86



                                                                       ANNEX 3.1

                                TARGET AGREEMENT

In accordance with the Distributor Agreement between smart gmbh ("smart gmbh")
and smart USA Distributor LLC ("DISTRIBUTOR") dated October 31st, 2006,
DISTRIBUTOR undertakes to and agrees with smart gmbh to achieve the following
targets during the Sales Period beginning on January 1st, 2008 and ending on
December 31st, 2008 (the "Sales Period"):

*

Any other targets mutually agreed for example, among others, CSI targets, market
share targets, number of outlets.

SMART GMBH                              SMART  USA DISTRIBUTOR LLC


/s/ Ulrich Walker                       /s/ Roger S. Penske
- -------------------------------------   ----------------------------------------

Dated: October 31st, 2006

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                                   Page 39 of 86



                                                                       ANNEX 3.2

                                      PARTS

The discount for Parts is subject to the discount class ("RG") applicable for
the relevant Part, as designated by DAIMLERCHRYSLER. Currently, the following
discounts apply for the following discount classes;

                      
General Parts
Discountgroup    *           *
Discountgroup    *           *

Assemblies
Discountgroup    *           *

Special Parts
Discountgroup    *           *

Accessories
Discountgroup    *           *

Special Tools
Discountgroup    *           *



Discounts are based on the German Wholesales list prices of the DaimlerChrysler
AG valid on the day of delivery.

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                                   Page 40 of 86


                                                                         ANNEX 4

               FORMAT TYPES, CORPORATE IDENTITY (CI) END STANDARDS

smart gmbh and United Auto Group, Inc, agree to the following matters pertaining
to Format Types, Corporate Identity and Standards, based on Article 5.2 (1) of
the Distributor Agreement made as of October 31st, 2006 by and between smart
gmbh and United Auto Group, Inc.

*




















*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                              Pps 41 to 50 of 86


                                     ANNEX 5

                             DISTRIBUTOR'S WARRANTY

                                                                    (SMART LOGO)

                         - MINIMUM WARRANTY CONDITIONS-

Vehicle warranty:                24 months, 24000 miles

Parts & accessories warranty:    24 months, 24000 miles

Corrosion perforation warranty:  48 months. 50000 miles

Any other warranty required by
Applicable Law:                  the warranty terms required Applicable Law

1. DISTRIBUTOR guarantees the fault-free functioning of the motor vehicle for
each motor vehicle type produced by smart gmbh, as set out in the following
conditions. The warranty covers any malfunction of the vehicle due to production
or material faults and for which warranty coverage is not excluded according to
these conditions.

2. The warranty entitles the customer to have the malfunction corrected and the
resulting damage caused to other parts of the vehicle either repaired or
replaced free of charge. Warranty claims can only be asserted at a smart
authorised repairer and must be reported there, accompanied by presentation of
the service booklet. The smart authorised repairer shall decide whether to
repair or replace. Any parts acknowledged as faulty and replaced become the
property of DISTRIBUTOR.

3. DISTRIBUTOR provides warranty on the vehicle as well as on smart replacement
parts and original accessories for a period of 24, months or 24000 miles
(whichever comes first). The criteria for the start of the warranty period are
the delivery date or the date of initial licensing of the vehicle (whichever is
the earlier), and in the case of replacement parts and original accessories, the
date of purchase, smart gmbh additionally grants a 48 months or 50000 miles
(whichever comes first) warranty against corrosion perforation of bodywork from
the inside out.

4. Natural wear and tear, non-warranty adjustment work and normal servicing and
maintenance are excluded from the warranty. Warranty claims also cannot be made
without regard to the contributory causes for malfunctions and damage caused by:

a) influences acting on the vehicle from outside, e.g. of a mechanical or
chemical nature (such as damage to paintwork, synthetics or bodywork caused by
flying stones, fly ash, industrial emissions, bird droppings) or other external
occurrences, including accidents, malicious or willful actions by third parties,
in particular theft and unauthorized use,


                                                                   Page 51 of 86



b) improper handling or overloading of the vehicle, including non-standard
conditions of use such as off-road driving, racing, overloading, excessive roof,
trailer or axle loads,

c) alteration of the original construction of the vehicle (e.g. tuning),
conversions or alterations of parts, installation of accessories or units from
other manufacturers, the use of which has not been approved by smart gmbh,

d) use of unsuitable lubrication and fuels, or

e) improper storage or damage during transport.

5. A warranty claim only exists if the servicing and maintenance works
prescribed and recommended by DISTRIBUTOR and/or smart gmbh have been carried
out on the vehicle at a smart authorized repairer or by another company
expressly authorized by DISTRIBUTOR to perform such tasks.

6. The warranty does not cover malfunctions and damage which have arisen
because:

a) the vehicle has previously, been serviced, maintained or attended in a garage
other than a smart authorized repairer or an operation authorized by
DISTRIBUTOR, or by a third party that has not been authorized by DISTRIBUTOR for
the specialist and professional maintenance, servicing or upkeep of the vehicle,

b) the operating instructions of the vehicle have not been observed, or

c) a malfunction or damage has not been immediately reported and the vehicle has
not been immediately brought in for repair.

7. The repair of indirect and consequential damage is not covered insofar as it
is not listed under clause 2 above.

8. This warranty does not constitute a basis for claims for cancellation
(annulment of the purchase contract) or reduction (reduction the purchase price)
against DISTRIBUTOR.

9. This warranty is valid exclusively for the territory in which smart gmbh
maintains a distribution network with smart authorized repairers at the date of
the occurrence of the warranty event. If the vehicle is still under warranty and
is in need of repair outside of the DISTRIBUTOR's Contract Territory the
warranty will be the warranty under this Annex 5 and not the warranty generally
applicable outside of the DISTRIBUTOR's Contract Territory.

10. All claims arising from the warranty are barred by the statute of
limitations 6 months after receipt of the damage report at the smart authorized
repairer in accordance with clause 2 above, but at the latest 30 months (in the
case of the corrosion perforation warranty, 54 months} after delivery of the
vehicle to the customer.

11. The customer has the right, if necessary, to make contractual and legal
warranty claims against the seller of the vehicle, irrespective of and in
addition to claims under this warranty.


                                                                   Page 52 of 86


                                                                         ANNEX 6

                                SALES CONDITIONS

                                                                    (SMART LOGO)

TERMS AND CONDITIONS FOR THE SALE OF BRAND-NEW VEHICLES ABROAD

Exclusively applicable to sales by smart gmbh to foreign business persons who in
concluding the contract of sale are acting in a commercial or independent
professional capacity, and to public authorities abroad.

I.   SCOPE OF CONDITIONS

1.   The contract of sale shall be governed exclusively by these Terms and
     Conditions of Sale. Conflicting terms of the Buyer shall not apply.

2.   These terms and conditions of sale apply to the sale of brand new vehicles
     of the smart brand to business persons domiciled outside the Federal
     Republic of Germany, who in concluding the contract of sale are acting in a
     commercial or independent professional capacity, and to foreign public
     authorities and foreign publicly-owned legal entities.

II.  CONCLUSION OF THE CONTRACT, AMENDMENTS TO THE CONTRACT AND ASSIGNMENT

1.   Offers of the Seller are not binding.

2.   The Buyer shall be bound by the order for a period not exceeding six
     weeks, in the case of vehicles which are in stock at the Seller's, for up
     to two weeks. The contract of sale is concluded when within this period the
     Seller confirms in writing or by electronic mail the acceptance of the
     order for the objects of sale described in more detail or, if the order is
     to be processed in an electronic data processing system (EDP system), at
     the time when the Buyer can see in the EDP system that the Seller has begun
     processing the order (e.g. Progress Code 15 in smart EDP system). In any
     event, the contract of sale shall be concluded when delivery has been made.
     The Seller shall be obliged to inform the Buyer without delay if it does
     not accept the order.

3.   Amendments or addenda to the contract and oral statements must be in
     writing or by electronic mail or, if the order is being processed in an EDP
     system, the Seller must have taken, them into account in a way that is
     apparent to the Buyer.

4.   During the delivery period, the manufacturer's right to make design or
     shape modifications, to deviate from the color shade and make changes to
     the scope of delivery is reserved, provided that the Buyer can reasonably
     be expected to accept such changes or deviations, taking the interests of
     the Seller into account.


                                                                   Page 53 of 86



     The Buyer cannot derive any rights from any marks or numbering used by the
     Seller or the manufacturer to identify the order or the objects of sale
     ordered. Only the order number used by the Seller is relevant for any
     correspondence between the parties.

5.   The rights and duties of the Buyer arising from the contract of sale may
     not be transferred without the Seller's consent in writing or by electronic
     mail.

III. DELIVERY AND PRICES

1.   Delivery shall be made "CIF USA port", smart gmbh will cover the costs for
     transportation to USA VPC within, a maximum of 100 miles distance from the
     respective sea port, provided DISTRIBUTOR uses a VPC for Vehicles within
     those 100 miles distance.

2.   Partial deliveries are permitted, insofar as the Buyer can be reasonably
     expected to accept them.

3.   The Seller does not accept a no-fault procurement risk for the objects of
     sale.

4.   In cases where an object of sale cannot be delivered on the scheduled
     delivery date due to the discontinuation of series production, both parties
     shall be released from the obligations under the contract of sale insofar
     as this object of sale is concerned. In such a case the Seller shall inform
     the Buyer without delay and reimburse any counter - performance received
     without delay. In such a case the Seller shall not be obliged either to
     deliver the originally ordered object of sale or to pay damages.

5.   Prices are understood, unless any other stipulations have been made, ex
     works net plus cost for logistics, transportation and insurance.

6.   Shipment within the European Economic Area shall be made d.d.u. [.....].
     All other shipment shall be made f.o.b. Baltic Sea Port, Federal Republic
     of Germany, or c.i.f, (port of entry), at the Seller's choice.

IV.  PAYMENT, DELAY IN PAYMENT AND OFFSETTING

1.   The purchase price and prices for incidental services shall be payable less
     any agreed discounts upon delivery of the objects of sale and submission of
     the invoice or other means of rendering account. On a monthly basis smart
     gmbh will reimburse DISTRIBUTOR for the difference between DISTRIBUTOR
     paying smart gmbh for Vehicles based upon 'net 15 days ex works' credit
     terms and DISTRIBUTOR paying smart gmbh for those Vehicles based upon
     delivery at USA VPC if USA VPC is used and is within 100 miles distance
     from USA port or, if not used, the USA port or another mutually agreed
     method.

2.   Payment must be made in the currency specified on the invoice and in such a
     way that the Seller does not incur any costs.


                                                                   Page 54 of 86



3.   Should the Buyer default on payment, including with respect to individual
     invoices, the Seller shall be entitled to demand payment in advance for
     consignments in transit and subsequent deliveries from all ongoing
     contracts.

4.   The Buyer may offset claims of the Seller only if the Buyer's counterclaim
     is uncontested or has been confirmed by a non-appealable court decision. A
     right of retention may only be exercised insofar as it relates to claims
     arising from the contract of sale.

V.   DELIVERY TIME, DELAY IN DELIVERY AND FORCE MAJEURE

1.   Delivery dates and delivery periods which may be agreed as either binding
     or non-binding are to be stated in writing or by electronic mail. Where
     orders are being processed in an EDP system, a delivery date or a delivery
     period shall be deemed to have been agreed if the Seller has taken it into
     account in a way that is apparent to the Buyer. Delivery periods shall
     commence upon conclusion of the contract.

2.   The Buyer may demand delivery six weeks after a non-binding delivery date
     or a non-binding delivery period has been exceeded. The Seller is in delay
     from the time that it receives this demand. If the Buyer wishes to
     withdraw from the contract and/or claim damages in lieu of performance, it
     must set for the Seller a reasonable period within which to effect delivery
     after the end of the six-week period pursuant to sentence 1. The Buyer
     shall not be entitled to seek damages in the event of slight negligence on
     the part of the Seller.

     If performance becomes impossible for the Seller by coincidence while it is
     in delay, the Seller shall be liable within the scope of the limitations on
     liability agreed above. The Seller shall not be liable if the damage would
     have been incurred even if the delivery had been made on time.

3.   If a binding delivery date or binding delivery period is exceeded, the
     Seller is in delay as soon as the delivery date or delivery period is
     exceeded. The rights of the Buyer shall then be determined by clause 2
     sentences 3 to 6 of this section.

4.   In the event that the Seller is temporarily prevented from delivering at
     the agreed time or within the agreed period through no fault of its own,
     due to force majeure. or operational disruptions occurring at the Seller's
     or its suppliers', the dates and periods referred, to in clauses 1 to 3
     shall be extended by the duration of the impairment of performance. The
     same shall apply if not all permits have been granted or not all documents,
     payments, securities, transport containers and means of transport to be
     provided by the Buyer have been received by the Seller on time. If
     disruptions pursuant to sentence 1 result in performance being postponed by
     more than four months, both Seller and Buyer shall be entitled to withdraw
     from the contract. This shall not prejudice other rights to withdraw from
     the contract.

VI.  ACCEPTANCE AND DELAY OF THE BUYER


                                                                   Page 55 of 86



1.   The Buyer is obliged to accept the objects of sale within 30 days of
     receiving notice of readiness for delivery or, where orders are being
     processed in an EDP system, within 30 days of the time at which the Buyer
     can see in the EDP system that the objects of sale are ready for delivery.
     In the absence of either a notice of readiness for delivery or a processing
     of the orders in an EDP system, the Buyer is obliged to accept the objects
     of sale within 30 days following the end of the month for which delivery
     was agreed upon, unless the Seller is in delay of delivery.

2.   Should the Buyer fail to accept the objects of sale, the Seller may
     exercise its statutory rights. The same applies if the Seller is unable to
     deliver because the Buyer has failed to supply the permits, documentation,
     payments, securities, transport containers or means of transport which it
     is required to provide or it does not assume transportation for which it is
     responsible. In the event of non-acceptance, the Seller is also entitled to
     send the items to the Buyer at the latter's expense and risk.

3.   Should the Seller seek damages, such damages shall amount to *% of the
     agreed purchase price. This amount may be increased if the Seller is able
     to prove greater damage or reduced if the Buyer can prove that the damage
     was lower.

VII. RESERVATION OF TITLE

1.   The objects of sale shall remain the property of the Seller until such
     time as the claims accruing to the Seller by virtue of the contract of
     sale have been settled. The reservation of title also applies to claims
     acquired by the Seller against the Buyer arising from the ongoing business
     relationship until such time as the claims of the Seller in connection with
     the sale have been settled.

2.   Any processing or modification of the reserved-title goods by the Buyer or
     a third party or the combination of such goods with other goods shall be
     for the Seller. The Seller shall acquire co-ownership of the newly created
     products which are deemed to be reserved-title goods within the meaning of
     this Section VII, such that its share of the new products corresponds to
     the value of the originally supplied objects of sale.

3.   The Seller consents to the resale of the reserved-title goods by the Buyer
     within the scope of its ordinary course of business; such consent being
     revocable and subject to the provisions of clause B. The Buyer may not
     pledge the reserved-title goods or assign them by way of security. To
     secure all claims arising from the ongoing business relationship, the Buyer
     assigns to the Seller its claims from the resale of the reserved-title
     goods in the amount of the Seller's claim to the purchase price.

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                                   Page 56 of 86



     Until its authorization is revoked, the Buyer is entitled and obliged to
     collect the debts assigned to the Seller. Should the Buyer suspend payments
     generally, this collection authorisation shall end without the need for
     explicit revocation.

4.   At the request of the Buyer, the Seller shall release the security provided
     in accordance with the foregoing provisions - at its discretion - insofar
     as the realizable value of this security exceeds the claims to be secured
     arising from the ongoing business relationship by *%.

5.   The Buyer is obliged to carefully look after the reserved-title goods for
     the Seller, to keep them in perfect technical condition and to have any
     necessary repairs carried out without delay. The reserved-title goods are
     to be serviced and repaired in workshops expressly approved by the
     manufacturer for the servicing of the objects of sale, except in cases of
     emergency.

6.   As long as reservation of title remains in force, the Buyer shall be
     required at the demand of the Seller to insure the reserved-title goods
     with all-risk cover at their value as new or in the amount of the
     outstanding claim, with the proviso that the rights arising from the
     insurance accrue to the Seller. The Seller shall be entitled to demand the
     insurance certificate.

7.   In the event of attachment or of other impediments to the owner's
     interests, the Buyer shall inform the Seller without delay.

8.   Should the Buyer fail to meet its payment and insurance obligations or
     other obligations arising from the reservation of title including the
     assignment of debts, or suspend payments in general, or should insolvency
     proceedings be instituted in respect of its assets or, as a result of the
     conduct of the Buyer, notification from the insurer provided for in the
     insurance certificate is sent to the Seller, the full outstanding balance
     shall fall due immediately, even if bills of exchange with later maturity
     dates are running, and any right of the Buyer to dispose of the
     reserved-title goods pursuant to clause 3 shall lapse. If the full
     outstanding balance is not paid immediately, the right of the Buyer to use
     the reserved-title goods shall lapse. The Seller shall be entitled after
     the expiration of a 14-day period of grace granted by it, or, in the event
     of the Buyer suspending payments in general or insolvency proceedings being
     instituted, immediately, to demand the restitution of the reserved-title
     goods excluding any right of retention, and to collect them from the Buyer.
     Such action shall not require cancellation of the contract; the demand for
     restitution and collection of the reserved-title goods shall not constitute
     a withdrawal from the contract.

     The repossession by the Seller of reserved-title goods in which third
     parties have co-ownership rights shall also constitute repossession for the
     co-owners. The Buyer shall be liable for all costs incurred in connection
     with repossession and realization of the value of the reserved-title goods.
     Notwithstanding the payment obligation of the Buyer, the Seller is entitled
     - where applicable by agreement with the co-owners -

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                                   Page 57 of 86



     to realize the value of the repossessed reserved-title goods and
     accessories at the beat price through sale on the open market or by public
     auction. The proceeds after deduction of costs will, insofar as they are
     not owed to the Seller or a third party to cover existing claims, be paid
     to the Buyer.

9.   If the country in whose territory the objects of sale are located does not
     permit reservation of title, but does permit the Seller to reserve other
     rights to the objects of sale, the Seller may exercise all such rights. The
     Buyer is obliged to take at its own expense all steps which are necessary
     to enable the reservation of title or other substitute right over the
     objects of sale to take effect and to be maintained.

VIII. DEFECTS

1.   Claims of the Buyer on grounds of defects in passenger cars shall become
     time-barred as provided by statutory provisions after two years from the
     date when the object of sale concerned was first registered or brought into
     service, depending an which came first, but no later than 30 months after
     delivery of the object of sale concerned unless otherwise agreed in the
     clauses below.

2.   In the event of malicious non-disclosure of defects or of a guarantee given
     for quality, claims over and above those set forth in clause 1 remain
     unaffected.

3.   The end purchaser may assert its claims for rectification of defects
     against the party which sold the object of sale concerned to it or against
     other workshops approved by the manufacturer for the servicing of the
     objects of sale. The Buyer must notify the Seller in each event as soon as
     it becomes aware of such claims being asserted. The Buyer shall have no
     recourse against the Seller in respect of claims far subsequent performance
     and withdrawal from the contract. Instead, the Seller shall reimburse the
     Buyer in respect of the costs necessitated by the subsequent performance or
     the damage incurred through exclusion of the right of withdrawal, less any
     expenses saved and income received in connection with any other use of or
     benefit obtained from the object of sale concerned.

4.   If a defect renders an object of sale unusable, the nearest available
     workshop to the unusable object of sale which has been approved by the
     manufacturer for the servicing of the objects of sale shall be informed.

5.   Replaced objects of sale or parts thereof shall be kept for the purpose of
     inspection by the Seller at a place specified by the Seller and returned to
     it upon request. Should the claims for defects prove to be justified, the
     items shall become the property of the Seller and the Seller shall bear the
     costs of their return.

6.   Claims for defects relating to the parts used to remedy defects may be
     asserted on the basis of the contract of sale until the end of the
     limitation period for the object of sale concerned.


                                                                   Page 58 of 86



7.   A change in ownership of the objects of sale will not affect claims for the
     rectification of defects.

X.   LIABILITY

1.   If the Seller is to be held responsible under the statutory provisions in
     accordance with these terms and conditions for damage caused by slight
     negligence, the liability of the Seller shall be limited as follows:

     The Seller shall be liable only for the breach of obligations essential to
     the contract and its liability shall be limited to the typical damage which
     was foreseeable at the time the contract was concluded. This limitation
     shall not apply in the event of injury to life, limb or health. So far as
     the damage is covered by insurance taken out by the Buyer for the
     respective damaging event (excluding fixed-sum insurance), the Seller shall
     only he liable for any associated disadvantage suffered by the Buyer e.g.
     increased insurance premiums or the cost of interest until such time as the
     claim is settled by the insurer.

     The Seller shall not be held liable for damage caused by slight negligence
     through a defect in an object of sale.

2.   Regardless of the issue of fault, this shall not prejudice the liability of
     the Seller in the event of malicious non-disclosure of a defect, or if the
     Seller has provided a guarantee or accepted a procurement risk, or under
     the terms of the German Product Liability Act.

3.   Liability in the event of delay in delivery is governed conclusively by the
     provisions of Section V.

4.   The legal representatives, vicarious agents and employees of the Seller
     shall bear no personal liability for damage caused by slight negligence on
     their part.

XI.  PLACE OF PERFORMANCE, JURISDICTION AND APPLICABLE LAW

1.   The place of performance for delivery of the objects of sale shall be the
     manufacturing plant.

2.   Should any provision of these terms end conditions and of the other
     agreements made be or become invalid, this shall not affect the validity of
     the contract in any other respect. The parties to the contract undertake to
     replace the invalid provision with a provision that accords most closely in
     terms of its commercial effects.

3.   The courts of Stuttgart shall have exclusive jurisdiction over all present
     and future claims arising from the business relationship between the Seller
     and the Buyer, including claims based on bills of exchange or checks. The
     Seller is also entitled to sue at the domicile of the Buyer.

4.   The contract is governed by German law. INCOTERMS 2000 shall apply. The
     United Nations Convention on the International Sale of Goods dated April
     11, 1980 shall not apply.


                                                                   Page 59 of 86



                                                                    (SMART LOGO)

TERMS AND CONDITIONS OF SALE FOR PARTS, COMPONENTS AND ACCESSORIES ABROAD

Exclusively applicable to sales by or on behalf of smart gmbh to foreign
business persons who in concluding the contract of sale are acting in a
commercial or independent professional capacity, and to public authorities
abroad.

I.   SCOPE OF APPLICATION

1.   The contract of sale shall be governed exclusively by these Terms and
     Conditions of Sale. Conflicting terms of the Buyer shall not apply.

2.   These terms and conditions of sale apply to the sale of new and
     reconditioned original smart parts and components, and vehicle accessories
     to business persons domiciled outside the Federal Republic of Germany who,
     in concluding the contract of sale, are acting in a commercial or
     independent professional capacity, and to foreign public authorities and
     foreign publicly-owned legal entities.

II.  CONCLUSION OF THE CONTRACT, AMENDMENTS TO THE CONTRACT AND ASSIGNMENT

1.   Offers of the Seller are not binding.

2.   The Buyer shall be bound by the order for a period not exceeding four
     weeks. The contract of sale is concluded when within this period the Seller
     confirms in writing or by electronic mail the acceptance of the order for
     the objects of sale described in more detail or, if the order is to be
     processed in an electronic data processing system (EDP system), at the
     time when the Buyer can see in the EDP system that the Seller has begun
     processing the order. In any event, the contract of sale shall be concluded
     when delivery has been made. The Seller shall be obliged to inform the
     Buyer without delay if it does not accept the order.

3.   Amendments or addenda to the contract and oral statements must be in
     writing or by electronic mail, or, if the order is being processed in an
     EDP system, the Seller must have taken them into account in a way that is
     apparent to the Buyer.

4.   During the delivery period, the manufacturer's right to make design or
     shape modifications, to deviate from the color shade and make changes to
     the scope of delivery is reserved, provided that the Buyer can reasonably
     be expected to accept such changes or deviations, taking the interests of
     the Seller into account.

     The Buyer cannot derive any rights from any marks or numbering used by the
     Seller or the manufacturer to identify the order or the objects of sale
     ordered.

5.   The rights and duties of the Buyer arising from the contract of sale may
     not be transferred without the Seller's consent in writing or by electronic
     mail.


                                                                   Page 60 of 86



III. DELIVERY AND PRICES

1.   Delivery shall be made "exw factory delivery store".

2.   Partial deliveries are permitted, insofar as the Buyer can be reasonably
     expected to accept them.

3.   The Seller does not accept a no-fault procurement risk for the objects of
     sale.

4.   In cases where any objects of sale cannot be delivered on the scheduled
     delivery date due to the discontinuation of series production, both
     parties shall be released from the obligations under the contract of sale
     insofar as these objects of sale are concerned. In such a case the Seller
     shall inform the Buyer without delay and reimburse any counter-performance
     received without delay. In such a case, the Seller shall not be obliged
     either to deliver the originally ordered objects of sale or to pay damages.

5.   The purchase price comprises the export list price valid on the delivery
     date plus any value-added tax applicable on the delivery data.

IV.  PAYMENT, DELAY IN PAYMENT AND OFFSETTING

1.   The purchase price and prices for incidental services shall be payable less
     any agreed discounts upon delivery of the objects of sale and submission of
     the invoice or other means of rendering account. Payments for parts shall
     be mutually agreed upon based upon the principal that smart gmbh shall not
     be conducting business in the United States.

2.   Payment must be made in the currency specified on the invoice and in such a
     way that the Seller does not incur any costs.

3.   Should the Buyer default on payment, including with respect to individual
     invoices, the Seller shall be entitled to demand payment in advance for the
     consignments in transit and subsequent deliveries from all ongoing
     contracts.

4.   The Buyer may offset claims of the Seller only if the Buyer's counterclaim
     is uncontested or has been confirmed by a non- appealable court decision. A
     right of retention may only be exercised insofar as it relates to claims
     arising from the contract of sale.

V.   DELIVERY TIME, DELAY IN DELIVERY AND FORCE MAJEURE

1.   Delivery dates and delivery periods which may be agreed as either binding
     or non-binding are to be stated in writing or by electronic mail. Where
     orders are being processed in an EDP system, a delivery date or a delivery
     period shall be deemed to have been agreed if the Seller has taken it into
     account in a way that is apparent to the Buyer. Delivery periods shall
     commence upon conclusion of the contract.


                                                                   Page 61 of 86


2.   The Buyer may demand delivery six weeks after a non-binding delivery date
     or a non-binding delivery period has been exceeded. The Seller is in delay
     from the time that it receives this demand. If the Buyer wishes to withdraw
     from the contract and/or claim damages in lieu of performance, it must set
     for the Seller a reasonable period within which to effect delivery after
     the end of the six-week period pursuant to Sentence 1. The Buyer shall not
     be entitled to seek damages in the event of slight negligence on the part
     of the Seller.

     If performance becomes impossible for the Seller by coincidence while it is
     in delay, the Seller shall be liable within the scope of the limitations
     on liability agreed above. The Seller shall not be liable if the damage
     would have been incurred even if delivery had been made on time.

3.   If a binding delivery date or binding delivery period is exceeded, the
     Seller is in delay as soon as the delivery date or delivery period is
     exceeded. The rights of the Buyer shall then be determined by clause 2
     sentences 3 to 6 of this section.

4.   In the event that the Seller is temporarily prevented from delivering at
     the agreed time or within the agreed period through no fault of its own,
     due to force majeure or operational disruptions occurring at the Seller's
     or its suppliers', the dates and periods referred to in clauses 1 to 3
     shall be extended by the duration of the impairment of performance. The
     same shall apply if not all permits have been granted or not all
     documents, payments, securities, transport containers and means of
     transport to be provided by the Buyer have been received by the Seller on
     time. If disruptions pursuant to sentence 1 result in performance being
     postponed by more than four months, both Seller and Buyer shall be
     entitled to withdraw from the contract. This shall not prejudice other
     rights to withdraw from the contract.

VI.  ACCEPTANCE AND DELAY OF THE BUYER

1.   The Buyer is obliged to accept the objects of sale without delay upon
     receiving notice of readiness for delivery or, where orders are being
     processed in an EDP system, without delay from the time when the Buyer can
     See in the EDP system that the objects of sale are ready for delivery. In
     the absence of either a notice of readiness for delivery or a processing of
     the orders in an EDP system, the Buyer shall accept the objects of sale
     without delay from the date upon which delivery was agreed, unless the
     Seller is in delay of delivery.

2.   Should the Buyer fail to accept the objects of sale, the Seller may
     exercise its statutory rights. The same applies if the Seller is unable to
     deliver because the Buyer has failed to supply the permits, documentation,
     payments, securities, transport containers or means of transport which it
     is required to provide or it does not assume transportation for which it is
     responsible. In the event of non-acceptance, the Seller is also entitled to
     send the objects of sale to the Buyer at the latter's expense and risk.


                                                                   Page 62 of 86



3.   Should the Seller seek damages, such damages shall amount to *% of the
     agreed purchase price. This amount may be increased if the Seller is able
     to prove greater damage, or reduced if the Buyer can prove that the damage
     was lower.

VII. RESERVATION OF TITLE

1.   The objects of sale shall remain the property of the Seller until such time
     as the claims accruing to the Seller by virtue of the contract of sale have
     been settled. The reservation of title also applies to claims acquired by
     the Seller against the Buyer arising from the ongoing business relationship
     until such time as the claims of the Seller in connection with the sale
     have been settled.

2.   Any processing or modification of the reserved-title goods by the Buyer or
     a third party or the combination of such goods with other goods shall be
     for the Seller. The Seller shall acquire co-ownership of the newly created
     products which are deemed to be reserved-title goods within the meaning of
     this Section VII, such that its share of the new products corresponds to
     the value of the objects of sale.

3.   The Seller consents to the resale by the Buyer of the goods in which title
     is reserved within the scope of its ordinary course of business; such
     consent being revocable and subject to the provisions of clause 8. The
     Buyer may not pledge the reserved- title goods or assign them by way of
     security. To secure all claims arising from the ongoing business
     relationship, the Buyer assigns to the Seller its claims from the resale of
     the reserved-title goods in the amount of the Seller's claim to the
     purchase price.

     Until its authorization is revoked, the Buyer is entitled and obliged to
     collect the debts assigned to the Seller. Should the Buyer suspend
     payments generally, this collection authorization shall end without the
     need for explicit revocation.

4.   At the request of the Buyer, the Seller shall release the security
     provided in accordance with the foregoing provisions - at its discretion -
     insofar as the realizable value of this security exceeds the claims to be
     secured arising from the ongoing business relationship by *%.

5.   The Buyer is obliged to carefully look after the reserved-title goods for
     the Seller, to keep them in perfect technical condition and to have any
     necessary repairs carried out without delay. The reserved-title goods are
     to be serviced and repaired in workshops expressly approved by the
     manufacturer for the servicing of the objects of sale, except in cases of
     emergency.

6.   AS long as reservation of title remains in force, the Buyer shall be
     required at the demand of the Seller to insure the reserved-title goods
     with all-risk cover at their value as new or in the amount of the
     outstanding claim, with the proviso that the rights arising from the
     insurance accrue to the Seller. The Seller shall be entitled to demand the
     insurance certificate.

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                                   Page 63 of 86



7.   In the event of attachment or of other impediments to the owner's
     interests, the Buyer shall inform the Seller without delay.

8.   Should the Buyer fail to meet its payment and insurance obligations or
     other obligations arising from the reservation of title including the
     assignment of debts, or suspend payments in general or should insolvency
     proceedings be instituted in respect of its assets or, as a result of the
     conduct of the Buyer, notification from the insurer provided for in the
     insurance certificate is sent to the Seller, the full outstanding balance
     shall fall due immediately, even if bills of exchange with later maturity
     dates are running, and any right of the Buyer to dispose of the
     reserved-title goods pursuant to clause 3 shall lapse. If the full
     outstanding balance is not paid immediately, the right of the Buyer to use
     the reserved-title goods shall lapse. The Seller shall be entitled after
     the expiration of a 14-day period of grace granted by it, or, in the event
     of the Buyer suspending payments in general or insolvency proceedings being
     instituted, immediately, to demand the restitution of the reserved-title
     goods excluding any right of retention and to collect them from the Buyer.
     Such action shall not require cancellation of the contract; the demand for
     restitution and collection of the goods in which title is reserved shall
     not constitute a withdrawal from the contract.

     The repossession by the Seller of reserved-title goods in which third
     parties have co-ownership rights shall also constitute repossession for the
     co-owners. The Buyer shall be liable for all costs incurred in connection
     with the repossession and realization of the value of the reserved-title
     goods. Notwithstanding the payment obligation of the Buyer, the Seller is
     entitled - where applicable by agreement with the co-owners - to realize
     the value of the repossessed reserved-title goods and accessories at the
     best price through sale on the open market or by public auction. The
     proceeds after deduction of costs will, insofar as they are not owed to the
     Seller or a third party to cover existing claims, be paid to the Buyer.

9.   If the country in whose territory the objects of sale are located does not
     permit reservation of title, but does permit the Seller to reserve other
     rights to the objects of sale, the Seller may exercise all such rights. The
     Buyer is obliged to take at its own expense all steps which are necessary
     to permit the reservation of title or other substitute right over the
     objects of sale to take effect and to be maintained.

VIII. INSTALLATION

Any installation of the objects of sale undertaken by the Buyer shall be on the
Buyer's own responsibility. The Buyer must ensure compliance with the
installation instructions and guidelines for storage of the objects of sale.

IX.  DEFECTS

1.   Claims of the Buyer on grounds of defects in parts, components or
     accessories intended to be installed in passenger cars shall


                                                                   Page 64 of 86


     expire as provided by statutory provisions after two years from the date of
     delivery of the object of sale concerned unless otherwise agreed in the
     clauses below.

2.   In the event of malicious non-disclosure of defects or of a guarantee given
     for quality, claims over and above those set forth in clause 1 remain
     unaffected.

3.   The end purchaser may assert its claims for rectification of defects
     against the party which sold the object of sale concerned to it or against
     other workshops approved by the manufacturer for the servicing of the
     objects of sale. The Buyer must notify the Seller in each event as soon as
     it becomes aware of such claims being asserted. The Buyer shall have
     no recourse against the Seller with respect to claims for subsequent
     performance and withdrawal from the contract. Instead, the Seller shall
     reimburse the Buyer with respect to the costs necessitated by subsequent
     performance or the damage incurred through exclusion of the right of
     withdrawal, less any expenses saved and income received in connection with
     any other use of or benefit obtained from the object of sale concerned.

4.   Replaced objects of sale or parts thereof shall be kept for the purpose of
     inspection by the Seller at a place specified by the Seller, and returned
     to it upon its request. Should the claims for defects prove to be
     justified, such parts shall become the property of the Seller and the
     Seller shall bear the costs of their return.

5.   Claims for defects relating to the parts used to remedy defects may be
     asserted on the basis of the contract of sale until the end of the
     limitation period for the object of sale concerned.

6.   A change in ownership of the objects of sale will not affect claims for the
     rectification of defects.

X.   LIABILITY

1.   If the Seller is to be held responsible under the statutory provisions in
     accordance with these terms and conditions for damage caused by slight
     negligence, the liability of the Seller shall be limited as follows:

     The Seller shall be liable only for the breach of obligations essential to
     the contract and its liability shall be limited to the typical damage which
     is foreseeable at the time the contract was concluded. This limitation
     shall not apply in the event of injury to life, limb or health. Insofar as
     the damage is covered by insurance taken out by the Buyer for the
     respective damaging event (excluding fixed-sum insurance), the Seller shall
     only be liable for any associated disadvantage suffered by the Buyer e.g,
     increased insurance premiums or the coat of interest until such time as the
     claim is settled by the insurer.

     The Seller shall not be held liable for damage caused by slight negligence
     through a defect in an object of sale.


                                                                   Page 65 of 86



2.   Regardless of the issue of fault, this shall not prejudice the liability of
     the Seller in the event of malicious non-disclosure of a defect, or if the
     Seller has provided a guarantee or accepted a procurement risk or under the
     terms of the German Product Liability Act.

3.   Liability in the event of delay in delivery is governed, conclusively by
     the provisions of Section V.

4.   The legal representatives, vicarious agents and employees of the Seller
     shall bear no personal liability for damage caused by slight negligence on
     their part.

XI.  GENERAL

1.   Place of performance for the delivery of the objects of sale shall be the
     Seller's store.

2.   Should any provision of these terms and conditions and of the other
     agreements made be or become invalid, this shall not affect the validity of
     the contract in any other respect. The parties to the contract undertake to
     replace the invalid provision with a provision that accords most closely in
     terms of its commercial effects.

3.   The courts of Stuttgart shall have exclusive jurisdiction over all present
     and future claims arising from the business relationship between the Seller
     and the Buyer, including claims based on bills of exchange or checks. The
     Seller is also entitled to sue at the domicile of the Buyer.

4.   The contract is governed by German law. INCOTERMS 2000 shall apply. The
     United Nations convention on the International Sale of Goods dated April
     11, 1980 shall not apply.


                                                                   Page 66 of 86



                                    ANNEX 7

                   TRADE AND SERVICES MARKS LICENSING CLAUSE

1.   SMART MARKS

1.1  Smart gmbh is the proprietor of the  following trade and service  marks in
     the Contract Territory ("smart Marks") and their applications and
     registrations:

     Serial No. 74/734869 SMART (word mark) in international class 12

     Registration No. 2837584 SMART (word mark) in international class 37

     Registration No. 2927097 (smart-ring device) in international classes 12
     and 37

                                     (LOGO)

1.2  The smart Marks are and remain the property of smart gmbh. This property
     right shall neither be prejudiced by these Trade and Service Marks
     Licensing Clauses, nor by the Distributor Agreement, nor by any other
     agreement between the Parties.

1.3  The smart Marts are subject of these Trade and Service Marks Licensing
     Clauses, unless their protection period in the Contract Territory has
     expired, smart gmbh does not accept any liability for the validity of the
     smart Marks or the right to use the smart Marks, other than the use of the
     smart Marks on Contract Goods.

1.4  If smart gmbh adds, modifies, replaces or amends marks used by its
     distribution partners, Annex 8 will be amended accordingly.

2.   RIGHT OF USE OF SMART MARKS FOR CONTRACT GOODS

2.1  smart gmbh hereby grants to DISTRIBUTOR the right of non-exclusive use of
     the smart Marks for sales and services in relation to Contract Goods in the
     Contract Territory. During the duration of the Distributor Agreement smart
     gmbh warrants not to grant any third party any right to use the smart Marks
     in the context of sale and service of Contract Goods in the Contract
     Territory according to the Distributor Agreement.

2.2  DISTRIBUTOR is obliged to use the smart Marks on all documents,
     CI-elements, stationary and advertisements relating to Contract Goods.

2.3  The use of The smart Marks by DISTRIBUTOR shall be made only in the
     positions and in the form and manner determined by smart gmbh. Other marks
     or designations must not be used by DISTRIBUTOR in connection with Contract
     Goods.

2.4  If DISTRIBUTOR intends to perform other services than those set forth in
     the Distributor Agreement, the prior written approval of smart gmbh for the
     use of the smart Marks is required. The granting of such approval shall be
     in smart gmbh's sole discretion.

2.5  DISTRIBUTOR is permitted to use the word mark "smart" in the combination
     "smart USA" as an integral part of its company name. All such uses of the
     word Mark "smart" shall inure to the benefit of smart gmbh. DISTRIBUTOR
     hereby assigns and transfers to smart gmbh any and all rights arising of
     such uses except the rights granted by smart gmbh to DISTRIBUTOR under the
     Distributor Agreement.


                                                                   Page 67 of 86



2.6  The right to use the smart Marks extends to the use of the domain
     www.smartusa.com.  All such use shall inure to the benefit of smart gmbh.
     DISTRIBUTOR hereby assigns and transfers to smart gmbh any and all rights
     arising of such uses except the rights granted by smart gmbh to DISTRIBUTOR
     under the Distributor Agreement.

3.   RIGHT OF USE FOR OTHER PURPOSES

3.1  The use of the smart Marks in the distribution, presentation and in any
     type of advertising practiced by DISTRIBUTOR, such as prospectus, newspaper
     and magazine advertising or advertising by way of posters and any other
     outdoor advertising, must be in compliance with smart gmbh's corporate
     identity guidelines and is subject to regular consultations with smart
     gmbh. Any products with regard to the CI-elements must be procured from
     suppliers that have been recommended by smart gmbh.

3.2  The use of the smart Marks on or in connection with advertising gifts or
     any other general advertising and publicity, including advertising by
     expressly authorized business representatives of DISTRIBUTOR in the
     Contractual Territory, requires the prior written approval of smart gmbh.
     The granting of such consent shall be in smart gmbh's sole discretion.

3.3  The lay-out of any stationery, invoices, or other correspondence depicting
     the smart Marks rust be approved by smart gmbh.

4.   SCOPE OF USE

The use of smart Marks is restricted to the Contract Territory. In case smart
gmbh permits the distribution of Contract Goods into countries outside of the
Contract Territory, the Parties will conclude a separate prior agreement on the
use of the smart Marks in the export country.

5.   FEES AND DEFENSE OF SMART MARKS

5.1  The consideration for the use of the smart Marks is included in the
     purchase prices of Contract Goods and covered by the joint effort of the
     Parties to defend the smart Marks against any violations by third parties
     in the Contract Territory.

5.2  DISTRIBUTOR shall therefore monitor the market with regard to any
     infringements of the smart Marks by third parties and will immediately
     notify smart gmbh of any unlawful use. DISTRIBUTOR will assist smart gmbh
     to the best of its ability in the defense of the smart Marks. No litigation
     or controversy involving the smart Marks shall be initiated or settled
     Without the prior written approval of smart gmbh. All costs of litigation,
     negotiation or settlements concerning collisions of the smart Marks in and
     in relation with the Contract Territory which occur following the execution
     of the Distributor Agreement shall be borne, up to a maximum amount of EUR
     * per calendar year (i.e. EUR * for each Party), equally by the Parties.
     All costs Of litigation, negotiation or settlements concerning collisions
     of the smart Marks which have started before the execution of the
     Distribution Agreement shall he borne by smart gmbh.

     If costs of litigation, negotiation or settlements concerning collisions of
     the smart Marks in and in relation with the Contract Territory exceed EUR *
     per calendar year (i.e. EUR * for both DISTRIBUTOR and smart gmbh each),
     smart gmbh will bear those exceeding costs alone. DISTRIBUTOR shall have no
     rights and/or claims against smart gmbh, should the latter decide not to
     proceed against the breaches.

6.   NON-ASSIGNMENT OF RIGHTS TO THIRD PARTIES

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                                   Page 68 of 86



6.1  DISTRIBUTOR shall not be entitled to assign or transfer to any third
     parties any of the rights to use any of the smart Marks.

6.2  As an exception to Clause 6.1 above, DISTRIBUTOR shall with the prior
     written approval of smart gmbh in each single case authorize its Authorized
     Resellers to use the smart Marks in the due course of their business and in
     accordance with the rules and regulations laid down in these Trade and
     Service Marks Licensing Clauses. This right shall be effective during the
     term of the Distributor Agreement only and must be revocable at any time if
     the smart Marks are not used in accordance with the terms of the Trade and
     Service Marks Licensing Clauses.

6.3  DISTRIBUTOR shall include in all subcontracts provisions which will grant
     smart gmbh full protection as is provided for under these Trade and Service
     Marks Licensing Clauses and which will entitle smart gmbh to exercise all
     rights directly against such third parties to the extent that smart gmbh
     deems necessary. Upon third failure of DISTRIBUTOR to abide by the above
     regulations may be construed by smart gmbh as a gross breach of contract.

7.   TERMINATION

7.1  smart gmbh shall have the right to terminate DISTRIBUTOR'S right to use the
     smart Marks upon serving a written notice without need for any further
     legal or judicial action:

     (a)  if any smart Mark is used by DISTRIBUTOR in a manner contrary to these
          Trade and Service Marks Licensing Clauses and if DISTRIBUTOR does not
          discontinue such unauthorized use within thirty (30) days from receipt
          of a request from smart gmbh demanding discontinuation;

     (b)  if any smart Mark is used by any Authorized Reseller of DISTRIBUTOR in
          a manner contrary to this Agreement and/or the Authorized Reseller's
          agreement with DISTRIBUTOR if DISTRIBUTOR does not take action to stop
          such unauthorized use, where it is legally permitted to do so by
          Applicable Laws, within thirty (30) days from receipt of a request
          from smart gmbh demanding discontinuation; or

     (c)  if any situation happens that entitles smart gmbh to terminate the
          Distributor Agreement; or

     (d)  if smart gmbh is prohibited by a court of a competent jurisdiction to
          use the smart Marks in the Contract Territory.

7.2  DISTRIBUTOR'S right to use the smart Marks shall automatically terminate
     upon the expiration or termination of the Distributor Agreement. In
     particular, DISTRIBUTOR'S right to use the word Mark "smart" as an integral
     part of its company name or domain name shall automatically terminate upon
     termination of the Distributor Agreement. Notwithstanding, in case the
     Contract Goods are, upon termination of the Distributor Agreement, not
     resold to smart gmbh, but remain With DISTRIBUTOR according to Article 14.4
     (viii) and 14.4 (iv) of the Distributor Agreement, DISTRIBUTOR may have a
     limited right to use the smart Marks within a period not exceeding twelve
     (12) months and only in the context of the Contract Products.

8.   OBLIGATIONS UPON TERMINATION

8.1  Subject to the Distributor Agreement in the event of permission of
     DISTRIBUTOR'S right to use the smart Marks for any reason, DISTRIBUTOR
     shall cease to utilize the smart Marks for any purpose at any time after
     such termination and shall remove or have removed the smart Marks
     immediately from wherever they have been affixed by or on behalf of
     DISTRIBUTOR.

8.2  DISTRIBUTOR shall ensure that its Authorized Resellers and agents also
     adhere to the provisions of Clause 8.1 above.


                                                                   Page 69 of 86



                                    ANNEX 8

                            ALLOCATIONS OF FUNCTIONS

Draft Version, final version to be mutually agreed upon and added to the
Agreement by December 31, 2006

ALLOCATION OF WHOLESALE FUNCTIONS

*




















*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                              Pps 70 to 84 of 86



                                     ANNEX 9

                              TREAD Act Information

*

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.

                                                                   Page 85 of 86



                                    ANNEX 10

                  Field Actions, Service Campaigns and Recalls

*

*    Confidential portions omitted and filed separately with the Securities and
     Exchange Commission pursuant to an application for confidential treatment
     pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
     amended.


                                                                   Page 86 of 86

EX-10.9

                                                                    EXHIBIT 10.9

                              AMENDED AND RESTATED
                          PENSKE AUTOMOTIVE GROUP, INC.
                          2002 EQUITY COMPENSATION PLAN

1.   DEFINITIONS: As used herein, the following definitions shall apply:

     (a)  "Award" shall mean any stock option, stock appreciation right,
          restricted stock, restricted stock unit, performance share award or
          other stock-based award granted under the Plan.

     (b)  "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (c)  "Committee" shall mean a committee consisting of two or more members
          of the Board of Directors of the Corporation, each of whom shall be an
          "outside director" as defined under Section 162(m) of the Code, and
          the Treasury Regulations thereunder, as appointed by the Board of
          Directors of the Corporation to administer the Plan. The Committee
          shall initially consist of the Corporation's Compensation and
          Management Development Committee.

     (d)  "Corporation" shall mean Penske Automotive Group, Inc., a Delaware
          corporation, or any successor thereof.

     (e)  "Discretion" shall mean in the sole discretion of the Committee, with
          no requirement whatsoever that the Committee follow past practices,
          act in a manner consistent with past practices, or treat a Participant
          (as hereinafter defined) in a manner consistent with the treatment
          afforded other Participants with respect to the Plan.

     (f)  "Incentive Option" shall mean an option to purchase Common Stock of
          the Corporation which meets the requirements set forth in the Plan and
          also meets the definition of an incentive stock option set forth in
          Section 422 of the Code.

     (g)  "Nonqualified Option" shall mean an option to purchase Common Stock of
          the Corporation which meets the requirements set forth in the Plan but
          does not meet the definition of an incentive stock option set forth in
          Section 422 of the Code.

     (h)  "Other stock-based award" shall mean any right granted under Paragraph
          20 of the Plan.

     (i)  "Participant" shall mean any individual designated by the Committee
          under Paragraph 6 for participation in the Plan who is (i) a key
          employee (including an officer or director who is also a key employee)
          of the Corporation or any Subsidiary, (ii) a director who is not an
          employee of the Corporation or any Subsidiary (hereinafter sometimes
          referred to as an "outside director"), and (iii) a consultant or
          advisor of the Corporation or any Subsidiary.


                                        1



     (j)  "Performance share" shall mean a grant of Common Stock of the
          Corporation upon the attainment of one or more performance goals
          during a performance period established by the Committee, as provided
          in Paragraph 19.

     (k)  "Plan" shall mean this Amended and Restated Penske Automotive Group,
          Inc. 2002 Equity Compensation Plan which is a continuation of, but
          which amends and restates, the Penske Automotive Group, Inc. 2002
          Equity Compensation Plan (the "Predecessor Plan").

     (l)  "Restricted stock" shall mean a grant of Common Stock of the
          Corporation which is subject to restrictions against transfer,
          forfeiture and such other terms and conditions determined by the
          Committee, as provided in Paragraph 18.

     (m)  "Restricted stock unit" shall mean a grant of a right to obtain the
          value of a share of Common Stock of the Corporation which is subject
          to restrictions against transfer, forfeiture and such other terms and
          conditions determined by the Committee, as provided in Paragraph 18.

     (n)  "Stock appreciation right" shall mean a right to receive the
          appreciation in value, or a portion of the appreciation in value, of a
          specified number of shares of the Common Stock of the Corporation, as
          provided in Paragraph 12.

     (o)  "Subsidiary" shall mean any corporation, limited liability company,
          partnership or any other entity in which the Corporation owns,
          directly or indirectly, stock or other ownership interest therein,
          possessing more than twenty-five percent (25%) of the combined voting
          power of all classes of stock or other ownership interest.

2.   PURPOSE OF PLAN: The purpose of the Plan is to provide key employees
     (including officers and directors who are also key employees), outside
     directors, consultants and advisors of the Corporation and its Subsidiaries
     with incentives to make significant and extraordinary contributions to the
     long-term performance and growth of the Corporation and its Subsidiaries,
     to join the interests of key employees, outside directors, consultants and
     advisors with the interests of the shareholders of the Corporation, and to
     facilitate attracting and retaining key employees, outside directors,
     consultants and advisors with exceptional abilities.

3.   ADMINISTRATION: The Plan shall be administered by the Committee. Subject to
     the provisions of the Plan, the Committee shall determine, from those
     eligible to be Participants under the Plan, the persons to be granted
     Awards, the type of Awards and the amount of stock or rights covered by
     Awards to be granted to each such person, and the terms and conditions of
     any Awards. Subject to the provisions of the Plan, the Committee is
     authorized to interpret the Plan, to promulgate, amend and rescind rules
     and regulations relating to the Plan and to make all other determinations
     necessary or advisable for its administration. Interpretation and
     construction of any provision of the Plan by the Committee shall, unless
     otherwise determined by the Board of Directors of the Corporation, be final
     and conclusive. A majority of the Committee shall constitute a quorum, and
     the acts approved by a majority of the members present at any meeting at


                                        2



     which a quorum is present, or acts approved in writing by a majority of the
     Committee, shall be the acts of the Committee.

4.   INDEMNIFICATION OF COMMITTEE MEMBERS: In addition to such other rights of
     indemnification as they may have, the members of the Committee shall be
     indemnified by the Corporation against the reasonable expenses, including
     attorneys' fees, actually and necessarily incurred in connection with the
     defense of any action, suit or proceeding, or in connection with any appeal
     therein, to which they or any of them may be a party by reason of any
     action taken or failure to act under or in connection with the Plan or any
     Award granted hereunder, and against all amounts paid by them in settlement
     thereof (provided such settlement is approved by the Board of Directors of
     the Corporation) or paid by them in satisfaction of a judgment in any such
     action, suit or proceeding, except in relation to matters as to which it
     shall be determined in such action, suit or proceeding that such Committee
     member has acted in bad faith; provided, however, that within sixty (60)
     days after receipt of notice of institution of any such action, suit or
     proceeding, a Committee member shall offer the Corporation in writing the
     opportunity, at its own cost, to handle and defend the same.

5.   MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN: The maximum number of shares of
     stock which may be issued pursuant to Awards granted under the Plan or with
     respect to which Awards may be granted under the Plan shall not exceed in
     the aggregate 4,200,000 shares of Common Stock of the Corporation, which
     amount gives effect to the Company's June 1, 2006 two-for-one stock split
     (subject to further adjustments as provided in this Paragraph 5). Any
     shares that are delivered by the Corporation, and any awards or grants that
     are made by, or become obligations of, the Corporation through the
     assumption by the Corporation or a Subsidiary of, or in substitution for,
     outstanding awards or grants previously made by an acquired company, shall
     not be counted against the number of shares available under the Plan.
     Consistent with the purpose of the Plan and with a view to avoiding over or
     under counting, the Committee shall, in its Discretion, determine the
     number of shares to charge against the shares remaining available under the
     Plan as a result of the grant or settlement of Awards made under the Plan.
     If any shares covered by an Award or to which an Award relates are
     forfeited, or if an Award otherwise terminates without the delivery of
     shares or of other consideration, then the shares covered by such Award, or
     to which such Award relates, or the number of shares otherwise counted
     against the aggregate number of shares available under the Plan with
     respect to such Award, to the extent of any such forfeiture or termination,
     shall again be, or shall become, available for granting Awards under the
     Plan.

     The maximum number of shares with respect to which Awards may be granted to
     any Participant during the term of the Plan shall not exceed 1,000,000
     shares of Common Stock of the Corporation, which amount gives effect to the
     Company's June 1, 2006 two-for-one stock split (subject to further
     adjustments as provided in this Paragraph 5). All shares with respect to
     which an Award is granted shall be counted for purposes of this per-person
     share limitation, regardless of whether the Participant did not realize the
     benefit of the Award as a result of forfeiture, cancellation, expiration,
     termination or other event.


                                        3



     The number of shares with respect to each outstanding Award, the option
     price with respect to outstanding stock options, the grant value with
     respect to outstanding stock appreciation rights, the aggregate number of
     shares available at any time under the Plan, and the maximum number of
     shares with respect to which Awards may be made to an individual
     Participant during the term of the Plan shall be subject to such adjustment
     as the Committee, in its Discretion, deems appropriate to reflect such
     events as stock dividends, stock splits, recapitalizations, mergers,
     consolidations or reorganizations of or by the Corporation; provided,
     however, that no fractional shares shall be issued pursuant to the Plan, no
     Awards may be granted under the Plan with respect to fractional shares, and
     any fractional shares resulting from such adjustments shall be eliminated
     from any outstanding Award.

6.   PARTICIPANTS: The Committee shall determine and designate from time to
     time, in its Discretion, those key employees (including officers and
     directors who are also key employees), outside directors, consultants or
     advisors of the Corporation or any Subsidiary to receive Awards who, in the
     judgment of the Committee, are or will become responsible for the direction
     and financial success of the Corporation or any Subsidiary.

7.   WRITTEN AGREEMENT: Each Award granted under the Plan may be evidenced by a
     written agreement between the Corporation and the Participant which shall
     contain such provisions as may be approved by the Committee. Such
     agreements shall constitute binding contracts between the Corporation and
     the Participant, and every Participant, upon acceptance of such agreement,
     shall be bound by the terms and restrictions of the Plan and of such
     agreement. The terms of each such agreement shall be in accordance with the
     Plan, but the agreements may include such additional provisions and
     restrictions determined by the Committee, provided that such additional
     provisions and restrictions do not violate the terms of the Plan.

8.   ALLOTMENT OF SHARES: The Committee shall determine and fix, in its
     Discretion, the number of shares with respect to which each Participant may
     be granted Awards; provided, however, that no Incentive Option may be
     granted under the Plan to any one Participant which would result in the
     aggregate fair market value, determined as of the date the option is
     granted, of underlying stock with respect to which Incentive Options are
     exercisable for the first time by such Participant during any calendar year
     under any plan maintained by the Corporation (or any parent or Subsidiary
     of the Corporation) exceeding $100,000.

9.   STOCK OPTIONS: Subject to the terms of the Plan, the Committee, in its
     Discretion, may grant to Participants either Incentive Options,
     Nonqualified Options or any combination thereof; provided, however, that an
     Incentive Option may only be granted to an employee of the Corporation or a
     Subsidiary, and in the case of a Subsidiary only if (i) the Subsidiary is
     treated as a disregarded entity owned by the Corporation, or (ii) the
     Subsidiary is a corporation (or is treated as a disregarded entity owned by
     a corporation) fifty percent or more of the combined voting power of all
     classes of stock of which is owned, directly or indirectly, by the
     Corporation. Each option granted under the Plan shall designate the number
     of shares covered thereby, if any, with respect to which the


                                        4



     option is an Incentive Option, and the number of shares covered thereby, if
     any, with respect to which the option is a Nonqualified Option.

10.  STOCK OPTION PRICE: Subject to the rules set forth in this Paragraph 10, at
     the time any stock option is granted, the Committee, in its Discretion,
     shall establish the price per share for which the shares covered by the
     option may be purchased. With respect to an Incentive Option, such option
     price shall not be less than 100% of the fair market value of the stock on
     the date on which such option is granted; provided, however, that with
     respect to an Incentive Option granted to a Participant who at the time of
     the grant owns (after applying the attribution rules of Section 424(d) of
     the Code) more than 10% of the total combined voting stock of the
     Corporation or of any parent or Subsidiary, the option price shall not be
     less than 110% of the fair market value of the stock on the date such
     option is granted. With respect to a Nonqualified Option, the option price
     shall not be less than 100% of the fair market value of the stock on the
     date such option is granted. Fair market value of a share shall be
     determined by the Committee. The option price shall be subject to
     adjustment in accordance with the provisions of Paragraph 5 of the Plan.

11.  PAYMENT OF STOCK OPTION PRICE: At the time of the exercise in whole or in
     part of any stock option granted hereunder, payment of the option price in
     full in cash or, with the consent of the Committee, in Common Stock of the
     Corporation shall be made by the Participant for all shares so purchased.
     In the Discretion of, and subject to such conditions as may be established
     by, the Committee, payment of the option price may also be made by the
     Corporation retaining from the shares to be delivered upon exercise of the
     stock option that number of shares having a fair market value on the date
     of exercise equal to the option price of the number of shares with respect
     to which the Participant exercises the option. In the Discretion of the
     Committee, a Participant may exercise an option, if then exercisable, in
     whole or in part, by delivery to the Corporation of written notice of the
     exercise in such form as the Committee may prescribe, accompanied by
     irrevocable instructions to a stock broker to promptly deliver to the
     Corporation full payment for the shares with respect to which the option is
     exercised from the proceeds of the stock broker's sale of or loan against
     some or all of the shares (a "Regulation T Stock Option Exercise"). In the
     event the Corporation then has in effect a stock repurchase program, in its
     Discretion and subject to such terms and conditions as it may impose, the
     Committee may permit a Participant to exercise an option and pay the option
     price by delivering to the Corporation a written notice of exercise which
     includes a request that the Corporation repurchase (and retain the
     repurchase price of) that number of the option shares having a fair market
     value on the date of exercise equal to the option price of the number of
     shares with respect to which the Participant exercises the option. Such
     payment may also be made in such other manner as the Committee determines
     is appropriate, in its Discretion. No Participant shall have any of the
     rights of a shareholder of the Corporation under any stock option until the
     actual issuance of shares to said Participant, and prior to such issuance
     no adjustment shall be made for dividends, distributions or other rights in
     respect of such shares, except as provided in Paragraph 5.

12.  STOCK APPRECIATION RIGHTS: Subject to the terms of the Plan, the Committee
     may grant stock appreciation rights to Participants either in conjunction
     with, or


                                        5



     independently of, any stock options granted under the Plan. A stock
     appreciation right granted in conjunction with a stock option may be an
     alternative right wherein the exercise of the stock option terminates the
     stock appreciation right to the extent of the number of shares purchased
     upon exercise of the stock option and, correspondingly, the exercise of the
     stock appreciation right terminates the stock option to the extent of the
     number of shares with respect to which the stock appreciation right is
     exercised. Alternatively, a stock appreciation right granted in conjunction
     with a stock option may be an additional right wherein both the stock
     appreciation right and the stock option may be exercised. A stock
     appreciation right may not be granted in conjunction with an Incentive
     Option under circumstances in which the exercise of the stock appreciation
     right affects the right to exercise the Incentive Option or vice versa,
     unless the stock appreciation right, by its terms, meets all of the
     following requirements:

     (a)  the stock appreciation right will expire no later than the Incentive
          Option;

     (b)  the stock appreciation right may be for no more than the difference
          between the option price of the Incentive Option and the fair market
          value of the shares subject to the Incentive Option at the time the
          stock appreciation right is exercised;

     (c)  the stock appreciation right is transferable only when the Incentive
          Option is transferable, and under the same conditions;

     (d)  the stock appreciation right may be exercised only when the Incentive
          Option is eligible to be exercised; and

     (e)  the stock appreciation right may be exercised only when the fair
          market value of the shares subject to the Incentive Option exceeds the
          option price of the Incentive Option.

     Upon exercise of a stock appreciation right, a Participant shall be
     entitled to receive, without payment to the Corporation (except for
     applicable withholding taxes), an amount equal to the excess of or, in the
     Discretion of the Committee, a portion of the excess of (i) the then
     aggregate fair market value of the number of shares with respect to which
     the Participant exercises the stock appreciation right, over (ii) the
     aggregate fair market value of such number of shares at the time the stock
     appreciation right was granted. This amount shall be payable by the
     Corporation, in the Discretion of the Committee, in cash, in shares of
     Common Stock of the Corporation, in other property or any combination
     thereof.

13.  GRANTING AND EXERCISE OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS:
     Subject to the provisions of this Paragraph 13, each stock option and stock
     appreciation right granted hereunder shall be exercisable at any such time
     or times or in any such installments as may be determined by the Committee
     at the time of the grant; provided, however, that the aggregate fair market
     value (determined at the time the option is granted) of the stock with
     respect to which Incentive Options are exercisable for the first time by a
     Participant during any calendar year shall not exceed $100,000. A
     Participant may exercise a stock option or stock appreciation right, if
     then


                                        6



     exercisable, in whole or in part, by delivery to the Corporation of written
     notice of the exercise, in such form as the Committee may prescribe,
     accompanied, in the case of a stock option, by payment for the shares with
     respect to which the stock option is exercised as provided in Paragraph 11
     (unless the Committee, in its Discretion, permits a cashless form of option
     exercise permitted by Paragraph 11). Except as provided in Paragraph 17,
     stock options and stock appreciation rights may be exercised only while the
     Participant is an employee, outside director, consultant or advisor, as the
     case may be, of the Corporation or a Subsidiary. Successive stock options
     and stock appreciation rights may be granted to the same Participant,
     whether or not the stock option(s) and stock appreciation right(s)
     previously granted to such Participant remain unexercised. A Participant
     may exercise a stock option or stock appreciation right, if then
     exercisable, notwithstanding that stock options and stock appreciation
     rights previously granted to such Participant remain unexercised.

14.  NON-TRANSFERABILITY OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS: No
     stock option or stock appreciation right granted under the Plan to a
     Participant shall be transferable by such Participant otherwise than by
     will, or by the laws of descent and distribution, and stock options and
     stock appreciation rights shall be exercisable, during the lifetime of the
     Participant, only by the Participant. Notwithstanding the foregoing, in its
     Discretion and subject to such terms and conditions as it may prescribe,
     the Committee may permit a Participant to transfer a Nonqualified Option or
     a related or independently granted stock appreciation right.

15.  TERM OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS: If not sooner
     terminated, each stock option and stock appreciation right granted
     hereunder shall expire not more than ten (10) years from the date of the
     granting thereof; provided, however, that with respect to an Incentive
     Option granted to a Participant who, at the time of the grant, owns (after
     applying the attribution rules of Section 424(d) of the Code) more than 10%
     of the total combined voting stock of all classes of stock of the
     Corporation or any parent or Subsidiary, such option shall expire not more
     than five (5) years after the date of granting thereof.

16.  CONTINUATION OF EMPLOYMENT: The Committee may require, in its Discretion,
     that any Participant under the Plan to whom a stock option or a stock
     appreciation right shall be granted shall agree in writing as a condition
     of the granting of such stock option or stock appreciation right to remain
     an employee, consultant, advisor or outside director of the Corporation or
     a Subsidiary, as the case may be, for a designated minimum period from the
     date of the granting of such stock option or stock appreciation right as
     shall be fixed by the Committee, and the Committee may further require, in
     its Discretion, that any Participant agree in writing to comply with any
     confidentiality, non-solicitation, non-competition and non-disparagement
     provisions and covenants that the Committee may require as a condition
     precedent to the exercise of a stock option or a stock appreciation right.

17.  TERMINATION OF EMPLOYMENT: If the employment of an employee Participant
     terminates, if the consultancy or advisorship of a consultant or advisor
     Participant terminates, or if an outside director Participant ceases to be
     a director (hereinafter


                                        7



     collectively referred to as a "termination of employment"), the Committee
     may, in its Discretion, permit the exercise of stock options and stock
     appreciation rights granted to such Participant (a) for a period not to
     exceed three months following such termination of employment (or one year
     following termination of employment on account of the Participant's death
     or permanent disability) with respect to Incentive Options or related stock
     appreciation rights, and (b) for a period not to extend beyond the
     expiration date with respect to Nonqualified Options or related or
     independently granted stock appreciation rights. In no event, however,
     shall a stock option or a stock appreciation right be exercisable
     subsequent to its expiration date. A stock option or stock appreciation
     right may only be exercised after a Participant's termination of employment
     to the extent exercisable on the date of termination of employment;
     provided, however, that if the termination of employment is due to the
     Participant's death, permanent disability or retirement at a retirement age
     permitted under the Corporation's or Subsidiary's retirement plan or
     policies, or if the termination of employment results from action by the
     Corporation or a Subsidiary without cause or from an agreement between the
     Corporation or a Subsidiary and the Participant (hereinafter collectively
     referred to as a "qualifying termination of employment"), the Committee, in
     its Discretion, may permit all or part of the stock options and stock
     appreciation rights granted to such Participant to thereupon become
     exercisable in full or in part. For purposes of this Paragraph 17 and any
     other provision of the Plan where the term is used, the Committee's
     definition of "cause" shall be final and conclusive.

18.  RESTRICTED STOCK OR RESTRICTED STOCK UNITS: Subject to the terms of the
     Plan, the Committee may award Participants shares of restricted stock
     and/or the Committee may grant Participants restricted units with respect
     to a specified number of shares of stock. All shares of restricted stock
     and all restricted stock units granted to Participants under the Plan shall
     be subject to the following terms and conditions (and to such other terms
     and conditions prescribed by the Committee):

     (a)  At the time of each award of restricted shares or restricted stock
          units, there shall be established for the shares or units a restricted
          period, which period may differ among Participants and may have
          different expiration dates with respect to portions of shares or units
          covered by the same award.

     (b)  Shares of restricted stock or restricted stock units awarded to
          Participants may not be sold, assigned, transferred, pledged,
          hypothecated or otherwise encumbered during the restricted period
          applicable to such shares or units. Except for such restrictions on
          transfer, a Participant may be provided all of the rights of a
          shareholder in respect of restricted shares including, but not limited
          to, the right to receive dividends on, and the right to vote, the
          shares. A Participant shall have no ownership interest in shares of
          stock with respect to which restricted stock units are granted;
          provided, however, that the Committee may, in its Discretion, permit
          payment to such Participant of dividend equivalents on such units
          equal to the amount of dividends, if any, which are paid on that
          number of shares with respect to which the restricted stock units are
          granted.


                                        8



     (c)  If there is a termination of employment of a Participant, all shares
          or units theretofore awarded to the Participant which are still
          subject to the restrictions imposed by Paragraph 18(b) shall upon such
          termination of employment be forfeited and transferred back to the
          Corporation, without payment of any consideration by the Corporation;
          provided, however, that in the event of a qualifying termination of
          employment, the Committee may, in its Discretion, release some or all
          of the shares or units from the restrictions.

     (d)  Shares of restricted stock granted under the Plan may be evidenced in
          such manner as the Committee may deem appropriate, including, without
          limitation, book-entry registration or issuance of stock certificates.
          If stock certificates are issued in respect of shares of restricted
          stock, such certificates shall be registered in the name of the
          Participant, deposited with the Corporation or its designee, together
          with a stock power endorsed in blank, and, in the Discretion of the
          Committee, a legend shall be placed upon such certificates reflecting
          that the shares represented thereby are subject to restrictions
          against transfer and forfeiture.

     (e)  At the expiration of the restricted period applicable to restricted
          shares, the Corporation shall deliver to the Participant or the legal
          representative of the Participant's estate stock certificates for such
          shares. If stock certificates were previously issued for the shares
          and a legend has been placed on such certificates, the Corporation
          shall cause such certificates to be reissued without the legend.

     (f)  At the expiration of the restricted period applicable to restricted
          stock units, the Corporation shall pay to the Participant an amount
          equal to the then fair market value of that number of shares to which
          such restricted stock units relate. In the Discretion of the
          Committee, such amount may be paid in cash, stock, other property or
          any combination thereof.

     In the case of events such as stock dividends, stock splits,
     recapitalizations, mergers, consolidations or reorganizations of or by the
     Corporation, any stock, securities or other property which a Participant
     receives or is entitled to receive by reason of his ownership of restricted
     shares shall, unless otherwise determined by the Committee, be subject to
     the same restrictions applicable to the restricted shares.

19.  PERFORMANCE SHARES: The Committee may grant to a Participant the right to
     obtain performance shares subject to the following terms and conditions:

     (a)  The Participant's right to obtain performance shares shall be subject
          to attainment of one or more performance goals over a performance
          period prescribed by the Committee.

     (b)  The performance goal applicable to an award to a Participant of the
          right to obtain performance shares shall be based upon free cash flow,
          cash flow return on investment, stock price, market share, sales,
          revenues, earnings per share, return on equity, total stockholder
          return, costs, net income, working capital turnover,


                                        9



          inventory or receivable turnover and/or margins of the Corporation, a
          Subsidiary, or a division or unit thereof. The specific targets and
          other details of the performance goal shall be established by the
          Committee in its Discretion. A performance goal must, however, be
          objective so that a third party with knowledge of the relevant facts
          could determine whether the goal has been attained.

     (c)  The performance goal applicable to an award to a Participant of the
          right to obtain performance shares shall be established by the
          Committee in writing at any time during the period beginning on the
          date of the award and ending on the earlier of (i) ninety (90) days
          after commencement of the performance period applicable to the award,
          or (ii) expiration of the first 25% of the performance period;
          provided, however, that there must be substantial uncertainty whether
          a performance goal will be attained at the time it is established by
          the Committee.

     (d)  The performance goal established by the Committee must prescribe an
          objective formula or standard, that could be applied by a third party
          having knowledge of the relevant performance results, to compute the
          number of performance shares issuable to the Participant if the goal
          is attained.

     (e)  Unless otherwise determined by the Committee in the case of a
          Participant who dies or becomes permanently disabled, performance
          shares shall be issued to a Participant only after (i) expiration of
          the performance period and attainment of the performance goal
          applicable to the award, and (ii) issuance of a written certification
          by the Committee (including approved minutes of the meeting of the
          Committee at which the certification is made) that the performance
          goal and any other material terms of the award have been attained or
          satisfied.

     (f)  No Participant shall have any of the rights of a shareholder of the
          Corporation in respect of the shares covered by a performance share
          award until the actual issuance of the shares to said Participant and,
          prior to such issuance, no adjustments shall be made for dividends,
          distributions or other rights in respect of such shares, except as
          provided in Paragraph 5.

     (g)  In its Discretion and subject to such terms and conditions as it may
          impose, including terms and conditions intended to comply with Section
          409A of the Code, the Committee may permit a Participant to elect to
          defer receipt of performance shares to a time later than the time the
          shares otherwise would be issued to the Participant. In such event,
          the Committee may, in its Discretion, provide for the payment by the
          Corporation of a dividend equivalent or interest at a rate determined
          by the Committee.

     (h)  In the Discretion of the Committee, in lieu of settling a performance
          share award by issuance of shares of Common Stock of the Corporation
          to a Participant, all or a portion of the award may be settled by
          payment of cash or other property to the Participant in an amount or
          having a value equal to the then value of the otherwise issuable
          shares; provided, however, that the amount of cash and the value of
          any


                                       10



          other property paid to any Participant during any calendar year in
          settlement of a performance share award shall not exceed $5.0 Million.

     (i)  Unless otherwise determined by the Committee, performance shares or
          rights therein awarded to a Participant may not be sold, assigned,
          transferred, pledged, hypothecated or otherwise encumbered by the
          Participant at any time before actual issuance of the shares to the
          Participant.

     (j)  In its Discretion, the Committee may subject a performance share award
          to a Participant to any other terms or conditions not inconsistent
          with the foregoing, including, without limitation, a requirement that
          the Participant remain an employee of the Corporation or a Subsidiary
          (including at or above a specified salary grade), or that the
          Participant remain a consultant, advisor or outside director of the
          Corporation or a Subsidiary, for the entire performance period
          applicable to the award.

     Performance share awards under the Plan are intended to constitute
     qualified performance-based compensation for purposes of Section
     162(m)(4)(C) of the Code and the Treasury Regulations thereunder, and the
     provisions of this Paragraph 19 (and the other provisions of the Plan
     relating to performance share awards) shall be interpreted and administered
     to effectuate that intent. Moreover, the Committee may revise or modify the
     terms of an outstanding performance share award to the extent the Committee
     determines, in its Discretion, that such revision or modification is
     necessary for such award to constitute qualified performance-based
     compensation.

20.  OTHER STOCK-BASED AWARDS: The Committee may grant to Participants such
     other awards that are denominated or payable in, valued in whole or in part
     by reference to, or otherwise based on or related to, shares of Common
     Stock of the Corporation as are deemed by the Committee, in its Discretion,
     to be consistent with the purposes of the Plan; provided, however, that
     such grants must comply with applicable law.

21.  INVESTMENT PURPOSE: If the Committee, in its Discretion, determines that as
     a matter of law such procedure is or may be desirable, it may require a
     Participant, upon any acquisition of stock hereunder and as a condition to
     the Corporation's obligation to deliver certificates representing such
     shares, to execute and deliver to the Corporation a written statement in
     form satisfactory to the Committee, representing and warranting that the
     Participant's acquisition of shares of stock shall be for such person's own
     account, for investment and not with a view to the resale or distribution
     thereof and that any subsequent offer for sale or sale of any such shares
     shall be made either pursuant to (a) a Registration Statement on an
     appropriate form under the Securities Act of 1933, as amended (the
     "Securities Act"), which Registration Statement has become effective and is
     current with respect to the shares being offered and sold, or (b) a
     specific exemption from the registration requirements of the Securities
     Act, but in claiming such exemption the Participant shall, prior to any
     offer for sale or sale of such shares, obtain a favorable written opinion
     from counsel for or approved by the Corporation as to the availability of
     such exemption. The Corporation may endorse an appropriate legend referring
     to the


                                       11



     foregoing restriction upon the certificate or certificates representing any
     shares issued or transferred to the Participant under the Plan.

22.  RIGHTS TO CONTINUED EMPLOYMENT: Nothing contained in the Plan or in any
     Award granted pursuant to the Plan, nor any action taken by the Committee
     hereunder, shall confer upon any Participant any right with respect to
     continuation of employment or service as an employee, consultant, advisor
     or outside director of the Corporation or a Subsidiary nor interfere in any
     way with the right of the Corporation or a Subsidiary to terminate such
     person's employment or service at any time with or without cause.

23.  WITHHOLDING PAYMENTS: If, upon the grant, exercise, release of restrictions
     or settlement of or in respect of an Award, or upon any other event or
     transaction under or relating to the Plan, there shall be payable by the
     Corporation or a Subsidiary any amount for income or employment tax
     withholding, in the Committee's Discretion, either the Corporation shall
     appropriately reduce the amount of stock, cash or other property to be paid
     to the Participant or the Participant shall pay such amount to the
     Corporation or Subsidiary to enable it to pay or to reimburse it for paying
     such income or employment tax withholding. The Committee may, in its
     Discretion, permit Participants to satisfy such withholding obligations, in
     whole or in part, by electing to have the amount of Common Stock delivered
     or deliverable by the Corporation in respect of an Award appropriately
     reduced, or by electing to tender Common Stock back to the Corporation
     subsequent to receipt of such stock in respect of an Award. The Corporation
     or any of its Subsidiaries shall also have the right to withhold the amount
     of such taxes from any other sums or property due or to become due from the
     Corporation or any of its Subsidiaries to the Participant upon such terms
     and conditions as the Committee shall prescribe. The Corporation may also
     defer issuance of stock under the Plan until payment by the Participant to
     the Corporation or any of its Subsidiaries of the amount of any such tax.
     In the case of a Regulation T Stock Option Exercise, the Committee may in
     its Discretion permit the Participant to irrevocably instruct a stock
     broker to promptly deliver to the Corporation an amount (in addition to the
     option exercise price) equal to any withholding tax owing in respect of
     such option exercise from the proceeds of the stock broker's sale of or
     loan against some or all of the shares. In the event the Corporation then
     has in effect a stock repurchase program, in its Discretion and subject to
     such terms and conditions as it may impose, the Committee may permit
     Participants to satisfy their withholding tax obligations by requesting
     that the Corporation repurchase (and retain the repurchase price of) that
     number of shares issuable or issued under the Plan having a then fair
     market value equal to the amount of withholding tax due. The Committee may
     make such other arrangements with respect to income or employment tax
     withholding as it shall determine.

24.  CHANGE IN CONTROL: Notwithstanding any other provision of the Plan or any
     provision of a grant or award agreement, in the event the Committee
     determines that there has been or will be a change in control of the
     Corporation or of any Subsidiary, the Committee may, without the consent of
     the holder, provide for any treatment of outstanding Awards which it
     determines, in its Discretion, to be appropriate. Such treatment may
     include, without limitation, acceleration of vesting of stock options and


                                       12



     stock appreciation rights, release of restrictions applicable to restricted
     stock or restricted stock units, or deeming performance share awards to
     have been earned. In determining whether there has been or will be a change
     in control of the Corporation or of any Subsidiary, the Committee may
     utilize a definition it deems appropriate of a change in control contained
     in any existing agreement between the Corporation or a Subsidiary and one
     of its senior executives.

25.  SECTION 409A: To the extent applicable, this Plan is intended to comply
     with the provisions of Section 409A of the Code. This Plan shall be
     administered in a manner consistent with the intent.

26.  EFFECTIVENESS OF PLAN: The Plan shall be effective on the date the Board of
     Directors of the Corporation adopts the Plan and shall apply with respect
     to Awards granted on or after such date; provided, however, that the terms
     of the Predecessor Plan shall continue to apply to Awards granted prior to
     the date the Board of Directors of the Corporation adopts the Plan.

27.  TERMINATION, DURATION AND AMENDMENTS OF PLAN: The Plan may be abandoned or
     terminated at any time by the Board of Directors of the Corporation. Unless
     sooner terminated by the Board of Directors, the Plan shall terminate on
     the date ten (10) years after the adoption by the Board of Directors of the
     Predecessor Plan, and no Awards may be granted thereafter. The termination
     of the Plan shall not affect the validity of any Award outstanding on the
     date of termination.

     For the purpose of conforming to any changes in applicable law or
     governmental regulations, or for any other lawful purpose, the Board of
     Directors of the Corporation or the Committee shall have the right, without
     approval of the shareholders of the Corporation, to amend or revise the
     terms of the Plan at any time; provided, however, that no such amendment or
     revision shall (i) with respect to the Plan, increase the maximum number of
     shares in the aggregate which are subject to the Plan or with respect to
     which Awards may be made to individual Participants (subject, however, to
     the provisions of Paragraph 5), materially change the class of persons
     eligible to be Participants under the Plan or establish additional and
     different business criteria on which performance share goals are based
     without approval or ratification of the shareholders of the Corporation; or
     (ii) with respect to an Award previously granted under the Plan, except as
     otherwise specifically provided in the Plan, alter or impair any such Award
     without the consent of the holder thereof.

As adopted by the Board of Directors on October 25, 2007.


                                       13

EX-10.11

                                                              CONFIDENTIAL DRAFT

                                                                   EXHIBIT 10.11

                              AMENDED AND RESTATED
                          PENSKE AUTOMOTIVE GROUP, INC.
                     NON-EMPLOYEE DIRECTOR COMPENSATION PLAN

                                OCTOBER 25, 2007

I.   INTRODUCTION AND DEFINITIONS

     A.   Purpose. The purpose of this Plan is to promote the interests of
          Penske Automotive Group, Inc. and its affiliates and stockholders by
          helping to attract and retain highly qualified non-employee directors.
          This Plan amends and restates the Amended and Restated United Auto
          Group, Inc. Non-Employee Director Compensation Plan adopted by the
          Board of Directors on December 10, 2003 and previously amended and
          restated as of October 20, 2004.

     B.   Definitions. Unless the context clearly indicates otherwise, the
          following terms, when used in the Plan, shall have the meanings set
          forth in this section:

          1.   "Board" shall mean the Board of Directors of the Company.

          2.   "Code" shall mean the Internal Revenue Code of 1986, as amended.

          3.   "Company" shall mean Penske Automotive Group, Inc., a Delaware
               corporation, and any successor corporation.

          4.   "Director" shall mean a member of the Board.

          5.   "Exchange Act" shall mean the Securities Exchange Act of 1934, as
               amended.

          6.   "Non-Employee Director" shall mean a Director who is not also a
               salaried employee of the Company or any of its subsidiaries.

          7.   "Payment Date" shall mean a date selected by the Board which
               falls within the first quarter of the calendar year following the
               calendar year in which a Non-Employee Director served on the
               Board.

          8.   "Plan" shall mean this Amended and Restated Penske Automotive
               Group, Inc. Non-Employee Director Compensation Plan, as set forth
               herein and as it may be amended from time to time.

          9.   "Stock" shall mean shares of the Voting Common Stock of the
               Company, par value $0.0001 per share.

          10.  "Termination of Service" means a Non-Employee Director's
               separation from service as defined under Section 409A of the
               Code.


                                       1



II.  NON-EMPLOYEE DIRECTOR FEES

     A.   Fee. Each Non-Employee Director shall be paid for each year or partial
          year of service a fee of $40,000 or, in the event the Director is a
          member of the Audit Committee of the Board, $45,000 (pro rated for
          partial years) (the "Fee"). The Fee may reduced, increased or
          otherwise amended from time to time by the Board and all references to
          the Fee shall include such amounts as so amended.

     B.   Manner of Payment. The Non-Employee Director must annually elect in
          advance whether to receive the Fee in the form of cash or Stock. This
          election must be received by the Company on or before December 31 (the
          "Election Date") of the preceding year. Once made, this election is
          irrevocable for such year.

     C.   Payment Date. That portion of the Fee not deferred shall be paid on
          the Payment Date. If a Non-Employee Director fails to elect the manner
          of payment of the Fee by the Election Date, or if a Non-Employee
          Director's election to receive the Fee in Stock has not been
          previously approved by the Board, then that Non-Employee Director's
          Fee shall be payable in Cash.

     D.   Election to Receive Fee in Stock

          1.   A Non-Employee Director's election to receive the Fee in Stock
               must be approved by the Board prior to the Payment Date.

          2.   If a Non-Employee Director's election is approved by the Board,
               then the Non-Employee Director's Fee, if not deferred, shall be
               paid in shares of Stock or, if deferred, then payable in Units,
               the number of which will be determined as follows: by dividing
               the Fee, (or the prorated portion for partial years) by the
               average of the closing market price of the Stock as reported on
               the New York Stock Exchange for the 20 trading days immediately
               preceding and including the Payment Date.

          3.   Such shares of Stock shall not be subject to any transfer or
               resale restrictions other than those applicable under federal and
               state securities laws.

          4.   If a Non-Employee Director becomes a member of the Board after
               the Election Date, then such Director may elect to receive the
               Fee in the form of Stock on the Payment Date by making such
               election within 30 days after becoming a Director, provided that
               such election shall be subject to approval by the Board.

III. DEFERRAL OF NON-EMPLOYEE DIRECTOR FEE.

     A.   Introduction: Non-Employee Directors, on an individual basis, may
          defer all or part of their Fee until such time as their service on the
          Board terminates.


                                       2



     B.   Manner of Deferral: On or before the Election Date, a Non-Employee
          Director may elect to defer all or a portion of the Fee (the "Deferred
          Fee"); provided, that a Non-Employee Director who first commences
          service on the Board during the course of a calendar year, rather than
          prior to such year, may make such election to defer with respect to
          such year not later than the 30th day following the date on which the
          Non-Employee Director first commences service, and such deferral
          election shall be effective with regard to Fees earned during such
          year. Such election shall be irrevocable for the period of service for
          which the Fee is payable. The Deferred Fee will be credited to the
          Non-Employee Director's deferred fees account (the "Deferred Fees
          Account") as of the Payment Date and accounted for pursuant to the
          manner of payment elected by the Non-Employee Director until fully
          paid out.

     C.   Deferral of Stock: If a Non-Employee Director elects to receive the
          Fee in Stock, the payment of which has been deferred in whole or in
          part, then the Non-Employee Director's Deferred Fees Account will be
          credited with the number of stock units ("Units"), calculated to the
          nearest thousandths of a Unit, determined by dividing the amount of
          the Deferred Fee by the average of the closing market price of the
          Stock as reported on the New York Stock Exchange for the 20 trading
          days immediately preceding and including the Payment Date. The
          Non-Employee Director's Deferred Fees Account will also be credited
          with the number of Units determined by multiplying the number of Units
          in the Non-Employee Director's Deferred Fees Account by any per share
          cash dividends declared by the Company on its Stock and dividing the
          product by the closing market price of the Stock as reported on the
          New York Stock Exchange on the related dividend payment date, and also
          by multiplying the number of Units in the Non-Employee Director's
          Deferred Fees Account by any stock dividends declared by the Company
          on its Stock.

     D.   Deferral of Cash: If a Non-Employee Director elects to receive the Fee
          in cash, the payment of which has been deferred in whole or in part,
          then the Non-Employee Director's Deferred Fees Account (a) will be
          credited on the Payment Date in an amount equal to the Deferred Fee,
          and (b) will be credited as of the end of each calendar quarter
          additional compensation equal to interest on the amounts credited to
          such account from the date credited (or the end of the preceding
          quarter, if later) to the end of such quarter at the rate of interest
          payable on the last issue of U.S. 90-day Treasury Bills made prior to
          the end of such quarter, as published in the Wall Street Journal.

     E.   Recapitalization: If, as a result of a recapitalization of the Company
          (including stock splits), the Company's outstanding shares of Stock
          shall be changed into a greater or smaller number of shares, the
          number of Units credited to a Non-Employee Director's Deferred Fees
          Account shall be appropriately adjusted on the same basis.


                                       3



F.   Distribution of Deferred Fees.

     1.   Upon a Non-Employee Director's Termination of Service, the
          Non-Employee Director shall receive the amount credited to his
          Deferred Fees Account in five substantially equal annual installments
          commencing on the first Payment Date following the Non-Employee
          Director's Termination of Service (the "Installment Payment Date"),
          unless prior to the time specified in Section III.B, the Non-Employee
          Director requests distributions in a different time or form.

     2.   Survivor Payout Elections. In the event of a Non-Employee Director's
          death prior to receiving all entitled deferred payments, the value of
          the Deferred Fees Account on the date of the Non-Employee Director's
          death shall be determined and paid to the beneficiary(s) designated by
          the Non-Employee Director (or, failing such designation, to the
          Non-Employee Director's estate) in accordance with the installment
          schedule set forth in Section III, F(1) above, unless the Non-Employee
          Director, prior to time specified in Section III.B, has elected to
          have the remaining payments made in a single lump sum upon his death,
          in which case a lump sum payment will be made to the designated
          beneficiaries or the Non-Employee Director's estate as soon as
          practicable after the Non-Employee Director's death.

     3.   Form of Payment Elections.

          (a)  All installment payments from the Non-Employee Director's
               Deferred Fees Account shall be in the form of cash.

          (b)  Notwithstanding the preceding paragraph, upon request of the
               Non-Employee Director, and subject to the Board's approval, a
               Non-Employee Director, former Non-Employee Director, or deceased
               Non-Employee Director's beneficiary or legal representative may
               elect at anytime to have any or all payouts, or remaining
               payouts, of the Non-Employee Director's Deferred Fees Account
               paid out in cash or in shares of the Stock.

     4.   Determination of Amount of Cash Installment Payments.

          (a)  The amount of the first cash installment payment shall be a
               fraction of the Cash and/or Units in the Non-Employee Director's
               Deferred Fees Account on the first Installment Payment Date, the
               numerator of which is one and the denominator of which is the
               total number of installments elected. Each subsequent installment
               shall be calculated in the same manner as of each subsequent
               Installment Payment Date except that the denominator shall be
               reduced by the number of installments which have been previously
               paid.


                                       4



          (b)  The amount of cash payable for deferred fees accounted for as
               Units based on the Company's Stock value will be paid as
               described above, based on the number of Units in the Non-Employee
               Director's Deferred Fees Account on the Installment Payment Date
               multiplied by the closing market price of the Company's Stock as
               reported on the New York Stock Exchange on the last trading day
               preceding the Installment Payment Date.

     5.   Determination of Amount of Installment Payments in Shares of Stock.

          (a)  The amount of the first installment payment payable in shares of
               the Stock for deferred fees shall be a fraction of the value of
               the Cash and/or Units in the Non-Employee Director's Deferred
               Fees Account on the date of the first Installment Payment Date,
               the numerator of which is one and the denominator of which is the
               total number of installments elected. Each subsequent installment
               shall be calculated in the same manner as of each subsequent
               Installment Payment Date except that the denominator shall be
               reduced by the number of installments which have been previously
               paid.

          (b)  If a payout to be made in shares of the Stock is based on
               deferred fees accounted for as Cash, the number of shares payable
               shall be determined by dividing the amount of cash that would
               otherwise be payable by the closing market price of the Stock as
               reported on the New York Stock Exchange on the last trading day
               preceding the Installment Payment Date.

          (c)  Except for the final installment payment, only whole shares shall
               be payable, and the value of any fractional share payable shall
               re retained in the Non-Employee Director's Deferred Fees Account
               until the final installment payment, at which time the value of
               any fractional share payable shall be paid in cash, based on the
               fractional share multiplied by the closing market price of Stock
               as reported on the New York Stock Exchange on the last trading
               day preceding the Installment Payment Date.

     6.   Six-Month Delay In Certain Payments. Notwithstanding the provisions of
          this Section III, F.1, if a Non-Employee Director is a specified
          employee (within the meaning of Section 409A of the Code) with respect
          to the Company at the time of his or her Termination of Service, all
          payments that would have been due during the six-month period
          following the Non-Employee Director's Termination of Service shall be
          paid on the first day of the seventh month following the Non-Employee
          Director's Termination of Service (or, if earlier, as soon as
          practicable after the date of the Participant's death).


                                       5



IV.  GENERAL TERMS

     A.   Unfunded Plan. It is presently intended that the fund constitute an
          unfunded plan for deferred compensation. No provision of the Plan
          shall require the Company, for the purpose of satisfying any
          obligations under the Plan, to purchase units or place any units in a
          trust or other entity to which contributions are made or otherwise to
          segregate any assets, nor shall the Company maintain separate bank
          accounts, books, records, or other evidence of the existence of a
          segregated or separately maintained or administered fund for such
          purposes.

     B.   Effective Date. The Amended and Restated Compensation Plan shall be
          effective upon approval by the Board.

     C.   Amendment and Termination of the Plan. The Board in its discretion may
          terminate the Plan or alter or amend the Plan or any part thereof from
          time to time.

     D.   Rule 16b-3. The terms and conditions of each grant of a Stock or Units
          under the Plan shall be approved in advance by the Board for purposes
          of the exemption from Section 16(b) of the Exchange Act available
          under Rule 16b-3(d)(1) and other applicable rules promulgated under
          Section 16 the Exchange Act.

     E.   Nonassignability. It shall be a condition of this Plan (and all rights
          of each Non-Employee Director and beneficiary shall be subject
          thereto) that no amount payable hereunder shall be assignable in whole
          or in part, either directly or by operation of law except by will or
          the laws of descent or distribution. Further, no right or interest of
          each Non-Employee Director or beneficiary under the Plan shall be
          liable for, or subject to, any obligation or liability of such
          director or beneficiary, including claims for alimony or the support
          of any spouse.

     F.   Section 409A of the Code. To the extent applicable, it is intended
          that this Plan comply with the provisions of Section 409A of the Code.
          The Plan shall be interpreted and administered in a manner consistent
          with this intent.


                                       6



               FORM OF NOTICE OF ELECTION FOR FORM OF PAYMENT FOR
                         NON-EMPLOYEE DIRECTOR SERVICES

TO:  (Input Director's Name and Address)

I.   MANNER OF PAYMENT ELECTION

     Pursuant to the United Auto Group, Inc.'s Non-Employee Director
Compensation Plan, for the annual fees payable to me as a Director of the
Company for the year ending December 31, 2003, I hereby irrevocably elect:

[ ]  To receive shares of United Auto Group, Inc. Voting Common Stock, par value
     $0.0001 per share, in lieu of cash in payment of the annual fee. The shares
     should be issued according to instructions set forth below; or

[ ]  Cash in payment of the annual fee.

II.  DEFERRAL OPTION ELECTION

     Pursuant to the United Auto Group, Inc.'s Non-Employee Compensation Plan, I
hereby irrevocably elect to defer the amount of the annual fee payable to me as
Director of the Company for the year ended December 31, 2003, as follows:

     ___% of, or $___ of my annual fee.

     The amount or percentage of the annual fee deferred shall be in the manner
of payment elected in Section I.

III. BENEFICIARY

     A.   If my membership on the Company's Board of Directors is terminated by
          death, or if I shall die after I cease to serve as a Director but
          before complete distribution of my Deferred Fees Account, I direct the
          balance in such account to be paid to:

                                        ----------------------------------------
                                        Name of Designated Beneficiary

                                        ----------------------------------------
                                        Address

                                        ----------------------------------------
                                        Relationship to Me

___________, 20__                       ----------------------------------------
Date                                    Director


                                       7



     B.   If my membership on the Company's Board of Directors is terminated by
          death, or if I shall die after I cease to serve as a Director but
          before complete distribution of my Deferred Fees Account, I direct the
          balance in such account to be paid:

[ ]  In one lump sum to the Designated Beneficiary

[ ]  In accordance with the Plan's Installment Payment Schedule or the schedule
     previously elected by me and approved by the Board.

IV.  SPECIAL INSTRUCTIONS

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

V.   SIGNATURE

_____________, 20__                     ________________________________________
Date                                    Director

Name:
      __________________________________
Address:
         _______________________________

         _______________________________

Social Security Number:
                        ________________


                                       8

EX-10.12

                                                                   EXHIBIT 10.12

                          PENSKE AUTOMOTIVE GROUP, INC.
                            MANAGEMENT INCENTIVE PLAN
                            (EFFECTIVE JULY 1, 2003)

1.   PURPOSE. The purpose of the Penske Automotive Group, Inc. Management
     Incentive Plan is to advance the interests of Penske Automotive Group,
     Inc., and its stockholders by motivating key personnel of the Company to
     take actions that will promote the Company's long-term success and growth.

2.   DEFINITIONS

     (a)  "Award" means an award entitling a Participant to receive incentive
          compensation subject to the terms and conditions of the Plan.

     (b)  "Board" means the Company's Board of Directors.

     (c)  "Code" means the Internal Revenue Code of 1986, as amended.

     (d)  "Committee" means the Compensation and Management Development
          Committee of the Board or any subcommittee thereof delegated by the
          Compensation and Management Development Committee to administer the
          Plan, or any other committee appointed by the Board to administer the
          Plan; provided, however, that in any event the Committee shall be
          comprised of not less than two directors of the Company, each of whom
          shall qualify as an "outside director" for purposes of Section 162(m)
          of the Code and Section 1.162-27 (e) (3) of the Regulations.

     (e)  "Common Stock" means shares of common stock, par value $.0001 per
          share, of the Company.

     (f)  "Company" means Penske Automotive Group, Inc., a Delaware corporation.

     (g)  "Fair Market Value" means the fair market value of a share of Common
          Stock as determined by the Committee from time to time. Unless
          determined otherwise by the Committee, the fair market value shall be
          the closing price of the Common Stock on the New York Stock Exchange
          on the relevant date or, if no sale occurred on such date, the closing
          price on the nearest preceding date on which sales occurred.

     (h)  "Officer" means a Participant who is an officer of the Company.

     (i)  "Participant" means a key employee of the Company or a Subsidiary who
          is selected by the Committee to participate in the Plan.

     (j)  "Performance Objectives" means the performance objectives established
          pursuant to this Plan for Participants who have received Awards.
          Performance Objectives


                                       1



          may be described in terms of Company-wide objectives or objectives
          that are related to the performance of the individual Participant or
          the Subsidiary, division, region, product line, department or function
          in which the Participant is employed or which is managed by the
          Participant. Any Performance Objectives applicable to a Qualified
          Performance-Based Award shall be limited to specified levels of or
          increases or decreases in return on equity, earnings per share, total
          earnings, earnings growth, earnings from continuing operations, return
          on capital, return on assets, gross profit, earnings before interest
          and taxes, sales, sales growth, gross margin, cost reduction goals,
          fixed cost coverage measurements (including, but not limited to, the
          ratio of service and parts revenues to operating costs), return on
          investment, increase in the fair market value of the Common Stock,
          share price (including, but not limited to, growth measures and total
          stockholder return), market capitalization, operating profit, net
          income, cash flow (including, but not limited to, operating cash flow
          and free cash flow), financial return ratios, total return to
          shareholders, market share, earnings measures/ratios, balance sheet
          measurements (including, but not limited to, debt to equity ratios and
          inventory or receivable turnover), human resources measurements
          (including, but not limited to, measurements of employee turnover,
          workers' compensation costs and employee satisfaction), internal rate
          of return, unit sales, same store sales, customer satisfaction and
          productivity. If the Committee determines that a change in the
          business, operations, corporate structure or capital structure of the
          Company, or the manner in which it conducts its business, or other
          events or circumstances render the Performance Objectives unsuitable,
          the Committee may modify such Performance Objectives or the related
          minimum acceptable level of achievement, in whole or in part, as the
          Committee deems appropriate and equitable; provided however that in
          the case of a Qualified Performance-Based Award, such modification is
          only permitted to the extent prescribed by Section 162(m) of the Code
          and the Regulations.

     (k)  "Performance Period" means a period determined by the Committee which
          shall be used for purposes of determining whether Awards are earned by
          Participants.

     (l)  "Performance Target" means a target level of performance, based on one
          or more Performance Objectives, established for a Performance Period
          in accordance with Section 4.

     (m)  "Plan" means the Penske Automotive Group, Inc. Management Incentive
          Plan, as stated herein, and as amended from time to time.

     (n)  "Qualified Performance-Based Award" means an Award or portion of an
          Award to an Officer that is intended to satisfy the requirements for
          "qualified performance-based compensation" under Code Section 162(m).
          The Committee shall designate any Qualified Performance-Based Award as
          such at the time of grant.

     (o)  "Regulations" means the Treasury Regulations promulgated under the
          Code, as amended from time to time.


                                       2



     (p)  "Retirement" means termination of employment with the Company or a
          Subsidiary after completing at least 5 years of continuous employment
          and attaining age 60.

     (q)  "Subsidiary" means a corporation or other entity (i) more than fifty
          percent (50%) of whose outstanding shares or securities (representing
          the right to vote for the election of directors or other managing
          authority) are, or (ii) which does not have outstanding shares or
          securities (as may be the case in a Partnership, joint venture or
          unincorporated association), but more than fifty percent (50%) of
          whose ownership interest (representing the right generally to make
          decisions for such other entity) is, now or hereafter owned or
          controlled directly or indirectly by the Company.

3.   PARTICIPATION. For each Performance Period, the Committee shall designate
     those key employees of the Company and its Subsidiaries who shall receive
     Awards under the Plan. Selection for participation for one Performance
     Period shall not confer on a Participant the right to participate in the
     Plan for any other Performance Period.

4.   AWARDS. For each Performance Period, each Participant shall receive an
     Award entitling the Participant to receive cash incentive compensation or
     other incentive compensation (including common stock or other awards under
     the Amended and Restated Penske Automotive Group, Inc. 2002 Equity Plan (or
     similar plan)) upon the attainment of one or more Performance Targets. The
     Committee may establish different terms for Awards for different
     Participants or groups of Participants. The amount of compensation payable
     under an Award may be stated as a dollar amount or as a percentage of the
     Participant's base compensation. The Committee may provide for a threshold
     level of performance below which no amount of compensation will be paid and
     a maximum level of performance above which no additional amount of
     compensation will be paid, and it may provide for the payment of differing
     amounts of compensation for different levels of performance.
     Notwithstanding any other provision of the plan to the contrary, the
     Committee retains the absolute discretion to reduce the amount of any
     incentive compensation that would be otherwise payable to a participant
     (including a reduction in such amount to zero).

5.   ESTABLISHMENT OF PERFORMANCE TARGETS. Within the first twenty-five percent
     (25%) of each Performance Period, the Committee shall establish one or more
     Performance Targets for that Performance Period.

6.   PAYMENT OF AWARDS. Following the end of each Performance Period, the
     Committee shall determine whether the Performance Targets for such
     Performance Period have been satisfied and shall certify its determination
     in approved minutes of the Committee meeting held for such purpose. If the
     Committee certifies that one or more Performance Targets for a Performance
     Period have been achieved, all compensation payable in respect of Awards
     subject to such Performance Target shall be paid to Participants as soon as
     reasonably practicable thereafter (subject to the limitations set forth in
     paragraph 3); provided, that such compensation shall be payable in the
     calendar year that follows the calendar year which includes the last day of
     the Performance Period


                                       3



     and in all events by March 15 of such calendar year and, provided, however,
     that the Committee may permit the deferral of such compensation under a
     deferred compensation plan of the Company or a Subsidiary. If a Performance
     Target for a Performance Period is not achieved, the Committee in its sole
     discretion may determine that all or a portion of any Award shall be deemed
     to be earned based on such criteria as the Committee deems appropriate,
     including without limitation individual performance or the performance of
     the Subsidiary or business division employing the Participant; provided,
     however, that the Committee shall not have such discretion with respect to
     any Qualified Performance-Based Award. Any Award that is not considered
     earned in accordance with this Section shall be forfeited.

7.   PARTIAL PARTICIPATION. Unless the Committee shall determine otherwise, the
     rules and procedures for partial participation shall be consistent with the
     following:

     (a)  EMPLOYMENT TERMINATION. If a Participant terminates employment with
          the Company before payment of Awards are made for a Performance Period
          for reasons other than death, disability or Retirement, any Award
          granted to the Participant in respect of that Performance Period shall
          be forfeited and cancelled.

     (b)  DEATH, DISABILITY OR RETIREMENT. A Participant whose employment
          terminates during a Performance Period because of death, disability or
          Retirement may, under such rules as the Committee may from time to
          time prescribe, be eligible for consideration for a pro-rata Award
          based on the period of active employment during the Performance
          Period, which Award shall be paid at the time specified in Section 5.

     (c)  LEAVE OF ABSENCE. A Participant who is on a leave of absence other
          than a personal leave for more than ninety (90) consecutive days
          during the Performance Period, or who is on a personal leave of
          absence for more than thirty (30) consecutive days, shall forfeit any
          portion of an Award attributable to said period of leave pursuant to
          such rules as the Committee may establish.

8.   MAXIMUM AMOUNT OF QUALIFIED PERFORMANCE-BASED AWARDS. The maximum dollar
     amount of compensation that may be paid to any Participant in respect of
     Qualified Performance-Based Awards for a single fiscal year shall be
     $5,000,000.

9.   ADJUSTMENTS. To the extent that a Performance Target is based on an
     increase in the Fair Market Value of the Common Stock, in the event of any
     stock dividend, stock split, combination of shares, recapitalization or
     other change in the capital structure of the Company, any merger,
     consolidation, spin-off, reorganization, partial or complete liquidation or
     other distribution of assets (other than a normal cash dividend), issuance
     of rights or warrants to purchase securities or any other corporate
     transaction having an effect similar to any of the foregoing, then the
     Committee may make or provide for such adjustments in such Performance
     Target as the Committee in its sole discretion may in good faith determine
     to be equitably required in order to prevent dilution or enlargement of the
     rights of Participants.


                                       4



10.  TAX WITHHOLDING. The Company shall be entitled to withhold from any payment
     made under the Plan the full amount of any required federal, state or local
     taxes.

11.  NONTRANSFERABILITY OF BENEFITS. A Participant may not assign or transfer
     any interest in an Award. Notwithstanding the foregoing, upon the death of
     a Participant, the Participant's rights and benefits under the Plan shall
     pass by will or by the laws of descent and distribution.

12.  ADMINISTRATION AND INTERPRETATION. The Committee shall have complete
     authority to interpret the Plan, to prescribe rules and requirements
     relating to it, and to make all determinations necessary or advisable in
     the administration of the Plan, including, without limitation, the amending
     or altering of the Plan as may be required to comply with or conform to any
     federal, state or local laws or regulations.

13.  AMENDMENT AND TERMINATION OF PLAN. The Committee may at any time terminate
     the Plan and may at any time and from time to time amend or modify the Plan
     in any respect; provided, however, that no amendment shall be effective
     without approval of the stockholders of the Company if the amendment would
     increase the maximum amount of compensation payable to a Participant in any
     Performance Period pursuant to Qualified Performance-Based Awards as
     specified in Section 7. Neither the termination of the Plan nor any
     amendment to the Plan shall reduce benefits accruing under Awards granted
     prior the date of such termination or amendment.

14.  GOVERNING LAW. The Plan shall be governed and construed in accordance with
     the laws of the State of Michigan. As a condition to eligibility to receive
     an Award under the Plan, each Participant irrevocably consents to the
     exclusive jurisdiction of the courts of the State of Michigan and of any
     federal court located in the Eastern District of Michigan in connection
     with any action or proceeding arising out of or relating to this Plan, any
     document or instrument delivered pursuant to or in connection with this
     Plan, or any alleged breach of this Plan or any such document or
     instrument.

15.  EFFECTIVE DATES AND STOCKHOLDER APPROVAL. This Plan shall be effective for
     periods beginning on and after July 1, 2003, provided that no Qualified
     Performance-Based Award shall be effective if the Plan is not approved by a
     vote of the stockholders of the Company at an annual meeting or special
     meeting.

16.  NO RIGHTS TO CONTINUED EMPLOYMENT. Participation in the Plan does not
     create or constitute an express or implied employment contract between the
     Company and the Participant nor limit the right of the Company to discharge
     or otherwise deal with a Participant without regard to the existence of the
     Plan.

17.  UNFUNDED PLAN. The Plan shall at all times be an unfunded payroll practice
     and no provision shall at any time be made with respect to segregating
     assets of the Company for payment of any Award. No Participant or any other
     person shall have any interest in any particular assets of the Company by
     reason of the right to receive an Award under the Plan and any such
     Participant or any other person shall have only the rights of a general
     unsecured creditor of the Company.


                                       5



18.  SECTION 409A. To the extent applicable, this Plan is intended to comply
     with the provisions of Section 409A of the Code. This Plan shall be
     administered in a manner consistent with the intent.


                                       6

EX-12

Exhibit 12

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

	Year Ended December 31,
	2007			2006			2005			2004			2003
Income from continuing operations before taxes and minority interests	$	197.1		$	203.3		$	188.8		$	176.4		$	131.9
Less undistributed earnings of equity method investments		(4.1	)		(8.2	)		(4.3	)		(5.8	)		(0.4	)
Plus distributed earnings of equity method investments		6.2			0.3			—			1.3			—
Plus amortization of capitalized interest		0.6			0.5			0.3			0.2			0.2
	$	199.8		$	195.9		$	184.8		$	172.1		$	131.7
Plus:
Fixed charges:
Other interest expense (includes amortization of deferred financing costs)	$	56.2		$	49.2		$	49.0		$	42.9		$	42.4
Floorplan interest expense		74.7			59.8			46.3			40.9			36.0
Capitalized interest		5.5			7.1			4.0			2.9			2.3
Interest factor in rental expense		50.2			43.7			35.3			27.6			22.9
Total fixed charges	$	186.6		$	159.8		$	134.6		$	114.3		$	103.6
Less:
Capitalized interest	$	5.5		$	7.1		$	4.0		$	2.9		$	2.3
Earnings	$	380.9		$	348.6		$	315.4		$	283.5		$	233.0
Ratio of earnings to fixed charges		2.0			2.2			2.3			2.5			2.2

EX-21

                                                                               .
                                                                               .
                                                                               .

                                                                      EXHIBIT 21



                                                  JURISDICTION OF
                  SUBSIDIARY                         FORMATION                       ASSUMED NAME (D/B/A)
                  ----------                     -----------------   ---------------------------------------------------
                                                               
Alpina GB Limited                                 England & Wales
Ascot Garage Company Limited                     England and Wales   Sytner Sunningdale
                                                                     Rolls Royce Motor Cars Sunningdale
Aston Green Limited                               England & Wales    Slough Audi
                                                                     Mayfair Audi
                                                                     Guildford Audi
                                                                     West London Audi
                                                                     Victoria Audi
                                                                     Reading Audi
Atlantic Auto Funding Corporation                       DE
Atlantic Auto Second Funding Corporation                DE
Atlantic Auto Third Funding Corporation                 DE
Auto Mall Payroll Services, Inc.                        FL
Autocare Insurance Agency, Inc.                         PR
Automotive Strategy Limited                       England & Wales
Boostmicro Limited                                England & Wales
Brett Morgan Chevrolet-Geo, Inc.                        DE           Landers Chevrolet HUMMER
Central Ford Center, Inc.                               AR
Central Garage (Surrey) Limited                   England & Wales
CJNS, LLC                                               DE           Jaguar North Scottsdale
Classic Auto Group, Inc.                                NJ           BMW of Turnersville
                                                                     Chevrolet  HUMMER Cadillac of Turnersville
                                                                     Turnersville Collision Center
Classic Enterprises, LLC                                DE           Acura of Turnersville
Classic Imports, Inc.                                   NJ           Toyota-Scion of Turnersville
Classic Management Company, Inc.                        NJ
Classic Motor Sales, LLC                                DE           Honda Turnersville
Classic Nissan of Turnersville, LLC                     DE           Nissan of Turnersville
Classic Oldsmobile Pontiac-GMC, Ltd.                    TX           Round Rock Collision Center
Classic Special Advertising, Inc.                       TX
Classic Special Automotive GP, LLC                      TX
Classic Special Automotive, Ltd.                        TX           Round Rock Toyota-Scion






                                                  JURISDICTION OF
                  SUBSIDIARY                         FORMATION                       ASSUMED NAME (D/B/A)
                  ----------                     -----------------   ---------------------------------------------------
                                                               
Classic Special Hyundai, Ltd.                           TX           Round Rock Hyundai
Classic Special, LLC                                    TX
Classic Turnersville, Inc.                              NJ           Hyundai of Turnersville
County Auto Group Partnership                           NJ
Covington Pike Dodge, Inc.                              DE
Cruickshank Motors Limited                       England and Wales   Mercedes-Benz/smart of Bristol
                                                                     Mercedes-Benz of Weston-Super-Mare
                                                                     Mercedes-Benz of Newbury
                                                                     Mercedes-Benz Cheltenham & Gloucester
                                                                     Mercedes-Benz/smart of Swindon
                                                                     Mercedes-Benz of Bath
                                                                     Kings Cheltenham & Gloucester
                                                                     Kings Swindon
                                                                     Kings Bristol
D. Young Chevrolet, LLC                                 DE           Penske Chevrolet
Dan Young Chevrolet, Inc.                               IN
Dan Young Motors, LLC                                   DE           Penske Honda
Danbury Auto Partnership                                CT           Honda of Danbury
Dealer Accessories, LLC                                 DE
DiFeo Chrysler Plymouth Jeep Eagle Partnership          NJ
DiFeo Hyundai Partnership                               NJ
DiFeo Leasing Partnership                               NJ
DiFeo Nissan Partnership                                NJ           Hudson Nissan
DiFeo Partnership, LLC                                  DE
DiFeo Tenafly Partnership                               NJ           DiFeo BMW
Donald Healey Motor Company Limited              England and Wales
Europa Auto Imports, Inc.                               CA           Mercedes-Benz of San Diego
                                                                     smart center San Diego
First Front (Wimbledon) Limited                   England & Wales
Florida Chrysler- Plymouth, Inc.                        FL
FRN of Tulsa, LLC                                       DE
FW Mays & Company Limited                        England and Wales   Guy Salmon Land Rover Gatwick
                                                                     Guy Salmon Land Rover Ascot
                                                                     Guy Salmon Land Rover Portsmouth
                                                                     Guy Salmon Land Rover Maidstone
                                                                     Guy Salmon Jaguar Gatwick
                                                                     Guy Salmon Jaguar Ascot
                                                                     Guy Salmon Jaguar Maidstone
                                                                     Honda Redhill






                                                  JURISDICTION OF
                  SUBSIDIARY                         FORMATION                       ASSUMED NAME (D/B/A)
                  ----------                     -----------------   ---------------------------------------------------
                                                               
Gene Reed Chevrolet, Inc.                               SC
GMG Motors, Inc                                         CA           BMW of San Diego
Goodman Leeds Limited                            England and Wales   Bradford Audi
                                                                     Wakefield Audi
                                                                     Leeds Audi
                                                                     Harrogate Audi
Goodson North, LLC                                      DE           Goodson Honda North
Goodson Pontiac GMC, LLC                                DE
Goodson Spring Branch, LLC                              DE           Goodson Honda West
Graypaul Motors Limited                          England and Wales   Graypaul Edinburgh
                                                                     Graypaul Nottingham
Guy Salmon Highgate Limited                      England and Wales   Guy Salmon Land Rover Stockport
Guy Salmon Honda Limited                         England and Wales
Guy Salmon Jaguar Limited                        England and Wales   Guy Salmon Jaguar/Land Rover Thames Ditton
                                                                     Tollbar Twickenham (Volvo)
Hallamshire Motor Company Limited                England and Wales   Guy Salmon Land Rover Sheffield
                                                                     Guy Salmon Land Rover Leeds
                                                                     Guy Salmon Land Rover Wakefield
HBL, LLC                                                DE           Aston Martin of Tysons Corner
                                                                     Audi of Tysons Corner
                                                                     Mercedes-Benz of Tysons Corner
                                                                     Porsche of Tysons Corner
                                                                     Tysons Corner Collision Center
                                                                     smart center Tysons Corner
Hill Country Imports, Ltd.                              TX           Round Rock Honda
HT Automotive, LLC                                      DE           Tempe Honda
Hudson Motors Partnership                               NJ           Hudson Toyota-Scion
Hughenden Motor Company Limited                  England and Wales   Sytner High Wycombe (BMW)
HVPH Motor Corp.                                    Puerto Rico
John Fox Limited                                  England & Wales    Leicester Audi
                                                                     Nottingham Audi
JS Imports, LLC                                         DE           Palm Beach Mazda
Kings Motors Limited                             England and Wales   Kings Manchester
KMPB, LLC                                               DE
KMT / UAG, Inc.                                         CA           Kearny Mesa Toyota-Scion
Landers Auto Sales, LLC                                 AR           Landers Chrysler Dodge Jeep
Landers Buick - Pontiac, Inc.                           AR
Landers Ford North, Inc.                                AR






                                                  JURISDICTION OF
                  SUBSIDIARY                         FORMATION                       ASSUMED NAME (D/B/A)
                  ----------                     -----------------   ---------------------------------------------------
                                                               
Landers United Auto Group No. 2, Inc.                   AR
Late Acquisition I, LLC                                 DE
Late Acquisition II, LLC                                DE
Leicester Audi Limited                            England & Wales
LMNS, LLC                                               DE
LRP, Ltd.                                               AZ           Land Rover North Scottsdale
Mar Parts Limited                                 England & Wales
Mar Parts Srl                                          Italy
Maranello Concessionaires Limited                 England & Wales
Maranello Holdings Limited                        England & Wales
Maranello Sales Limited                           England & Wales    Maranello Egham
Michael Chevrolet-Oldsmobile, Inc.                      SC
Minden Limited                                    England & Wales
Motorcars Acquisition II, LLC                           DE
Motorcars Acquisition III, LLC                          DE           Infiniti of Bedford
Motorcars Acquisition IV, LLC                           DE           Toyota-Scion of Bedford
Motorcars Acquisition V, LLC                            DE           Bedford Collision Center
Motorcars Acquisition VI, LLC                           DE
Motorcars Acquisition, LLC                              DE           Mercedes-Benz of Bedford
                                                                     smart center Bedford
National City Ford, Inc.                                DE
Natures Farm (UK) Limited                         England & Wales
Nottingham Audi Limited                           England & Wales
OCT Partnership                                         NJ           Gateway Toyota-Scion
Oxford Mazda Limited                             England and Wales
PAG Acquisition 13, LLC                                 DE
PAG Acquisition 14, LLC                                 DE
PAG Acquisition 15, LLC                                 DE
PAG Austin S1, LLC                                      DE           smart center Round Rock
PAG East, LLC                                           DE
PAG Long Island A1, LLC                                 DE
PAG Long Island B1, LLC                                 DE
PAG Long Island L1, LLC                                 DE






                                                  JURISDICTION OF
                  SUBSIDIARY                         FORMATION                       ASSUMED NAME (D/B/A)
                  ----------                     -----------------   ---------------------------------------------------
                                                               
PAG Long Island M1, LLC                                 DE
PAG Michigan Holdings, LLC                              DE
PAG Michigan S1, LLC                                    DE           smart center Bloomfield
PAG North Scottsdale BE, LLC                            DE           Bentley Scottsdale
PAG Orlando General, Inc.                               DE
PAG Orlando Limited, Inc.                               DE
PAG Orlando Partnership, Ltd.                           FL           Central Florida Toyota-Scion
PAG West, LLC                                           DE           Scottsdale 101 Auto Collection
Palm Auto Plaza, LLC                                    DE           Palm Beach Toyota-Scion
Peachtree Nissan, Inc                                   GA
Pearlshadow Limited                              England and Wales
Penske Automotive Group, Inc.                           DE
Penske Direct, LLC                                      DE
PMRC, LLC                                               DE           Penske Racing Museum
Prestage Limited                                  England & Wales
Prophets (Gerrards Cross) Limited                England and Wales
Prophets Garage Limited                          England and Wales
Quad Finance Limited                              England & Wales
R Stratton (Knutsford) Limited                   England and Wales   Guy Salmon Land Rover Knutsford
R Stratton Limited                               England and Wales   Bentley Lamborghini Birmingham
                                                                     Bentley Lamborghini Edinburgh
                                                                     Bentley Manchester
Rectory Road Ltd                                  England & Wales
Relentless Pursuit Enterprises, Inc.                    CA           Lexus Kearny Mesa
RHD Finance Limited                               England & Wales
Riding Garages Limited                            England & Wales
Rybridge Cars Limited                             England & Wales
Ryburn Cars Limited                               England & Wales
Rycar Limited                                     England & Wales
Rycar Limited                                     England & Wales






                                                  JURISDICTION OF
                  SUBSIDIARY                         FORMATION                       ASSUMED NAME (D/B/A)
                  ----------                     -----------------   ---------------------------------------------------
                                                               
Rycom Vehicles Limited                            England & Wales
Rycroft Vehicles Limited                         England and Wales   Mercedes Benz of Newcastle
                                                                     Mercedes Benz of Sunderland
                                                                     Mercedes Benz of Carlisle
                                                                     Mercedes Benz of Teeside
                                                                     Kings Teeside
                                                                     Kings Newcastle
                                                                     smart North East Stockton
Rydale Cardiff Limited                            England & Wales
Rydnal Limited                                    England & Wales
Ryland Cars Limited                               England & Wales
Ryland Group Limited                             England and Wales
Ryland Group Services Limited                    England and Wales
Ryland Investments Limited                       England and Wales
Ryland Leasing Limited                            England & Wales
Ryland North West Limited                         England & Wales
Ryland Properties Limited                        England and Wales
Ryland Vehicles Limited                           England & Wales
SA Automotive, Ltd.                                     AZ           Acura North Scottsdale
Sandridge Limited                                England and Wales
SAU Automotive, Ltd.                                    AZ           Audi Chandler
Scottsdale 101 Management, LLC                          DE
Scottsdale Ferrari, LLC                                 AZ           Scottsdale Ferrari Maserati
Scottsdale Jaguar, Ltd.                                 AZ           Scottsdale Jaguar , Scottsdale Aston Martin, Land
                                                                     Rover Scottsdale and  Rolls Royce Scottsdale
Scottsdale Management Group, Ltd.                       AZ
Scottsdale Paint & Body, LLC                            DE
Shannon Automotive, Ltd.                                TX
Shires (Coventry) Limited                        England and Wales






                                                  JURISDICTION OF
                  SUBSIDIARY                         FORMATION                       ASSUMED NAME (D/B/A)
                  ----------                     -----------------   ---------------------------------------------------
                                                               
SHVP Motor Corp.                                    Puerto Rico
Sigma Motors, Inc.                                      AZ           Mercedes-Benz of Chandler
                                                                     smart center Chandler
SK Motors, LLC                                          DE           Porsche North Scottsdale
SL Automotive, LLC                                      DE           Scottsdale Lexus and Lexus of Chandler
smart USA Distributor LLC                               DE           smart USA
smart USA Distributor of Puerto Rico LLC            Puerto Rico
Somerset Motors Partnership                             NJ           Lexus of Bridgewater
                                                                     Lexus of Edison
Somerset Motors, Inc.                                   NJ
SP Towcester Limited                              England & Wales
Sun Motors, LLC                                         DE           BMW North Scottsdale and MINI North Scottsdale
Sunningdale Carriage Company Limited              England & Wales
Sytner Cars Limited                               England & Wales    Porsche Centre Edinburgh
                                                                     Porsche Centre Glasgow
                                                                     Porsche Centre Mid-Sussex
                                                                     Porsche Centre Silverstone
Sytner city Limited                               England & Wales
Sytner Coventry Limited                          England and Wales   Sytner Coventry
Sytner Direct Limited                            England and Wales
Sytner Equals Prestige Cars Limited               England & Wales
Sytner Finance Limited                           England and Wales
Sytner Group Limited                             England and Wales
Sytner Holdings Limited                          England and Wales   Guy Salmon Jaguar Coventry
                                                                     Guy Salmon Jaguar Northampton
                                                                     Guy Salmon Jaguar Oxford
                                                                     Guy Salmon Land Rover Coventry
                                                                     Oxford Saab
                                                                     Lexus Cardiff
                                                                     Lexus Birmingham
                                                                     Lexus Bristol
                                                                     Lexus Leicester






                                                  JURISDICTION OF
                  SUBSIDIARY                         FORMATION                       ASSUMED NAME (D/B/A)
                  ----------                     -----------------   ---------------------------------------------------
                                                               
                                                                     Lexus Oxford
                                                                     Tollbar Coventry
                                                                     Tollbar Warwick
                                                                     Toyota Solihull
                                                                     Toyota World Bristol North
                                                                     Toyota World Bristol South
                                                                     Toyota World Cardiff
                                                                     Toyota World Bridgend
                                                                     Toyota World Newport
                                                                     Toyota World (Birmingham)
                                                                     Toyota World Tamworth
Sytner Limited                                   England and Wales   Sytner Nottingham
                                                                     Sytner Canary Wharf
                                                                     Sytner Solihull
Sytner London Limited                            England and Wales   Sytner Chigwell
                                                                     Sytner Harold Wood
Sytner of Leicester Limited                      England and Wales   Sytner Leicester
Sytner of Nottingham Limited                      England & Wales
Sytner Online Limited                             England & Wales
Sytner Properties (Cribbs Causeway) Limited       England & Wales
Sytner Properties (Grove Park) Limited           England and Wales
Sytner Properties (Harold Wood) Limited          England and Wales
Sytner Properties (Riverside) Limited             England & Wales
Sytner Properties Limited                        England and Wales
Sytner Retail Limited                            England and Wales   Sytner Birmingham
                                                                     Sytner Sutton
                                                                     Sytner Oldbury
                                                                     Sytner Cardiff
                                                                     Sytner Newport
Sytner Sheffield Limited                          England & Wales    Sytner Sheffield
Sytner.com Limited                                England & Wales
Tamburro Enterprises, Inc.                              NV
Tamsen GmbH                                           Germany
The Caxton Engineering Co Limited                 England & Wales






                                                  JURISDICTION OF
                  SUBSIDIARY                         FORMATION                       ASSUMED NAME (D/B/A)
                  ----------                     -----------------   ---------------------------------------------------
                                                               
Thomson & Taylor (Brooklands) Limited             England & Wales
Toyota World Limited                              England & Wales
Tri-City Leasing, Inc.                                  CA
Turnersville Auto Outlet, LLC                           DE
UAG Arkansas FLM, LLC                                   DE           Landers Ford Lincoln Mercury
UAG Atlanta H1, LLC                                     DE           Honda Mall of Georgia
UAG Atlanta IV Motors, Inc.                             GA           United BMW Gwinnett, United BMW of Roswell and
                                                                     United Collision Center
UAG Capitol, Inc.                                       DE           Capitol Honda
UAG Carolina, Inc.                                      DE
UAG Central NJ, LLC                                     DE           Ferrari Maserati of Central New Jersey
UAG Central Region Management, LLC                      IN
UAG Cerritos, LLC                                       DE           Cerritos Pontiac Buick GMC Hummer
UAG Chantilly AU, LLC                                   DE
UAG CHCC, Inc.                                          NJ
UAG Chevrolet, Inc.                                     NJ
UAG Citrus Motors, LLC                                  DE
UAG Classic, Inc.                                       DE
UAG Clovis, Inc.                                        DE           Honda North
UAG Connecticut I, LLC                                  DE
UAG Connecticut, LLC                                    DE
UAG Duluth, Inc.                                        TX           Atlanta Toyota-Scion
UAG East, LLC                                           DE
UAG Escondido A1, Inc.                                  DE           Acura of Escondido
UAG Escondido H1, Inc.                                  DE           Honda of Escondido
UAG Escondido M1, Inc.                                  DE           Mazda of Escondido
UAG Fairfield CA, LLC                                   DE           Audi Fairfield
UAG Fairfield CM, LLC                                   DE           Mercedes-Benz of Fairfield
                                                                     Fairfield Motor Cars Collision Center
                                                                     smart center Fairfield
UAG Fairfield CP, LLC                                   DE           Porsche of Fairfield
UAG Fayetteville I, LLC                                 DE           Chevrolet  HUMMER of Fayetteville
UAG Fayetteville II, LLC                                DE           Honda of Fayetteville
UAG Fayetteville III, LLC                               DE           Acura of Fayetteville
UAG Finance Company, Inc.                               DE
UAG GD, Ltd.                                            TX






                                                  JURISDICTION OF
                  SUBSIDIARY                         FORMATION                       ASSUMED NAME (D/B/A)
                  ----------                     -----------------   ---------------------------------------------------
                                                               
UAG Germany GmbH                                      Germany
UAG GN, Ltd.                                            TX
UAG GP, Ltd.                                            TX
UAG Graceland II, Inc.                                  DE
UAG GW, Ltd.                                            TX
UAG Holdings de Mexico, S. de R.L. de C.V.            Mexico
UAG Houston Acquisition, Ltd.                           TX
UAG Hudson CJD, LLC                                     DE
UAG Hudson, Inc.                                        NJ
UAG International Holdings, Inc.                        DE
UAG Kissimmee Motors, Inc.                              DE
UAG Landers Springdale, LLC                             DE           Toyota-Scion of Fayetteville Fayetteville Auto Mall
UAG Los Gatos, Inc.                                     DE           Los Gatos Acura
UAG Marin, Inc.                                         DE           Marin Honda
UAG Memphis II, Inc.                                    DE           Wolfchase Toyota-Scion
UAG Memphis IV, Inc.                                    DE
UAG Memphis Management, Inc.                            DE
UAG Mentor Acquisition, LLC                             DE           Honda of Mentor
UAG Michigan Cadillac, LLC                              DE           Rinke Cadillac
UAG Michigan H1, LLC                                    DE           Honda Bloomfield
UAG Michigan H2, LLC                                    DE
UAG Michigan Pontiac-GMC, LLC                           DE
UAG Michigan T1, LLC                                    DE           Rinke Toyota-Scion
UAG Michigan TMV, LLC                                   DE           Toyota-Scion of Waterford
UAG Minneapolis B1, LLC                                 DE           Motorwerks BMW/Motorwerks MINI
UAG Nanuet I, LLC                                       DE           Mercedes-Benz of Nanuet
UAG Nanuet II, LLC                                      DE           Honda of Nanuet
UAG Nevada Land, LLC                                    DE
UAG Northeast Body Shop, Inc.                           DE
UAG Northeast, LLC                                      DE
UAG Oldsmobile of Indiana, LLC                          IN
UAG Phoenix VC, LLC                                     DE           Volvo North Scottsdale
UAG Realty, LLC                                         DE
UAG Royal Palm M1, LLC                                  DE
UAG Royal Palm, LLC                                     DE           Royal Palm Toyota-Scion
UAG San Diego A1, Inc.                                  DE           Kearny Mesa Acura
UAG San Diego AU, Inc.                                  DE           Audi of Escondido
UAG San Diego H1, Inc.                                  DE           Honda Mission Valley
UAG San Diego JA, Inc.                                  DE           Jaguar Kearny Mesa, Aston Martin of San Diego






                                                  JURISDICTION OF
                  SUBSIDIARY                         FORMATION                       ASSUMED NAME (D/B/A)
                  ----------                     -----------------   ---------------------------------------------------
                                                               
UAG San Diego Management, Inc.                          DE
UAG Southeast, Inc.                                     DE
UAG Spring, LLC                                         DE
UAG Stevens Creek II, Inc.                              DE           Audi Stevens Creek, Porsche of Stevens Creek
UAG Sunnyvale, Inc.                                     DE
UAG Texas II, Inc.                                      DE
UAG Texas, LLC                                          DE
UAG Torrance, Inc.                                      DE           Penske Cadillac Hummer South Bay
UAG Tulsa Holdings, LLC                                 DE
UAG Tulsa JLM, LLC                                      DE           Jaguar of Tulsa
UAG Tulsa VC II, LLC                                    DE           Lincoln Mercury of Tulsa, Volvo of Tulsa
UAG Turnersville Motors, LLC                            DE
UAG Turnersville Realty, LLC                            DE
UAG UK Holdings Limited                          England and Wales
UAG VC, LLC                                             DE           United Hummer of Tulsa
UAG VK, LLC                                             DE           Volkswagen North Scottsdale
UAG West Bay AM, LLC                                    DE
UAG West Bay FM, LLC                                    DE
UAG West Bay IA, LLC                                    DE           Inskip Acura
UAG West Bay IAU, LLC                                   DE           Inskip Audi
UAG West Bay IB, LLC                                    DE           Inskip Bentley Providence
UAG West Bay II, LLC                                    DE           Inskip Infiniti
UAG West Bay IL, LLC                                    DE           Inskip Lexus
UAG West Bay IM, LLC                                    DE           Inskip Autocenter (Mercedes-Benz)
                                                                     smart center Warwick
UAG West Bay IN, LLC                                    DE           Inskip Nissan
UAG West Bay IP, LLC                                    DE           Inskip Porsche
UAG West Bay IV, LLC                                    DE           Inskip Volvo
UAG West Bay IW, LLC                                    DE           Inskip BMW
UAG Young II, Inc.                                      DE
UAG/PFS, Inc.                                           AZ
UAG-Caribbean, Inc.                                     DE
United Auto Licensing, LLC                              DE
United Auto Scottsdale Property Holdings, LLC           DE
United AutoCare Products, LLC                           DE
United Ford Broken Arrow, LLC                           DE
United Ford North, LLC                                  DE           United Ford North
United Ford South, LLC                                  DE           United Ford South
United Nissan, Inc.                                     GA






                                                  JURISDICTION OF
                  SUBSIDIARY                         FORMATION                       ASSUMED NAME (D/B/A)
                  ----------                     -----------------   ---------------------------------------------------
                                                               
United Nissan, Inc.                                     TN
United Ranch Automotive, LLC                            DE           Audi North Scottsdale
UnitedAuto Dodge of Shreveport, Inc.                    DE
UnitedAuto Fifth Funding Inc.                           DE
UnitedAuto Finance Inc.                                 DE
UnitedAuto Fourth Funding Inc.                          DE
UnitedAuto Group UK Limited                      England and Wales   Mercedes-Benz Milton Keynes
                                                                     Mercedes-Benz Kettering
                                                                     Mercedes-Benz Northampton
                                                                     Mercedes-Benz Bedford
                                                                     smart Milton Keynes
VPH Motor Corporation                               Puerto Rico
West Palm Auto Mall, Inc.                               FL
West Palm Nissan, LLC                                   DE           Palm Nissan
West Palm S1, LLC                                       DE           Palm Beach Subaru
Westbury Superstore, Ltd.                               NY           Westbury Toyota-Scion
William Jacks Limited                             England & Wales
William Jacks Properties Limited                 England and Wales
William Jacks Services Limited                    England & Wales
Woodcote Properties Limited                       England & Wales
WTA Motors, Ltd.                                        TX           BMW of Austin
Yarnolds of Stratford Limited                    England and Wales
Young Automotive Holdings, LLC                          DE
Young Management Group, Inc.                            IN
Zycor 16 Limited                                  England & Wales
Zycor 17 Limited                                  England & Wales
Zycor 18 Limited                                  England & Wales
Zycor 5 Limited                                   England & Wales

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements No. 333-105311, 333-14971, 333-26219, 333-50816, and 333-61835 on Form S-8 and Registration Statement No. 333-134170 on Form S-3ASR of our report dated February 25, 2008, relating to the consolidated financial statements and financial statement schedule of Penske Automotive Group, Inc. and subsidiaries (the “Company”), and on the effectiveness of the Company’s internal control over financial reporting (which report expressed an unqualified opinion and included an explanatory paragraph relating to the Company electing application of Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”), effective January 1, 2006, appearing in this Annual Report on Form 10-K of Penske Automotive Group, Inc. for the year ended December 31, 2007.

/s/ Deloitte & Touche LLP

Detroit, Michigan

February 25, 2008

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors Penske Automotive Group Inc:

We consent to the incorporation by reference in the registration statements No. 333-105311, 333-14971, 333-26219, 333-50816, and 333-61835 on Form S-8 and Registration Statement No. 333-134170 on Form S-3ASR of Penske Automotive Group, Inc. of our report dated February 25, 2008, with respect to the consolidated balance sheets of UAG UK Holdings Limited as of December 31, 2007 and 2006, the related consolidated statements of income, stockholder’s equity, comprehensive income and cash flows for each of the years in the three-year period ended December 31, 2007, the related financial statement schedule (none of either the aforementioned financial statements or the related financial statement schedule are presented separately therein) and the effectiveness of internal control over financial reporting as of December 31, 2007. Our report includes an explanatory paragraph relating to the Company electing application of Staff Accounting Bulletin No. 108 “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”,

/s/ KPMG Audit Plc

Birmingham, United Kingdom

February 25, 2008

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Roger S. Penske, certify that:

1. I have reviewed this annual report on Form 10-K of Penske Automotive Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Roger S. Penske

Roger S. Penske

Title:  Chief Executive Officer

February 25, 2008

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Robert T. O’Shaughnessy, certify that:

1. I have reviewed this annual report on Form 10-K of Penske Automotive Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Robert T. O’Shaughnessy

Robert T. O’Shaughnessy

Chief Financial Officer

February 25, 2008

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Penske Automotive Group, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Roger S. Penske and Robert T. O’Shaughnessy, Principal Executive Officer and Principal Financial Officer, respectively, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  Roger S. Penske

Roger S. Penske

Chief Executive Officer

February 25, 2008

/s/  Robert T. O’Shaughnessy

Robert T. O’Shaughnessy

Chief Financial Officer

February 25, 2008

A signed original of this written statement required by Section 906 has been provided to Penske Automotive Group, Inc. and will be retained by Penske Automotive Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.