SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT, dated as of August 1, 1995, among United
Auto Group, Inc., a Delaware corporation ("UAG"), United Landers, Inc., a
Delaware corporation and a wholly owned subsidiary of UAG ("UAG/Landers"),
Landers Auto Sales, Inc., an Arkansas corporation (the "Company"), Steve
Landers, an individual residing in Arkansas ("Steve Landers"), and John Landers,
an individual residing in Arkansas ("John Landers") (Steve Landers and John
Landers are collectively referred to herein as the "Landers Shareholders").
UAG/Landers and the Landers Shareholders, and each other person or entity that
may become a party hereto as contemplated hereby, are hereinafter individually
referred to a "Shareholder" and collectively referred to as the "Shareholders."
W I T N E S S E T H :
WHEREAS, the Company has authorized capital stock of ten shares of
common stock, no par value (the "Common Stock"); and
WHEREAS, immediately prior to consummation of the UAG Purchase (as
defined below), the Landers Shareholders and Bob Landers will each own 3.33
shares of Common Stock, which will constitute all of the issued and outstanding
capital stock of the Company as of such time; and
WHEREAS, the Landers Shareholders, Bob Landers, UAG and the Company
have entered into an Amended and Restated Stock Purchase Agreement, dated as of
July 1, 1995 (the "Stock Purchase Agreement"), pursuant to which UAG has agreed
to purchase (the "UAG Purchase") 3.33 shares of Common Stock from Bob Landers
and 2.335 shares of Common Stock from each of the Landers Shareholders (the
"Shares"), such that immediately after giving effect to the UAG Purchase, UAG
and the Landers Shareholders will own eighty percent (80%) and twenty percent
(20%), respectively, of all of the issued and outstanding shares of Common
Stock, on a fully-diluted basis; and
WHEREAS, immediately after consummation of the UAG Purchase, UAG will
contribute the Shares to UAG/Landers, its wholly owned subsidiary; and
WHEREAS, pursuant to the Stock Purchase Agreement it is a condition
precedent to the obligations of UAG and the Landers Shareholders to consummate
the UAG Purchase that UAG, UAG/Landers, the Company and the Landers Shareholders
shall have entered into this Agreement; and
WHEREAS, UAG, UAG/Landers, the Company and the Landers Shareholders
desire, INTER ALIA, to (i) make arrangements as to the composition of the
Company's Board of Directors and the executive committee thereof, (ii) make
certain provisions for the management of the Company, and (iii) provide certain
rights and set certain restrictions in connection with the transfer of the
Shareholders' shares of capital stock of the Company;
NOW, THEREFORE, in consideration of the mutual terms, conditions,
covenants and agreements made herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1. CERTAIN DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
"AFFILIATE" shall mean, with respect to any Shareholder, (i) in all cases,
any Person that, directly or indirectly, controls, is controlled by or is under
common control with such Shareholder and (ii) in the case of a Shareholder who
is a natural person, his spouse, his issue, his estate and any trust entirely
for the benefit of his spouse and/or issue. Neither the Company nor any of its
Subsidiaries shall be deemed an Affiliate of any Shareholder. For purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with") as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
"APPRAISED VALUE" shall have the meaning specified in Section 5.2(c)
hereof.
"BUSINESS DAY" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday, excluding Federal holdings.
"COMMON STOCK" shall have the meaning specified in the first recital
hereof.
"COMMON STOCK EQUIVALENTS" shall mean all rights, warrants, options,
indebtedness or other securities exercisable or exchangeable for, or convertible
into, directly or indirectly, Common Stock.
2
"COMPANY" shall have the meaning set forth in the preamble hereof.
"COMPANY BOARD" shall have the meaning specified in Section 3.1(a) hereof.
"EFFECTIVE DATE" shall have the meaning set forth in Section 2.1 hereto.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"FIRST OFFER" shall have the meaning specified in Section 4.3(a) hereof.
"FIRST OFFER PERIOD" shall have the meaning specified in Section 4.3(a)
hereof.
"FULLY-DILUTED SHARES" shall mean, at any time, the outstanding Common
Stock plus (without duplication) all shares of Common Stock issuable, whether at
such time, upon the passage of time or occurrence of future events, upon the
exercise, conversion or exchange of all then outstanding Common Stock
Equivalents.
"LANDERS DESIGNEE" shall have the meaning specified in Section 3.1(a)
hereof.
"LANDERS EXCHANGED SHARES" shall have the meaning specified in Section
5.1(c) hereof.
"LANDERS INTEREST" shall have the meaning specified in Section 5.1(a)
hereof.
"LANDERS INTEREST PERCENTAGE" shall have the meaning specified in Section
5.1(c) hereof.
"LANDERS INTEREST VALUE" shall have the meaning specified in Section 5.1(b)
hereof.
"LANDERS SHAREHOLDERS" shall have the meaning specified in the preamble
hereof.
"MANAGING UNDERWRITER" shall have the meaning specified in Section 5.1(b)
hereof.
"MINORITY INTEREST PERCENTAGE" shall have the meaning specified in Section
5.1(c) hereof.
3
"MINORITY SHARES" shall have the meaning specified in Section 5.1(c)
hereof.
"OFFERED SHARES" shall have the meaning specified in Section 4.3(a) hereof.
"OTHER MINORITY HOLDERS" shall have the meaning specified in Section 5.1(c)
hereof.
"OTHER MINORITY INTEREST" shall have the meaning specified in Section
5.1(c) hereof.
"OUTSTANDING UAG SHARES" shall have the meaning specified in Section 5.1(c)
hereof.
"PERSON" shall mean an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
"PUBLIC FLOAT DATE" shall mean the date on which shares of Common Stock
shall have been sold by the Company or its shareholders pursuant to a Public
Offering.
"PUBLIC OFFERING" shall mean the completion of a sale of Common Stock
pursuant to a registration statement which has become effective under the
Securities Act, excluding registration statements on Form S-4, S-8 or similar
forms.
"PURCHASE OFFER" shall have the meaning specified in Section 4.3(a) hereof.
"PURCHASER" shall have the meaning specified in Section 4.3(a) hereof.
"PUT" shall have the meaning specified in Section 5.2(a) hereof.
"PUT CLOSING" shall have the meaning specified in Section 5.2(a) hereof.
"PUT CLOSING DATE" shall have the meaning specified in Section 5.2(a)
hereof.
"PUT INTEREST" shall have the meaning specified in Section 5.2(a) hereof.
"PUT NOTICE" shall have the meaning specified in Section 5.2(a) hereof.
4
"PUT PRICE" shall have the meaning specified in Section 5.2(c) hereof.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"SELLING STOCKHOLDER" shall have the meaning specified in Section 4.3(a)
hereof.
"SHAREHOLDERS" shall have the meaning specified in the preamble hereof.
"SHARES" shall have the meaning specified in the third recital hereof.
"STOCK PURCHASE AGREEMENT" shall have the meaning specified in the third
recital hereof.
"SUBSIDIARY" shall mean (i) a corporation a majority of whose capital stock
with voting power, under ordinary circumstances, to elect directors is at the
time, directly or indirectly, owned by the Company, by a Subsidiary or by the
Company and a Subsidiary or (ii) any other Person (other than a corporation) in
which the Company, a Subsidiary or the Company and a Subsidiary, directly or
indirectly, at the date of determination thereof, has at least a majority
ownership interest.
"SUBSTITUTE DIRECTOR" shall have the meaning specified in Section 3.1(b)
hereof.
"TAG-ALONG OFFER" shall have the meaning specified in Section 4.3(b)
hereof.
"TAG-ALONG PARTICIPATION NOTICE" shall have the meaning specified in
Section 4.3(b) hereof.
"TAG-ALONG SALE" shall have the meaning specified in Section 4.3(b) hereof.
"TAG-ALONG SALE NOTICE" shall have the meaning specified in Section 4.3(b)
hereof.
"TAKE-ALONG SALE" shall have the meaning specified in Section 4.3(c)
hereof.
5
"TOTAL EXCHANGED SHARES" shall have the meaning specified in Section 5.1(c)
hereof.
"TOTAL INTEREST PERCENTAGE" shall have the meaning specified in Section
5.1(c) hereof.
"TRANSFER" shall have the meaning specified in Section 4.1(a) hereof.
"UAG" shall have the meaning specified in the preamble hereof.
"UAG COMMON STOCK" shall have the meaning specified in Section 5.1(a)
hereof.
"UAG COMMON STOCK EQUIVALENTS" shall have the meaning specified in Section
5.1(c) hereof.
"UAG COMMON STOCK PRICE" shall have the meaning specified in Section 5.1(b)
hereof.
"UAG DESIGNEE" shall have the meaning specified in Section 3.1(a) hereof.
"UAG EXCHANGE" shall have the meaning specified in Section 5.1(a) hereof.
"UAG EXCHANGE DATE" shall have the meaning specified in Section 5.1(c)
hereof.
"UAG PUBLIC OFFERING" shall have the meaning specified in Section 5.1(c)
hereof.
"UAG PURCHASE" shall have the meaning specified in third recital hereof.
"UAG SHAREHOLDERS AGREEMENT" shall mean the Stockholders' Agreement, dated
as of October 15, 1993, among UAG and certain shareholders of UAG named therein.
"WITHDRAWING DIRECTOR" shall have the meaning specified in Section 3.1(b)
hereof.
6
ARTICLE II
EFFECTIVENESS OF AGREEMENT
Section 2.1. EFFECTIVE DATE. This Agreement shall become effective as of
the date and time (the "Effective Date") the UAG Purchase shall have been
consummated, and this Agreement shall have no effect for any purpose unless and
until the UAG Purchase shall have occurred.
ARTICLE III
MANAGEMENT OF THE COMPANY;
ACTIVITIES OF THE SHAREHOLDERS
Section 3.1. BOARD OF DIRECTORS.
(a) NUMBER AND MEMBERSHIP. The Shareholders and the Company shall
take all action within their respective power, including, but not limited to,
the voting of capital stock of the Company, required to cause the Board of
Directors of the Company (the "Company Board") to consist of five (5) members
and to at all times include (i) four (4) designees of UAG (each a "UAG
Designee") and (ii) one (1) designee of the Landers Shareholders (the "Landers
Designee"), provided that the Landers Designee shall be Steve Landers or, in the
event that Steve Landers is no longer employed by the Company, John Landers.
The right of the Landers Shareholders to designate one director under this
Section 3.1(a) shall terminate at such time as (i) the Landers Shareholders and
their Affiliates shall first cease to own at least 50% of the Fully-Diluted
Shares owned by the Landers Shareholders on the Effective Date (after giving
effect to the UAG Purchase and without giving effect to any stock splits or
reclassifications occurring after the Effective Date) or (ii) both Steve
Landers' and John Landers' employment with the Company has terminated.
(b) SUBSTITUTE DIRECTOR. In the event that any director (a
"Withdrawing Director") designated in the manner set forth in Section 3.1(a)
hereof is unable to serve, or once having commenced to serve, is removed or
withdraws from the Company Board (other than as contemplated in Section 3.1(a)
hereof), such Withdrawing Director's replacement (the "Substitute Director") on
the Company Board will be designated by the party who designated the Withdrawing
Director. Subject to the foregoing, any UAG Designee may be removed, with or
without cause, by UAG, and UAG may thereafter designate a replacement for such
director. The Company and each of the Shareholders agree to take all action
within its or his power, including, but not limited to, the
7
voting of capital stock of the Company, to cause the election of such Substitute
Director.
(c) VACANCIES. Subject to Section 3.1(a) hereof, in the event any
Shareholder entitled to designate a director or directors pursuant to Section
3.1(a) hereof ceases to be so entitled, the vacancy or vacancies resulting
therefrom shall be filled by the remaining directors or by the Shareholders in
the manner provided by law.
(d) EXECUTIVE COMMITTEE. The Company and the Shareholders shall take
all action within their respective power, including, but not limited to, the
voting of capital stock of the Company, required to cause the Executive
Committee of the Company Board to consist of two UAG Designees and the Landers
Designee and each such designee shall be entitled to serve on such committee for
as long as UAG or the Landers Shareholders, as the case may be, are entitled to
designate such designee as a director pursuant to Section 3.1(a) hereof. It is
agreed by the parties hereto that the Executive Committee of the Company Board
shall initially be comprised of Marshall S. Cogan and Carl Spielvogel as the UAG
Designees and Steve Landers as the Landers Designee.
(e) NO ASSIGNMENT. Notwithstanding anything to the contrary in this
Agreement, the rights of the Landers Shareholders to designate a director of the
Company pursuant to Section 3.1(a) hereof are not transferable, whether by sale
of capital stock or otherwise, to any Person.
Section 3.2. MANAGEMENT.
(a) MANAGEMENT OF THE COMPANY. The Landers Shareholders shall have
responsibility for the day-to-day management of the Company, subject in all
cases to the instructions and requirements of, and the policy guidelines
established by, UAG, the Company Board (or the Executive Committee thereof) or
the Chief Executive Officer of UAG. In connection with the management of the
Company, prior to the 1st day of December of each year, the Landers Shareholders
(or their designee) shall prepare a detailed business plan of the Company
covering the following year's budget and subsequent long-range business
forecasts and projections of operating results, which shall be submitted to the
Executive Committee of the Company Board and the Chief Executive Officer of UAG
for its and his approval. Within forty-five (45) days of the close of each
fiscal quarter of the Company, the Landers Shareholders shall provide the
Executive Committee of the Company Board and the
8
Chief Executive Officer of UAG with a comparison of actual year-to-date results
with the corresponding budgeted amounts.
(b) TRANSACTIONS REQUIRING CONSENT OF LANDERS DESIGNEE. For as long
as the Landers Shareholders and their Affiliates own shares of capital stock of
the Company or Common Stock Equivalents representing collectively at least
10% of the Fully-Diluted Shares, prior to the third anniversary of the date
hereof, without the consent of the Landers Designee, which consent shall not be
unreasonably withheld, (A) the Company shall not, and the remaining
Shareholders, severally, shall not permit the Company to:
(i) directly or indirectly declare or pay any dividends or make
distributions in cash, property or securities upon any of its equity
securities to the extent any such dividend or distribution has the effect
of reducing the working capital of the Company to an amount that is less
than 80% of the amount of working capital required by the automobile
manufacturers with whom the Company has entered into franchise agreements;
(ii) directly or indirectly redeem, purchase or otherwise acquire any
equity security of the Company, except for redemptions and purchases
permitted herein or in the Stock Purchase Agreement;
(iii) voluntarily liquidate or dissolve;
(iv) merge or consolidate with any Person; or
(v) sell or dispose of any assets other than in the ordinary course of
business; and
(B) UAG shall not grant registration rights to any future investor
containing terms and conditions more favorable to such future investor than
those terms and conditions applicable to the Landers Shareholders contained in
the Registration Rights Agreement, dated August 1, 1995, among UAG and certain
parties named therein.
9
ARTICLE IV
TRANSFER OF SECURITIES
Section 4.1. CONSENT OF UAG.
(a) Subject to the rights of Landers Shareholders contained in
Sections 4.3(b), 5.1 and 5.2 hereof and for as long as UAG/Landers (or an
Affiliate thereof) shall own 35% of the Fully-Diluted Shares, prior to the third
anniversary of the date hereof, no Shareholder other than UAG/Landers shall
directly or indirectly Transfer (as defined below) any shares of capital stock
of the Company now or hereafter at any time owned by such Shareholder or any
interest therein, or the stock certificate or certificates representing any such
shares, or any voting trust certificate or certificates issued with respect to
such shares, without the prior written consent of UAG. Any Transfer effected,
or purported or attempted to be effected, not in accordance with the terms and
conditions of this Section 4.1, or to a Person prohibited by law from holding
shares of capital stock of the Company, shall be void and shall not bind the
Company. As used in this Agreement, the term "Transfer" shall mean and include
(i) when used as a verb, the act of selling, pledging, mortgaging,
hypothecating, giving, transferring, creating a security interest, lien or trust
(voting or otherwise), assigning or otherwise encumbering or disposing of, and
(ii) when used as a noun, any sale, pledge, mortgage, hypothecation, gift,
transfer, creation of security interest, lien or trust, any assignment or other
encumbrance or disposition.
(b) Notwithstanding the provisions of Section 4.1(a) hereof, but
subject to the provisions of Section 4.2(a) and (b) hereof, a Shareholder may
effect a Transfer of shares of capital stock of the Company by will or the laws
of descent and distribution to the legal representative of such Shareholder or
to such Shareholder's spouse, immediate family members or lineal descendants or
a trust the primary beneficiaries of which are such persons.
Section 4.2. GENERAL RESTRICTIONS. No Shareholder (including UAG/Landers
and any other Shareholder permitted to Transfer shares of capital stock of the
Company or any interest therein in accordance with Section 4.1 hereof) shall,
directly or indirectly, Transfer any shares of capital stock of the Company or
any interest therein, whether voluntarily or involuntarily, unless:
(a) (i) such Transfer complies with the provisions of this Agreement,
including Section 4.3 hereof, if applicable, and
10
(ii) the transferee (if other than another Shareholder) agrees to be bound by
this Agreement and executes a counterpart hereof and such further documents as
may be necessary, in the opinion of the Company, to make it a party hereto (any
such transferee shall be deemed to be a Shareholder for purposes of this
Agreement); and
(b) such Transfer is made pursuant to either (i) an effective
registration statement under the Securities Act and any applicable state
securities laws, or (ii) an available exemption from the registration
requirements of the Securities Act and such laws and, prior to any such Transfer
(other than a Transfer to another Shareholder), the Person proposing the
Transfer provides to the Company a written opinion of legal counsel satisfactory
in form and substance to the Company and its counsel to the effect that the
proposed Transfer may be effected without registration under the Securities Act
and any applicable state securities laws.
Section 4.3. RIGHT OF FIRST REFUSAL AND CO-SALE RIGHTS AND OBLIGATIONS.
(a) RIGHT OF FIRST REFUSAL.
(i) FIRST OFFER NOTICE. Except as otherwise permitted by Section
4.1(b) hereof, subject to Section 4.1(a) hereof, at any time prior to the Public
Float Date, no Shareholder (other than UAG/Landers (or an Affiliate thereof))
shall transfer all or any of his shares of Common Stock (which shall include all
or any Common Stock Equivalents) (the "Offered Shares") unless (x) such
Shareholder (the "Selling Shareholder") has received a bona fide written offer
(the "Purchase Offer") from the proposed transferee of the Offered Shares (the
"Purchaser") to purchase the Offered Shares, which offer shall be in writing
signed by the Purchaser, and (y) the Selling Shareholder first offers to sell to
UAG the Offered Shares. Prior to making any transfer that is subject to this
Section 4.3(a), the Selling Shareholder shall give UAG written notice (the
"Offer Notice") which shall include (x) the identity of the Purchaser, (y) a
copy of the Purchase Offer, and (z) an offer (the "First Offer") to sell to UAG
the Offered Shares upon the same terms and conditions as those provided for in
the Purchase Offer. The First Offer shall be irrevocable for a period of thirty
(30) days following receipt by UAG of the Offer Notice (the "First Offer
Period").
(ii) ACCEPTANCE OF FIRST OFFER. At any time during the First Offer
Period, UAG may accept the First Offer of the Offered Shares by giving written
notice to the Selling Shareholder of such acceptance . In the event UAG accepts
the First Offer, the closing of the sale of the Offered Shares shall take place
within
11
thirty (30) days after the First Offer is accepted by UAG or, if later, the date
of closing set forth in the Purchaser Offer. At such closing, the Selling
Shareholder will deliver certificates for such Offered Shares against payment of
the purchase price therefor, and UAG will acquire the Offered Shares free and
clear of all liens, pledges, encumbrances, restrictions and security interests
of any kind. If UAG does not accept the First Offer, the Selling Shareholder
may sell the Offered Shares to the Purchaser at any time within thirty (30) days
after the last day of the First Offer Period, provided that such sale shall be
made on terms no less favorable to the Selling Shareholder than the terms
contained in the Purchase Offer and provided further that such sale complies
with the terms, conditions and restrictions of this Agreement. In the event
that the Offered Shares are not sold in accordance with the terms of the
preceding sentence, the Offered Shares shall again be subject to all of the
conditions and restrictions of this Section 4.3(a).
(b) TAG-ALONG RIGHT.
(i) TAG-ALONG SALE NOTICE. If, at any time prior to
the earlier to occur of the Public Float Date and the Put Closing Date, UAG (or
an Affiliate thereof) at any time receives a bona fide offer (a "Tag-Along
Offer") from a third party to purchase shares of Common Stock from UAG (or an
Affiliate thereof) or UAG otherwise proposes to sell shares of Common Stock for
value, in each case other than in connection with a Public Offering (a
"Tag-Along Sale"), UAG shall be required to notify the Landers Shareholders, not
less than fifteen (15) days prior to such proposed Tag-Along Sale, of such
Tag-Along Offer or proposed Tag-Along Sale and the Landers Shareholders shall
have the option to participate in such Tag-Along Sale as set forth in clause
(ii) of this Section 4.3(b). The notice from UAG (the "Tag-Along Sale Notice")
shall set forth: (A) the number of shares of Common Stock proposed to be
transferred, (B) the name and address of the proposed purchaser, (C) the
proposed amount of consideration and terms and conditions of payment offered by
or to such proposed purchaser, and (D) that the proposed purchaser has been
informed of the "tag-along" rights provided for in this Section 4.3(b) and has
agreed to purchase shares of Common Stock in accordance with the terms hereof.
(ii) TAG-ALONG RIGHT. Any time prior to the earlier to occur of the
Public Float Date and the Put Closing Date, each Landers Shareholder shall have
the right to require the proposed purchaser to purchase from him a number of
whole shares of Common Stock up to the number of shares equal to the total
number of shares to be sold to the proposed purchaser multiplied by a fraction,
the numerator of which is the number of shares of
12
Common Stock held by him and the denominator of which is the total number of
shares of Common Stock held by him and UAG (or an Affiliate thereof). Any
shares of Common Stock purchased from a Landers Shareholder pursuant to this
Section 4.3(b) shall be paid for upon the same terms and conditions (including
as to price and type of consideration) received by UAG.
(iii) TAG-ALONG NOTICE. If a Landers Shareholder elects to exercise
the tag-along right provided for in this Section 4.3(b), he must deliver written
notice to UAG (the "Tag-Along Participation Notice") within five (5) days
following receipt by him of the Tag-Along Sale Notice. If such Landers
Shareholder does not deliver a Tag-Along Participation Notice within such
five-day period he shall be deemed to have waived his tag-along right with
respect to the proposed Tag-Along Sale. Each Tag-Along Participation Notice
shall state the number of shares of Common Stock that such Landers Shareholder
proposes to include in such transfer to the proposed purchaser up to the number
of shares determined in accordance with Section 4.3(b)(ii) hereof.
(c) TAKE-ALONG RIGHT.
(i) TAKE-ALONG NOTICE. If UAG (or an Affiliate thereof) at any time
receives a bona fide offer from a third party to purchase shares of Common Stock
from UAG (or an Affiliate thereof) or UAG (or an Affiliate thereof) otherwise
proposes to sell shares of Common Stock for value (a "Take-Along Sale"), UAG can
require the other Shareholders, to participate in such Take-Along Sale as set
forth in clause (ii) of this Section 4.3(c). If UAG elects to exercise the
take-along right provided for in this Section 4.3(c), it must provide, at least
twenty (20) days before the date of consummation of the proposed Take-Along
Sale, notice to each other Shareholder setting forth: (i) the number of shares
of Common Stock proposed to be transferred, (ii) the number of shares of Common
Stock that such Shareholder must include in such transfer to the proposed
purchaser as determined in accordance with clause (ii) of this Section 4.3(c),
(iii) the name and address of the proposed purchaser, (iv) the proposed amount
of consideration and terms and conditions of payment offered by or to such
proposed purchaser, and (v) that the proposed purchaser has been informed of the
"take-along" rights provided for in this Section 4.3(c) and has agreed to
purchase shares of Common Stock in accordance with the terms hereof.
(ii) TAKE-ALONG RIGHT. UAG shall at any time have the right to
require each other Shareholder to sell to the proposed purchaser a number of
whole shares of Common Stock up to the number of shares equal to the total
number of shares to be sold
13
to the proposed purchaser multiplied by a fraction, the numerator of which is
the number of shares of Common Stock held by such other Shareholder and the
denominator of which is the total number of shares of Common Stock held by all
of the Shareholders, including UAG (or an Affiliate thereof). Any shares of
Common Stock purchased from Shareholders other than UAG pursuant to this Section
4.3(c) shall be paid for upon the same terms and conditions (including as to
price and type of consideration) received by UAG.
Section 4.4. LEGENDS ON STOCK CERTIFICATES. For so long as shares of
capital stock of the Company held by a Shareholder are subject to this
Agreement, all certificates representing such shares shall bear the following
legend:
"The securities represented by this certificate are subject to
restrictions on transfer and certain other provisions of the Shareholders'
Agreement, dated as of August 1, 1995, as the same may be amended from time
to time, by and among United Auto Group, Inc., United Landers, Inc.,
Landers Auto Sales, Inc. (the "Company"), Steve Landers, John Landers, Bob
Landers and certain other shareholders of the Company who may from time to
time become parties to such Shareholders' Agreement, a copy of which may be
obtained at the offices of the Company."
Section 4.5. IMPROPER TRANSFERS INEFFECTIVE. Any purported transfer of
Common Stock by a Shareholder which is not permitted by the foregoing provisions
of this Article IV, or which is in violation of such provisions, shall be void
and of no force and effect whatsoever.
ARTICLE V
EXCHANGE; PUT
Section 5.1 EXCHANGE FOR UAG COMMON STOCK.
(a) In the event of an underwritten public offering pursuant to an
effective registration statement under the Securities Act covering the offering
and sale of common stock, par value $.0001 per share, of UAG ("UAG Common
Stock") for the account of UAG on a firm commitment basis (the "UAG Public
Offering"), the Landers Shareholders (and any transferee or Affiliate of the
Landers Shareholders holding shares of Common Stock) shall be required to
exchange all shares of Common Stock beneficially owned by them (and their
transferees and Affiliates) (the "Landers Interest") immediately prior to the
closing of the
14
UAG Public Offering for shares of UAG Common Stock under the terms and
conditions set forth below, and UAG shall be required to exchange the Landers
Interest for UAG Common Stock (such exchange is hereinafter referred to as the
"UAG Exchange").
(b) If the parties are required to consummate the UAG Exchange, the
value of UAG (the "UAG Value") and the Company (the "Company Value") shall be
determined by the investment banking firm which is acting as managing
underwriter (the "Managing Underwriter") for the UAG Public Offering and such
determination shall be binding upon the parties hereto. The value of the
Landers Interest (the "Landers Interest Value") shall be an amount equal to (A)
the Company Value multiplied by (B) a fraction, the numerator of which shall be
equal to the aggregate number of shares of Common Stock comprising the Landers
Interest immediately prior to the UAG Exchange, and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to the UAG Exchange. The additional cost which the Managing Underwriter
charges to compute the UAG Value and the Company Value shall be paid by UAG.
(c) The number of shares of UAG Common Stock to which the Landers
Shareholders are entitled upon the consummation of the UAG Exchange (the
"Landers Exchanged Shares") shall be determined by multiplying the Landers
Interest Percentage (as defined below) by the total number of shares of UAG
Common Stock outstanding immediately prior to the closing of the UAG Public
Offering, which such number of shares shall include all shares of UAG Common
Stock issued in respect of the Landers Interest pursuant to this Section 5.1 and
to holders of minority interests (the "Other Minority Holders") in subsidiaries
of UAG (the "Other Minority Interests") pursuant to agreements comparable to the
agreement contained in this Section 5.1 (collectively, the "Minority Shares"),
but shall not include any other shares of UAG Common Stock issuable upon the
exercise, conversion or exchange of all then outstanding rights, warrants,
options, indebtedness or other securities exercisable or exchangeable for, or
convertible into, directly or indirectly, UAG Common Stock (collectively, "UAG
Common Stock Equivalents"). Specifically, the number of Landers Exchange Shares
shall be determined by multiplying (A) the number of Total Exchanged Shares (as
defined below) by (B) a fraction, the numerator of which shall be equal to the
Landers Interest Percentage, and the denominator of which shall be equal to the
Total Interest Percentage (as defined below). For purposes of this Section 5.1,
(i) the "Landers Interest Percentage" shall be determined by dividing the
Landers Interest Value by the UAG Value, (ii) the "Total Interest Percentage"
shall equal the sum of all of the "Minority Interest Percentages," each of which
shall be determined pursuant to the
15
agreements between UAG and the Other Minority Holders relating to the exchange
of the Other Minority Interests for shares of UAG Common Stock in connection
with the UAG Public Offering, and (iii) the "Total Exchanged Shares" shall be
determined by dividing (A) the product of (x) the Total Interest Percentage and
(y) the total number of shares of UAG Common Stock outstanding immediately prior
to the closing of the UAG Public Offering (the "Outstanding UAG Shares") (not
including the Minority Shares and any shares of UAG Common Stock issuable upon
the exercise, conversion or exchange of any UAG Common Stock Equivalent) by (B)
an amount equal to 1 minus the Total Interest Percentage. Expressed as a
formula, the number of Landers Exchanged Shares shall be determined as follows:
(TIP X OUS) LIP
--------------- X ---
(1 - TIP) TIP,
where "TIP" refers to the Total Interest Percentage, "OUS" refers to the
Outstanding UAG Shares and "LIP" refers to the Landers Interest Percentage.
(d) The Landers Exchanged Shares shall be issued immediately prior to
the occurrence of the UAG Public Offering and UAG shall not be required to issue
such shares if the UAG Public Offering is not consummated for any reason.
(e) Upon consummation of the UAG Exchange, (i) if the UAG Public
Offering is not a Qualified Public Offering (as such term is defined in UAG's
Amended and Restated Certificate of Incorporation) or the UAG Shareholders
Agreement otherwise remains in full force or effect, then the Landers
Shareholders shall each become a party to the UAG Shareholders Agreement and
(ii) the Landers Shareholders agree to take such actions and to execute such
instruments as UAG may reasonably request to evidence the consummation of the
UAG Exchange and the change in the agreement between the parties hereto as a
result of the UAG Exchange.
Section 5.2 ABILITY TO PUT. (a) If the UAG Public Offering has not
occurred within five years of the date hereof, pursuant to the provisions of
this Section 5.2, the Landers Shareholders shall have the option to sell to UAG,
and thereupon UAG shall have the obligation to purchase, all, but not less than
all, of the number of shares of Common Stock held by the Landers Shareholders
(the shares which are put by the Landers Shareholders pursuant to this Section
5.2 are hereinafter referred to as the "Put Interest") at a price equal to the
Put Price (as defined in Section 5.2(c)) (such option to sell and reciprocal
obligation to purchase are hereinafter referred to as
16
the "Put"). In the event the Landers Shareholders intend to exercise the Put,
the Landers Shareholders shall deliver a written notice (the "Put Notice") to
UAG notifying UAG of the Landers Shareholders' desire to exercise the Put. The
closing ("Put Closing") for the purchase by UAG of the Put Interest upon
exercise of the Put shall occur at UAG's principal office, or at such other
place as shall be mutually agreeable to the Landers Shareholders and UAG, within
twenty (20) Business Days after the determination of the Put Price in accordance
with Sections 5.2(c) (such date of closing hereinafter referred to as the "Put
Closing Date").
(b) PUT CLOSING. On the Put Closing Date, (i) UAG shall pay to the
Landers Shareholders by wire transfer or certified or official bank check an
amount equal to the Put Price with respect to the Put Interest and (ii) the
Landers Shareholders shall deliver to UAG such documents and instruments as
shall be effective to vest in UAG all of the Landers Shareholders' right, title
and interest in and to all of the Put Interest, free and clear of all liens,
pledges, encumbrances, restrictions and security interests of any kind.
(c) PUT PRICE. (A) In the event that either Steve Landers or John
Landers is not continuously employed by the Company from the date hereof through
the fifth anniversary of the date hereof pursuant to the terms of his respective
Employment Agreement with the Company, "Put Price" for the Put Interest shall
mean an amount equal to the Put Interest's proportionate share of the
UAG/Landers Net Worth (as defined herein). For purposes of this Section 5.2,
the term "UAG/Landers Net Worth" shall mean the value or amount, as reflected on
UAG/Landers most recent consolidated balance sheet, of (i) the total assets of
the Companies, LESS (ii) the intangible assets of the Companies, LESS (iii) the
current liabilities of the Companies, LESS (iv) the long-term liabilities of the
Companies and any outstanding equity securities that are senior to the Common
Stock, provided that for purposes of this Section 5.1(c), UAG/Landers Net Worth
shall be calculated giving effect to the net worth (as determined in accordance
with the foregoing formula) (the "Acquired Net Worth") of the entity or entities
(each, an "Acquired Entity" and, collectively, the "Acquired Entities") acquired
pursuant to Section 5.11 of the Stock Purchase Agreement, provided that (i) if
the consideration paid by UAG (or an Affiliate thereof) in the acquisition
pursuant to which UAG contributes $5,000,000 exceeds $5,000,000, then the
Acquired Net Worth included in the UAG/Landers Net Worth shall be equal to an
amount obtained by multiplying the net worth of the Acquired Entity obtained in
such acquisition by a fraction, the numerator of which is equal to $5,000,000
and the denominator of which is equal to the
17
consideration paid in such acquisition, or (ii) if there is more than one
acquisition pursuant to Section 5.11 of the Stock Purchase Agreement pursuant to
which UAG has contributed an aggregate of $5,000,000, and the total
consideration paid by UAG (or an Affiliate thereof) in such acquisitions exceeds
$5,000,000, then the Acquired Net Worth included in the UAG/Landers Net Worth
with respect to all of the Acquired Entities shall be an amount equal to the
product of (A) the sum of each Acquired Entity's Pro Rata Net Worth (as defined
below) and (B) a fraction, the numerator of which is equal to $5,000,000 and the
denominator of which is equal to the total consideration paid for all of the
Acquired Entities. For purposes of this Agreement, the term "Acquired Entity's
Pro Rata Net Worth" shall mean, with respect to an Acquired Entity, an amount
equal to the product of (i) the net worth of such Acquired Entity and (ii) a
fraction, the numerator of which is equal to the consideration paid for such
Acquired Entity and the denominator of which is equal to the total consideration
paid for all Acquired Entities.
(B) In the event that both Steve Landers and John Landers remain
continuously employed by the Company from the date hereof through the fifth
anniversary of the date hereof pursuant to the terms of their respective
Employment Agreements with the Company, "Put Price" for the Put Interest shall
mean the fair market value of the Put Interest determined by mutual agreement of
UAG and the Landers Shareholders. In the event UAG and the Landers Shareholders
are unable to agree on a fair market value, UAG and the Landers Shareholders
shall each submit their respective valuations of the Put to a third party
appraiser selected pursuant to the procedures set forth below who shall
determine a fair market value pursuant to the appraisal procedure set forth
below, which shall be binding upon the parties hereto (the "Appraised Value").
In order to determine the Appraised Value of the Put Interest to be purchased
and sold pursuant to the provisions of this Section 5.2, UAG and the Landers
Shareholders shall mutually agree on an appraiser who shall choose one of the
valuations submitted to it pursuant to this Section 5.2(c)(B) within thirty (30)
days, which shall be binding on UAG and the Landers Shareholders. UAG and the
Landers Shareholders shall share the cost of such appraiser equally. The
appraiser appointed pursuant to this Section 5.2(c)(B) shall be a nationally
recognized investment banking firm or nationally recognized accounting firm
qualified in valuing automobile dealerships similar to the Company and shall be
unaffiliated with either party.
18
ARTICLE VI
MISCELLANEOUS
Section 6.1. TERM. All provisions of this Agreement shall terminate upon
consummation of the UAG Exchange or, in respect of any Shareholder, when such
Shareholder no longer owns any capital stock of the Company. Notwithstanding
the foregoing, the provisions contained in Article III hereof shall terminate
and cease to be of any further effect on August 1, 2004, unless the Shareholders
agree in writing to extend the effectiveness of such provisions at any time
after August 1, 2002 and prior to August 1, 2004.
Section 6.2. AMENDMENT; WAIVER. This Agreement may be altered or amended
only with the written consent of all of the parties hereto. Any term of this
Agreement and the observance of any term herein may be waived (either generally
or in a particular instance and either retroactively or prospectively) by any
party hereto only with the written consent of such party, provided that any such
waiver by any party hereto shall not operate or be construed as a waiver of any
other term or observance of any term herein, whether or not similar.
Section 6.3. SPECIFIC PERFORMANCE. The parties recognize that the
obligations imposed on them in this Agreement are special, unique and of
extraordinary character, and that in the event of breach by any party, damages
will be an insufficient remedy; consequently, it is agreed that the parties
hereto may have specific performance (in addition to damages) as a remedy for
the enforcement hereof, without proving damages.
Section 6.4. ASSIGNMENT. Except as otherwise expressly provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and permitted assigns of the parties
hereto. This Agreement may be assigned by a Shareholder only in connection with
a Transfer of any shares of Common Stock in accordance with the terms of this
Agreement; PROVIDED, HOWEVER, that the rights of the Landers Shareholders
contained in Sections 3.1, 3.2, 4.3 and 5.2 hereof cannot be assigned or
otherwise transferred in connection with any Transfer of shares of Common Stock
by the Landers Shareholders without the prior written consent of UAG. No
assignment of this Agreement shall relieve the assignor from any liability
hereunder.
Section 6.5. SHARES SUBJECT TO THIS AGREEMENT. All shares of capital
stock of the Company now owned or hereafter acquired
19
by any of the Shareholders shall be subject to the terms of this Agreement.
Section 6.6. ADDITIONAL SHAREHOLDERS. The Company covenants that it shall
not issue or cause to be issued at any time prior to the Public Float Date any
shares of capital stock of the Company to any Person in any transaction not
involving a Public Offering of such shares, unless as a condition to such
issuance such Person agrees to become a party to this Agreement and to be bound
by all the obligations of a Shareholder under this Agreement. Stock certificates
issued to such Persons shall be marked as provided in Section 4.4 hereof. No
shares of capital stock of the Company shall be transferred on the books of the
Company until all the applicable provisions of this Agreement have been complied
with.
Section 6.7. LEGEND. Certificates evidencing shares of capital stock
shall bear such legends as the Company shall reasonably deem necessary to
protect the rights of the parties hereunder.
Section 6.8. NOTICES. All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be delivered
personally, telegraphed, telexed, sent by facsimile transmission or sent by
certified, registered, or express mail, postage prepaid, to the parties at the
addresses sent forth below. Notices or other communications given by certified,
registered, or express mail shall be deemed given three (3) Business Days after
the date of mailing. Notices or other communications sent in any other manner
shall be deemed given only when actually received.
If to the Company:
Landers Auto Sales, Inc.
Congo Exit 118 -- Highway I-30
Benton, Arkansas 72015
Facsimile No.: (501) 778-4077
Attn: Mr. Steve Landers
20
with a copy to:
Davidson, Horne & Hollingsworth
401 West Capitol
Suite 501
P.O. Box 3363
Little Rock, Arkansas 62203
Facsimile No.: (501) 372-7142
Attn: Garland W. Binns, Jr., Esq.
and
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.,
Executive Vice President and
General Counsel
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Facsimile No.: (212) 821-8111
Attn: Peter A. Appel, Esq.
If to any Landers Shareholder:
Mr. Steve Landers
3316 Highway 5
Benton, Arkansas 72015
Facsimile No.: (501) 778-4077
with a copy to:
Davidson, Horne & Hollingsworth
401 West Capitol
Suite 501
P.O. Box 3363
Little Rock, Arkansas 62203
Facsimile No.: (501) 372-7142
Attn: Garland W. Binns, Jr., Esq.
21
If to UAG or UAG/Landers:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.,
Executive Vice President and
General Counsel
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Facsimile No.: (212) 821-8111
Attn: Peter A. Appel, Esq.
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so delivered or three (3) days after the date so mailed;
PROVIDED, HOWEVER, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
Section 6.9. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and which
counterparts together shall constitute one and the same agreement of the parties
hereto.
Section 6.10. SECTION HEADINGS. Headings contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit or extend
the scope or intent of this Agreement or any provisions hereof.
SECTION 6.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ARKANSAS, WITHOUT GIVING
EFFECT TO THE CHOICE-OF-LAW PROVISIONS THEREOF.
Section 6.12. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto respecting the subject matter hereof and
supersedes all prior agreements, discussions, and understandings among such
parties with respect to such subject matter.
22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
UNITED AUTO GROUP, INC.
By: /s/Carl Spielvogel
--------------------------
Name: Carl Spielvogel
Title: Chairman and
Chief Executive Officer
UNITED LANDERS, INC.
By:/s/ Carl Spielvogel
---------------------------
Name: Carl Spielvogel
Title: Chairman and
Chief Executive Officer
LANDERS AUTO SALES, INC.
By:/s/Steve Landers
---------------------------
Name: Steve Landers
Title: President and
Chief Executive Officer
/s/Steve Landers
------------------------------
Steve Landers
/s/John Landers
------------------------------
John Landers
23