EXHIBIT 10.1.3
-2-
September 22, 1995
United Auto Group, Inc.
375 Park Avenue, Suite 2201
New York, New York 10152
Re: PROPOSED SALE AND PURCHASE OF SECURITIES OF UNITED AUTO GROUP,
INC.
Gentlemen:
Reference is made to the Securities Purchase Agreement dated September
22, 1995 (together with all exhibits and schedules thereto, the "Securities
Purchase Agreement"), entered into by United Auto Group, Inc. (the "Company")
and J.P. Morgan Capital Corporation ("Morgan Capital"). This letter will
confirm our agreement to supplement the Securities Purchase Agreement as set
forth herein. Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Securities Purchase Agreement.
1. MANUFACTURER APPROVALS
(a) For purposes of Section 1.1 of the Warrants issued to Morgan
Capital, the term "Manufacturer Approvals" shall not include any manufacturer's
approval that contains any condition that could limit or adversely affect (i)
the ability of Morgan Capital (or its Affiliated transferees) to exercise the
Warrants or (ii) the ability of Morgan Capital to transfer Warrants and Warrant
Shares to its Affiliates as contemplated by Section 2.3 hereof (a "Limited
Approval"), PROVIDED that, notwithstanding any such adverse condition contained
in a manufacturer's approval, Morgan Capital, in its sole discretion, may, by
written notice to the Company, elect to treat any Limited Approval as a
Manufacturer Approval.
(b) The Company will use its reasonable best efforts to obtain all
applicable manufacturers' approvals relating to all the transactions
contemplated by the Securities Purchase Agreement.
2. TRANSFERABILITY.
2.1 RESTRICTIONS ON TRANSFER.
Notwithstanding the termination of any provision of this Agreement or
the Securities Purchase Agreements or anything to the contrary in this Agreement
or the Securities Purchase
United Auto Group, Inc.
September 22, 1995
Page 2
Agreements, no Regulation Y Stockholder (as defined below) may transfer Warrants
or Warrant Shares may sell, assign, pledge, encumber or transfer any shares of
Non-voting Common Stock or Warrants to purchase Non-voting Common Stock, except:
(a) to the Company or any member or members of the Initial
Shareholder Group who own or control a majority of the voting shares of the
Company;
(b) to the ultimate parent (a "Parent") of such Regulation Y
Stockholder or any wholly-owned direct or indirect subsidiary of such Parent or
any partnership of which any such subsidiary is the general partner (a
"Controlled Subsidiary");
(c) pursuant to Section 12 of the Warrants;
(d) to any member of the Initial Shareholder Group pursuant to
Section 13.1 of the Warrants;
(e) in connection with any merger, consolidation or reorganization of
the Company (a "reorganization");
(f) in a registered public offering or an open market sale pursuant
to Rule 144 under the Securities Act (or any successor rule or regulation);
(g) in a private sale (otherwise than to the Company, any member
referred to above of Initial Shareholder Group, a Parent, a Controlled
Subsidiary, in a reorganization or pursuant to Section 12 of the Warrants),
provided that the Regulation Y Stockholder (i) shall have first offered to the
Company the right to purchase all of such shares of Non-voting Common Stock
being sold pursuant to a written offer which shall have been open to acceptance
for a period of at least ten days, for cash at a price which did not exceed the
price obtained in the private sale, and (ii) shall not knowingly sell or
otherwise transfer to any single person or group of persons acting in concert a
number of shares of Non-voting Common Stock which, if converted into shares of
Voting Common Stock would represent more than two percent of the shares of
Voting Common Stock then outstanding; or
(h) upon the advice of counsel to such Regulation Y Stockholder that
such sale or other transfer is permitted under the laws and regulations
applicable to such Regulation Y Stockholder;
United Auto Group, Inc.
September 22, 1995
Page 3
PROVIDED, HOWEVER, that nothing in this Section 2.1 shall be deemed to modify
the terms and provisions contained in the Warrants regarding the sale,
assignment, pledge, encumbrance or transfer of Warrants or Warrant Shares.
"Regulation Y Stockholder" means (i) any stockholder that is subject
to the provisions of Regulation Y of the Board of Governors of the Federal
Reserve System (12 C.F.R. Part 225) or any successor to such regulation
("Regulation Y") so long as such stockholder shall hold, and only with respect
to, the Warrants, the Warrant Shares or shares issued upon conversion(s) of the
Warrant Shares, (ii) any Affiliate of a Regulation Y Stockholder that is a
transferees of Warrants, Warrant Shares or shares issued upon conversion(s) of
the Warrant Shares, so long as such Affiliate shall hold, and only with respect
to such Warrants, Warrant Shares or shares issued upon conversion(s) of the
Warrant Shares and (iii) any Person to which such Regulation Y Stockholder or
any of its Affiliates has transferred such Warrants, Warrant Shares or shares
issued upon conversion(s) of the Warrant Shares, so long as such transferee
shall hold and only with respect to, any Warrants, Warrant Shares or shares
issued upon conversion(s) of the Warrant Shares transferred by such stockholder
or Affiliates but only if such Person is (or an Affiliate of such person is)
subject to the Provisions of Regulation Y.
2.2 ASSISTANCE IN SALES.
Anything in this Agreement or in the Securities Purchase Agreements to
the contrary notwithstanding, in the event that it becomes unlawful for any
Regulated Stockholder to continue to hold some or all of the Warrants or shares
of Common Stock held by it, or restrictions are imposed on any such stockholder
by any statute, regulation or governmental authority which, in the reasonable
judgment of such stockholder, make it unduly burdensome to continue to hold such
Warrants or shares of Common Stock, such stockholder, subject to the provisions
of the Warrants, may sell or otherwise dispose of its Warrants and shares in the
Company, and the Company shall (i) provide (and authorize such stockholder to
provide) to any prospective purchaser of the Warrants and shares of Common Stock
owned by such stockholder financial and other information concerning the Company
reasonably requested by such stockholder or prospective purchaser and (ii)
endeavor to obtain such automobile manufacturers' approvals as are necessary to
effect such disposition.
United Auto Group, Inc.
September 22, 1995
Page 4
2.3 PERMITTED TRANSFERS.
Notwithstanding anything to the contrary contained in the Securities
Purchase Agreement, the Warrants or herein, Morgan Capital shall be permitted to
transfer to Sixty Wall Street Fund 1995, L.P. ("Sixty Wall"), or any similar
partnership in which a Controlled Subsidiary is the sole General Partner, any
Notes, Warrants or Value Notes held by it or any of its rights under the
Securities Purchase Agreement, under any Transaction Document or the Agreement
for Purchase of Notes dated September ___, 1995 between Morgan Capital and The
Equitable Life Assurance Society of the United States. Notwithstanding anything
to the contrary contained in the Securities Purchase Agreement, Morgan Capital
shall be permitted to transfer Notes in denominations of less than $100,000 to
Sixty Wall Street 1995 Fund, L.P. or any similar partnership in which a
Controlled Subsidiary is the sole General Partner. As used in the Transaction
Documents, "JPMCC" shall mean Morgan Capital together with Sixty Wall Street
Fund 1995, L.P.
3. CONTINGENT VALUE OBLIGATIONS.
For purposes of Section 1.2 of the Warrants, Sixty Wall shall be
deemed an initial holder of Warrants distributed to Morgan Capital pursuant to
the Warrant Escrow Agreement.
4. COVENANTS.
With respect to Sections 4.1 and 4.2 below, until the first date on
which Morgan Capital (and its Affiliated transferees) has transferred in the
aggregate more than 50 percent of the Warrant Shares that Morgan Capital would
be entitled to purchase upon exercise of four-sevenths (4/7ths) of all the
Warrants issued by the Company (after taking into account all adjustments to the
number of Warrant Shares underlying the Warrants):
4.1 OBSERVER RIGHTS.
The Company shall allow a representative designated by Morgan Capital
to attend as an observer any meeting of the Company's board of directors (the
"Board"), including telephonic meetings (except such meetings, or portions
thereof, in which Morgan Capital (or any of its Affiliates) is discussed and in
relation to which the Board makes a good faith determination that the presence
of a representative of Morgan Capital would be inappropriate), in a non-voting
capacity. The Company shall give
United Auto Group, Inc.
September 22, 1995
Page 5
such representative notice of each such meeting in the form and manner such
notice is given to the Board. The Company will provide such representative with
copies of all written materials and other information given to the Board in
connection with such meetings (except such information relating to Morgan
Capital that the Company determines not to provide) at the same time such
materials and information are given to the Board. Morgan Capital and such
representative shall keep all such materials and information, as well as the
matters discussed at such Board meetings (whether written or oral),
confidential. If the Company proposes to take any action by written consent in
lieu of a meeting of the Board, the Company will give written notice thereof to
such representative simultaneously with and in the same manner as it sends such
consent documents to the Board. For purposes of this Section 4.1, the initial
designee of Morgan Capital shall be Charles Ewald. In the event that Morgan
Capital desires to change its designee, Morgan Capital shall select a new
designee subject to the Company's approval, which approval shall not be
unreasonably withheld.
It is agreed that breach of the Company's obligations under this
Section 4.1 (which, to the extent remediable, is not remedied within five (5)
days) shall constitute an additional Event of Default under the Securities
Purchase Agreement pursuant to which Morgan Capital (or any Affiliate transferee
of the Notes) can, upon 15 days' notice to the Company, declare the Notes to be
immediately due and payable, anything to the contrary herein or in the
Securities Purchase Agreement notwithstanding. This provision is not intended
to, and shall not, afford to noteholders other than Morgan Capital (or any
Affiliate transferee of the Notes) any independent basis for declaring a default
and exercising remedies.
4.2 FINANCIAL AND OTHER INFORMATION.
The Company will deliver to Morgan Capital:
(a) Monthly Statements -- within a reasonable time after the end of
each calendar month, a copy of the consolidated balance sheet and consolidated
statement of income of the Company and a copy of the balance sheet and statement
of income for each operating division of the Company, together with a brief
discussion by the Chairman of the Company, for such calendar month, PROVIDED,
HOWEVER, that such financials shall be subject to year-end adjustments and may
not contain all footnotes required under GAAP;
United Auto Group, Inc.
September 22, 1995
Page 6
(c) Quarterly Statements -- within 45 days after the end of the first
three quarters of each fiscal year, a copy of the consolidated balance sheet of
the Company as of the end of such quarter and consolidated statements of income,
changes in shareholders' equity and cash flows and a management's discussion and
analysis of financial condition and results of operation of the Company for the
fiscal quarter and for the portion of the fiscal year ending on the last day of
such quarter, each of the foregoing balance sheets and statements to set forth
in comparative form the corresponding figures for the same period of the prior
fiscal year and actual versus budgeted amounts, to be in reasonable detail;
PROVIDED, HOWEVER, such financials are subject to year-end adjustments and may
not contain all footnotes required under GAAP and to be certified, subject to
normal year-end audit adjustments, by the principal financial officer of the
Company that they are true and accurate in all material respects as of their
dates and PROVIDED FURTHER, that statements of changes in shareholders' equity,
cash flows and actual versus budgeted amounts need not be provided with respect
to any fiscal quarter prior to the quarter ending June 30, 1996, and PROVIDED
FURTHER, that the financial statements delivered pursuant hereto need not cover
any newly acquired Subsidiary until the fiscal quarter ending one year after the
end of the fiscal quarter in which such Subsidiary was acquired;
(b) Annual Statements -- within 150 days after the end of the fiscal
year ending December 31, 1995 and within 120 days after the end of each
subsequent fiscal year, PROVIDED, HOWEVER, that for the fiscal year in which the
Company becomes subject to the reporting requirements of the Exchange Act and
for each subsequent fiscal year, within 90 days after the end of such fiscal
year a copy of the balance sheet of the Company as of the end of such year,
together with consolidated and consolidating statements of income and of cash
flows and a management's discussion and analysis of financial condition and
results of operation of the Company for such year, in all reasonable detail,
prepared in accordance with GAAP, consistently applied, and certified in an
audit report by independent public accountants of national standing selected by
the Board;
(d) SEC and Other Reports -- promptly upon their becoming available,
copies of all financial statements and reports that the Company shall send to
its stockholders or file with the Securities and Exchange Commission or any
stock exchange on which any securities of the Company may be listed; and
(e) Requested Information -- with reasonable promptness, such other
data and information relating to the business, operations, affairs, financial
condition, assets or properties of the Company or any of its Subsidiaries as
from time to time may be reasonably requested by Morgan Capital.
United Auto Group, Inc.
September 22, 1995
Page 7
4.3 CERTAIN TRANSACTION EXPENSES.
Notwithstanding anything to the contrary contained in the Securities
Purchase Agreement, the Company hereby acknowledges its obligation to pay all
reasonable legal fees and disbursements of Proskauer Rose Goetz & Mendelsohn LLP
("Proskauer"), counsel for Morgan Capital, together with legal fees and
disbursements of Davis Polk & Wardwell, incurred in connection with the
transactions contemplated by the Securities Purchase Agreement. Payment by the
Company pursuant to this Section 4.3 of the fees and disbursements of Proskauer
shall satisfy the obligations of the Company to Morgan Capital under Section
14.2 of the Securities Purchase Agreements except insofar as Section 14.2
relates to the fees of Davis Polk and Wardwell, which fees have been paid.
If the foregoing accurately sets forth our agreement, please so
indicate by executing this letter in the space provided and delivering one
executed copy to us.
Sincerely yours,
J.P. MORGAN CAPITAL CORPORATION
By: /s/ Charles Ewald
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Accepted and Agreed:
UNITED AUTO GROUP, INC.
By: /s/ Carl Spielvogel
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