EMPLOYMENT AGREEMENT
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This Employment Agreement is dated as of June 21, 1996, and is entered
into between United Auto Group, Inc. (formerly EMCO Motor Holdings, Inc.), a
Delaware corporation (the "Company"), and Carl Spielvogel ("Executive").
WHEREAS, Executive and the Company entered into an Employment
Agreement dated as of October 18, 1994 (the "Original Agreement");
WHEREAS, on April 3, 1996, Executive and the Company amended the stock
option portion of the Original Agreement; and
WHEREAS, Executive and the Company desire to amend certain other terms
of the Original Agreement and to embody in this Agreement all the terms and
conditions of Executive's employment by the Company as so amended.
NOW, THEREFORE, the parties hereby agree that this Agreement
supersedes and supplants the Original Agreement in all respects and further
agree as follows:
ARTICLE I.
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
1.1 EMPLOYMENT. The Company shall employ Executive as Chief
Executive Officer and Chairman of the Board of Directors (the "Board") of the
Company. Executive hereby accepts such employment. Executive agrees to devote
substantially all of his business time and efforts to the business of the
Company. Anything herein to the contrary notwithstanding, nothing shall
preclude Executive from (i) serving on the boards of directors of a reasonable
number of other corporations or trade associations and/or charitable
organizations, (ii) engaging in charitable activities and community affairs,
(iii) rendering consulting services to clients on an occasional basis, and (iv)
managing his personal investments and affairs, provided that such activities do
not materially interfere with the proper performance of his duties and
responsibilities as the Company's Chief Executive Officer and Chairman.
1.2 DUTIES AND RESPONSIBILITIES. Executive shall be responsible
for the general management of the affairs of the Company (subject to the day-to-
day operating control of certain of the Company's subsidiaries which the Board
or the Executive Committee thereof (the "Executive Committee") may specifically
allocate to other senior officers of the Company to the extent
required by agreements to which the Company or any of its subsidiaries are
subject (other than agreements with such senior officers), including franchise
agreements with automobile manufacturers or authorized distributors thereof) and
shall be required to perform such duties and responsibilities as are consistent
with his position and as the Board or the Executive Committee may from time to
time prescribe.
1.3 BOARD AND EXECUTIVE COMMITTEE MEMBERSHIP. During the Term (as
defined in Section 2.1), the Company will nominate Executive for election to the
Board and will use its best efforts to secure Executive's election to the Board
and his appointment as a member of the Executive Committee.
1.4. REPORTING. Executive shall report, in the performance of his
duties, directly to the Board. During the Term, Executive shall be the only
officer of the Company or any subsidiary of the Company required to report
directly to the Board or the Executive Committee, and all other officers of the
Company and its subsidiaries shall report directly, or indirectly through their
superiors, to Executive.
ARTICLE II.
TERM
2.1 TERM. The term of Executive's employment under this Agreement
(the "Term") shall commence on October 18, 1994 and shall continue until
December 31, 2000; provided that (i) the Term shall be renewed for an additional
one-year period as of January 1 of each calendar year commencing with calendar
year 2001 (each, a "Renewal Date"), unless either the Company or Executive gives
written notice, at least ninety (90) days prior to a Renewal Date, of its or his
intention not to so renew the Term, and (ii) the Term may be terminated earlier
as provided in Article V hereof.
ARTICLE III.
COMPENSATION AND EXPENSES
3.1 SALARY, BONUSES AND BENEFITS. As compensation and
consideration for the performance by Executive of his obligations under this
Agreement, Executive shall be entitled to the following (subject, in each case,
to the provisions of Article V hereof):
(a) BASE SALARY. The Company shall pay Executive an annualized
base salary during the Term, payable in accordance with the normal payment
procedures of the Company and subject to such withholdings and other normal
employee deductions as may be required by law, of $750,000 through December 31,
1996 and of $1,000,000 beginning January 1, 1997. The base salary shall be
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reviewed no less frequently than annually for increase. Determination as to any
increase shall be in the sole discretion of the Board or the Compensation
Committee thereof (the "Compensation Committee").
(b) BONUS. The Company shall pay Executive an annual, fiscal
year bonus during the Term commencing with the year beginning January 1, 1995 in
an amount determined by the Compensation Committee (or in the absence of such a
committee, by the Executive Committee or the Board), provided that (i) if the
Company meets the plan established by the Company prior to each year providing
for certain financial and other performance targets to be agreed upon by the
Compensation Committee (or in the absence of such a committee, by the Executive
Committee or the Board) and Executive, such bonus will be at least equal to 50%
of Executive's base salary, and (ii) in no event shall such bonus exceed an
amount equal to Executive's base salary. The bonus shall be paid within 90 days
after the end of each full fiscal year of the Company during the Term.
(c) STOCK OPTIONS.
(i) On April 3, 1996, the Company amended the option granted to
Executive under the Original Agreement. As so amended, such option (the "First
Option") in the form of Exhibit A hereto entitles Executive to purchase up to
400,000 shares of the Company's Voting Common Stock, par value $0.0001 per share
("Common Stock") at an exercise price of $10.00 per share. Subject to Article V
hereof, the First Option will vest and become exercisable ratably in four
installments as follows: one-fourth of the number of shares covered under the
First Option on each of the first, second, third and fourth anniversaries of
October 18, 1994. The First Option shall terminate on October 18, 2004, subject
to earlier termination as provided in Article V hereof.
(ii) Effective as of the effective date of the registration
statement filed in connection with the IPO (as defined in Section 5.3) (the "IPO
Date"), the Company shall grant to Executive, under the Company's Stock Option
Plan, an option (the "Second Option") in the form of Exhibit B hereto to
purchase up to 100,000 shares of Common Stock at an exercise price equal to the
price per share to the public set forth on the cover of the prospectus relating
to the IPO. Subject to Article V hereof, the Second Option will vest and become
exercisable ratably in four installments as follows: one-fourth of the number
of shares covered under the Second Option on each of the first, second, third
and fourth anniversaries of the IPO Date. The Second Option shall terminate on
the tenth anniversary of the IPO Date, subject to earlier termination as
provided in Article V hereof.
(iii) Effective as of the first anniversary of the IPO Date
(the "Third Grant Date"), the Company shall grant to Executive, under the
Company's Stock Option Plan, an option (the
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"Third Option" and, collectively with the First Option and the Second Option,
the "Options") in the form of Exhibit B hereto to purchase up to 100,000 shares
of Common Stock at an exercise price per share equal to the Market Price (as
defined below) of one share of Common Stock on the day immediately preceding the
Third Grant Date. Subject to Article V hereof, the Third Option will vest and
become exercisable ratably in four installments as follows: one-fourth of the
number of shares covered under the Third Option on each of the first, second,
third and fourth anniversaries of the Third Grant Date. The Third Option shall
terminate on the tenth anniversary of the Third Grant Date, subject to earlier
termination as provided in Article V hereof.
For purposes of this Section 3.1(c), the term "Market Price"
means (1) the reported last sales price regular way or, if no such reported sale
occurs on such day, the average of the closing bid and asked prices regular way
on such day, in each case on the principal national securities exchange in which
the Common Stock is listed or admitted to trading or on the National Market
System of the Nasdaq Stock Market if the Common Stock is listed thereon, or (2)
if the Common Stock is not listed or admitted to trading on any national
securities exchange or on the National Market System of the Nasdaq Stock Market,
the average of the closing bid and asked prices in the over-the-counter market
on such day as reported by the Nasdaq Stock Market or National Quotation System,
Inc.; in any case where the price cannot be determined as aforesaid on the
relevant day, it shall be determined on the next preceding day on which such
determination can be made as aforesaid.
(iv) The Company and certain of its stockholders are parties to
a stockholders agreement (the "Stockholders Agreement") delivered pursuant to
Sections 4.7 and 5.3 of each of the Preferred Stock Purchase Agreement (the
"Preferred Stock Purchase Agreement"), dated as of October 15, 1993, among the
Company, certain investors named therein, Trace International Holdings, Inc.
("TIHI"), and Ezra P. Mager ("Mager") and the Common Stock Purchase Agreement
(the "Common Stock Purchase Agreement"), dated as of October 15, 1993, among the
Company, TIHI and Mager. For so long as the Stockholders Agreement shall be in
effect, it shall be a condition precedent to the exercise of the Options by
Executive that Executive execute and deliver a counterpart of the Stockholders
Agreement, as a result of which he shall be deemed to be a "Stockholder"
thereunder and bound by all of the applicable provisions of the Stockholders
Agreement.
(v) Upon the request of the Company's underwriters managing any
underwritten public offering of the Common Stock, Executive shall not sell, make
any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any shares of Common Stock acquired upon exercise of the Options for
such period of time from the effective date of such offering as the Company or
the underwriters may specify, provided
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that any such restriction on such disposition by Executive shall not exceed 180
days.
(vi) The Options shall not be transferable, except by will or
the laws of descent and distribution, provided that Executive may at any time
transfer all or a portion of the Options to his spouse, any of his descendants
or trusts for the benefit of Executive, his spouse or his descendants, subject
to all of the terms and conditions of the Options.
(vii) Executive shall enter into a stock option agreement with
the Company with respect to the First Option in the form of Exhibit A hereto and
with respect to each of the Second Option and the Third Option in the form of
Exhibit B hereto.
(viii) From the date hereof until the IPO Date, with respect to
the Second Option, and until the Third Grant Date, with respect to the Third
Option, upon any change in the outstanding shares of Common Stock by reason of
any recapitalization, merger, consolidation, spin-off, combination or exchange
of shares or other corporate change, or any distributions to common shareholders
other than ordinary cash dividends, the Company shall make such substitutions or
adjustments as are appropriate and equitable, as to the number or kind of shares
of Common Stock or other securities covered by such Option and the exercise
price thereof.
(d) BENEFIT PLANS. Executive shall participate during the Term
in all employee pension and welfare benefit plans and programs made available to
the Company's senior-level executives generally, as such plans or programs may
be in effect from time to time, including, without limitation, pension, savings
and other retirement plans and programs, in each case to the extent and in the
manner available to all other senior level executives of the Company and subject
to the terms and provisions of such plans or programs. To the extent there is a
period of employment required as a condition for full benefit coverage under any
employee benefit program, to the extent permissible under such program,
Executive shall be deemed to have met such requirement. Notwithstanding the
foregoing, while Executive and his family are covered by the medical and dental
plans of his prior employer, he will not participate in the medical and dental
plans of the Company. Executive and his family are entitled to such coverage
under the medical and dental plans of his prior employer at his prior employer's
expense until December 31, 1996 and thereafter may continue such coverage at his
expense. The Company agrees that whenever Executive is required to pay for such
coverage the Company shall reimburse him for the amount of such payments on a
"tax grossed-up basis" so that Executive will not be "out-of-pocket" on an
after-tax basis with respect to such reimbursement. If for any reason Executive
and his family are no longer covered under his prior employer's medical and
dental plans, he and his family shall thereafter participate in the
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Company's medical and dental plans as provided in the first two sentences of
this Section 3.1(d).
(e) VACATION. Executive shall be entitled to a paid vacation
in accordance with Company policy during the Term, but not less than four weeks
per year.
3.2 EXPENSES; PERQUISITES. (a) The Company will reimburse
Executive for reasonable business-related expenses incurred by him in connection
with the performance of his duties hereunder during the Term, including the
reasonable legal expenses incurred by Executive in connection with the
negotiation of his employment arrangements with the Company prior to the date
hereof, subject, however, to the Company's policies relating to business-related
expenses as in effect from time to time during the Term.
(b) During the Term, Executive shall be entitled to participate
in any of the Company's executive fringe benefit arrangements in accordance with
the terms and conditions of such arrangements as are in effect from time to time
for the Company's senior-level executives generally.
ARTICLE IV.
EXCLUSIVITY, ETC.
4.1 EXCLUSIVITY. Executive agrees to perform his duties,
responsibilities and obligations hereunder to the best of his ability.
Executive agrees that he will devote substantially all of his business time,
care and attention and best efforts to such duties, responsibilities and
obligations throughout the Term, except as otherwise provided in Section 1.1
hereof. Executive also agrees that during the Term he will not engage in any
other business activities, pursued for gain, profit or other pecuniary
advantage, that are competitive with the activities of the Company or any of its
subsidiaries, except as permitted in Section 4.2 below. Executive agrees that
all of his activities as an employee of the Company shall be in conformity in
all material respects with all policies, rules and regulations and directions of
the Company not inconsistent with this Agreement and which have been expressly
communicated to him, whether orally or in writing.
4.2 OTHER BUSINESS VENTURES. Executive agrees that, so long as he
is employed by the Company, he will not have any financial or other beneficial
interest in any business enterprise which is competitive with any business
engaged in by the Company or any of its subsidiaries. Notwithstanding the
foregoing or anything contained in Section 4.1 hereof, Executive may own,
directly or indirectly, up to one percent (1%) of the outstanding capital stock
of any such business having a class of capital
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stock which is traded on any U.S. or foreign stock exchange or in the
over-the-counter market.
4.3 CONFIDENTIALITY; NON-COMPETITION. (a) Executive agrees that
he will not, at any time during or after the Term, make use of or divulge to any
other person, firm or corporation any trade or business secret, process, method
or means, or any other confidential information concerning the business or
policies of the Company or any of its subsidiaries or Affiliates (as defined in
Section 5.3 hereof), except (i) as such disclosure or use may be required or
appropriate in connection with his work as an employee of the Company or (ii)
when required to do so by a court of law, by any governmental agency having
supervisory authority over the business of the Company or by any administrative
or legislative body (including a committee thereof) with apparent jurisdiction
to order him to divulge, disclose or make accessible such information. For
purposes of this Agreement, a "trade or business secret, process, method or
means, or any other confidential information" shall mean and include information
treated as confidential or as a trade secret by the Company or any of its
subsidiaries or Affiliates, including but not limited to information regarding
contemplated products, models, compilations, business and financial methods or
practices, marketing, merchandising and selling techniques, customers, vendors,
suppliers, trade secrets, training programs, manuals or materials, technical
information, contracts, systems, procedures, mailing lists, know-how, trade
names, improvements, pricing, price lists, financial or other data (including
the revenues, costs or profits associated with any of the Company's products or
services), business plans, strategy, code books, invoices and other financial
statements, computer programs, software systems, databases, discs and printouts,
other plans (technical or otherwise), customer and industry lists, supplier
lists, correspondence, internal reports, personnel files, sales and advertising
material, telephone numbers, names, addresses or any other compilation of
information, written or unwritten, which is or was used in the business of the
Company or any of its subsidiaries or Affiliates. Executive's obligation under
this Section 4.3(a) shall not apply to any information which is generally known
to the public or hereafter becomes generally known to the public without the
fault of Executive. Executive agrees not to remove from the premises of the
Company, except as an employee of the Company in pursuit of the business of the
Company or except as specifically permitted in writing by the Company, any
document or other object containing or reflecting any such information.
Executive agrees and acknowledges that all of such information, in any form, and
copies and extracts thereof, are and shall remain the sole and exclusive
property of the Company, and upon termination of his employment with the
Company, Executive shall return to the Company the originals and all copies of
any such information provided to or acquired by Executive in connection with the
performance of his duties for the Company, and shall return to the Company all
files, correspondence and/or other communications received, maintained
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and/or originated by Executive during the course of his employment, and no copy
of any such shall be retained by him, except that he may retain his personal
notes, diaries, Rolodexes and correspondence.
(b)(i) Executive acknowledges that the agreements and covenants
contained in this Section 4.3(b) are essential to protect the value of the
Company's business and assets and by virtue of his employment with the Company,
Executive has obtained and will obtain knowledge, contacts, know-how, training,
experience and other information relating to the Company's business operations,
and there is a substantial probability that such knowledge, know-how, contacts,
training, experience and information could be used to the substantial advantage
of a competitor of the Company and to the Company's substantial detriment.
Accordingly, for a period commencing on the date of termination of Executive's
employment with the Company and ending two (2) years from and after such date
(the "Non-Compete Period"), Executive shall not, directly or indirectly, for
himself or on behalf of or in conjunction with any person, partnership,
corporation or other entity, compete, own, operate, control, or participate or
engage in the ownership, management, operation or control of, or be connected
with as an officer, employee, partner, director, shareholder, representative,
consultant, independent contractor, guarantor, advisor or in any other manner or
otherwise have a financial interest in, a proprietorship, partnership, joint
venture, association, firm, corporation or other business organization or
enterprise that competes with the Company (which for this purpose shall mean any
business or enterprise that operates dealerships for the retail sales of new and
used automobiles or trucks and businesses ancillary thereto), provided that such
business or enterprise (A) is or becomes located or otherwise engaged within a
100 mile radius of any automobile or truck dealership or ancillary business in
which the Company, directly or indirectly, has a 50% or greater economic or
voting or otherwise controlling ownership interest at any time during the
Non-Compete Period or (B) is an automobile or truck dealership or group of
affiliated automobile or truck dealerships (and all businesses ancillary
thereto) whose aggregate gross sales during the 12 month period immediately
preceding the date of Executive's termination exceeded $500,000,000, and
provided further that it shall not be a violation of this Section 4.3(b) if (x)
Executive owns up to one percent (1%) of the outstanding capital stock of any
such business having a class of capital stock which is traded on any U.S. or
foreign stock exchange or in the over-the-counter market, (y) Executive owns,
operates, is employed by or is otherwise connected with an advertising agency
that serves automobile dealerships, provided Executive does not personally
perform any work for, or otherwise provide any advice with respect to, any
account that is engaged in competitive activity with the Company, or
(z) Executive is employed by or is a consultant or independent contractor for an
entity that competes with the Company but Executive is employed by or is a
consultant or independent
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contractor for a division or subsidiary of such entity that does not engage in
such competitive activity. During the Non-Compete Period, Executive shall not
interfere with or disrupt, or attempt to interfere with or disrupt, the
relationship, contractual or otherwise, between the Company and any customer,
client, supplier, manufacturer, distributor, consultant, independent contractor
or employee of the Company.
(ii) It is the desire and intent of the parties that the
provisions of this Section 4.3(b) shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular portion of this
Section 4.3(b) shall be adjudicated to be invalid or unenforceable, this
Section 4.3(b) shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of this Section 4.3(b) in the particular jurisdiction
in which such adjudication is made.
(c) Executive agrees that, at any time and from time to time
during and after the Term, he will execute any and all documents which the
Company may reasonably request to effectuate the provisions of this Section 4.3.
ARTICLE V.
TERMINATION
5.1 TERMINATION BY THE COMPANY. Subject to Section 5.6, the
Company shall have the right to terminate Executive's employment at any time,
with or without "Cause." For purposes of this Agreement, "Cause" shall mean:
(a) Executive is convicted of or enters a plea of guilty to any
felony (or equivalent offense not categorized as a "felony") under federal or
state law;
(b) Executive engages in conduct that constitutes gross neglect
(including, without limitation, such neglect which may result from Executive's
compliance with the terms and conditions of any agreements between Executive and
his prior employer) or willful misconduct in carrying out his duties under this
Agreement, resulting, in either case, in material harm to the Company;
(c) Executive refuses to follow the instructions, orders or
directives of the Board or the Executive Committee (including the Chairman
thereof) with respect to his duties and responsibilities hereunder, provided
that such refusal shall constitute Cause only if the instruction, order or
directive in question has been furnished to Executive in writing and provided
further that such refusal shall not constitute Cause if Executive
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has a good faith and reasonable belief, based on advice of counsel, that to
follow such instruction, order or directive would be unlawful; or
(d) Executive commits any other material breach of this
Agreement (other than Section 1.1 hereof and the first and second sentences of
Section 4.1 hereof, without limiting the effect of the foregoing clauses (a),
(b) and (c) of this Section 5.1) that causes material harm to the Company.
Prior to his termination for Cause, Executive shall be given written
notice ("Notice of Cause") by the Board of the intention to terminate him for
Cause, such Notice of Cause (A) to state in detail the particular act or acts or
failure or failures to act that constitute the grounds on which the proposed
termination for Cause is based and (B) to be given within six (6) months of the
Board learning of such act or acts or failure or failures to act. Executive
shall have ten (10) days after the date that Notice of Cause has been given to
Executive in which to cure such conduct, to the extent such cure is possible.
Executive may also, within such 10-day period, request a hearing before the
Board. If so requested, such hearing shall be held on a date set by the Board
at any time within forty-five (45) days after the date such hearing was
requested. If, at any time within thirty (30) days following such hearing, the
Executive is furnished written notice by the Board confirming that, in its
judgment, grounds for Cause on the basis set forth in the Notice of Cause exist,
he shall thereupon be terminated for Cause. If no hearing is requested and the
conduct described above has not been cured within the 10-day period following
the date the Notice of Cause was given by the Company, Executive shall be deemed
terminated for Cause, such termination to be effective as of the day the Notice
of Cause was given by the Company.
5.2 TERMINATION FOR GOOD REASON. "Termination for Good Reason"
shall mean a termination of Executive's employment at his initiative following
the occurrence, without Executive's written consent, of one or more of the
following events:
(a) a reduction in Executive's then current base salary or
target annual bonus opportunity;
(b) the failure to elect or re-elect Executive, or his removal,
as Chairman or Chief Executive Officer of the Company other than as permitted
hereunder;
(c) a material diminution in Executive's duties or the
assignment to Executive of duties which are materially inconsistent with his
position as Chief Executive Officer of the Company;
(d) as a result of a material breach by the Company or the
Chairman of the Executive Committee of Section 1.4 hereof, Executive reasonably
determines in good faith that he
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cannot carry out his duties and responsibilities in the manner originally
contemplated hereunder;
(e) the occurrence of a Change in Control (as defined in
Section 5.3 hereof);
(f) the relocation of the Company's principal office, or
Executive's own office location as assigned to him by the Company, to a location
more than 50 miles from the Borough of Manhattan; or
(g) the failure of the Company to obtain the assumption in
writing of its obligation to perform this Agreement by any successor to all or
substantially all of the assets of the Company within 15 days after a merger,
consolidation, sale or similar transaction.
Prior to his termination for Good Reason, Executive shall give written
notice ("Notice of Good Reason") to the Board of his intention to terminate for
Good Reason, such Notice of Good Reason (A) to state in detail the particular
event, act or acts or failure or failures to act that constitute the grounds on
which the proposed termination for Good Reason is based and (B) to be given
within six (6) months of his learning of such event, act or acts or failure or
failures to act. The Company shall have thirty (30) days after the date that
the Notice of Good Reason has been given to the Board in which to cure such
conduct, to the extent such cure is possible. If the Company fails to cure such
conduct, Executive shall then be entitled to terminate his employment for Good
Reason.
5.3 CHANGE IN CONTROL. A "Change in Control" shall mean the
occurrence of any one of the following events:
(a) Prior to an IPO, TIHI or its Affiliates sells or otherwise
disposes to persons or entities who are not Affiliates of TIHI, in one
transaction or a series of related transactions, 85% or more of the Voting Stock
(as defined below) of the Company held by TIHI on the date of this Agreement and
issuable to TIHI pursuant to the Common Stock Purchase Agreement;
(b) any "person," as such term is used in Sections 3(a)(9) and
13(d) of the Securities Exchange Act of 1934, becomes a "beneficial owner," as
such term is used in Rule 13d-3 promulgated under that act (other than an
Affiliate of the Company or any "person" who was a "beneficial owner" of 10% or
more of the Voting Stock of the Company on the date hereof or who has received
Voting Stock from Executive), of 50% or more of the Voting Stock of the Company
prior to an IPO and 40% or more of the Voting Stock after an IPO;
(c) the majority of the Board consists of individuals other
than Incumbent Directors, which term means the members of the Board on the date
of this Agreement or otherwise
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designated pursuant to various agreements among the Company's stockholders in
effect on the date hereof; provided that any person becoming a director
subsequent to such date whose election or nomination for election was supported
by a majority of the directors who then comprised the Incumbent Directors shall
be considered to be an Incumbent Director;
(d) all or substantially all of the assets or business of the
Company is disposed of pursuant to a merger, consolidation or other transaction
other than to an Affiliate of the Company (unless the shareholders of the
Company immediately prior to such merger, consolidation or other transaction
beneficially own, directly or indirectly, 50% or more of the Voting Stock or
other ownership interests of the entity or entities, if any, that succeed to the
business of the Company); or
(e) the Company combines with another company (other than an
Affiliate of the Company) and is the surviving corporation but, immediately
after the combination, the shareholders of the Company immediately prior to the
combination hold, directly or indirectly, less than 50% of the Voting Stock of
the combined company.
For the purposes of this Agreement, (i) "Affiliate" of a specified
person or other entity shall mean a person or other entity that directly or
indirectly controls, is controlled by, or is under common control with the
person or other entity specified, and in the case of a specified person who is a
natural person, his spouse, his issue, his parents, his estate and any trust
entirely for the benefit of his spouse and/or issue; (ii) "Voting Stock" shall
mean capital stock of any class or classes having voting power under ordinary
circumstances, in the absence of contingencies, to elect the directors of a
corporation; and (iii) "IPO" shall mean the completion of an underwritten sale
of Common Stock or securities convertible into Common Stock of the Company (or
an entity formed by the Company for the purpose of issuing Common Stock (or
securities convertible into Common Stock) in connection with the IPO) pursuant
to a registration statement which has become effective under the Securities Act
of 1933, as amended.
5.4 DEATH. In the event Executive dies during the Term, the Term
shall automatically terminate, such termination to be effective on the date of
Executive's death.
5.5 DISABILITY. In the event that Executive shall suffer a
disability which shall have prevented him from performing his obligations
hereunder for a period of at least 120 consecutive days, the Company shall have
the right to terminate the Term, such termination to be effective upon the
giving of notice thereof to Executive in accordance with Section 6.2 hereof.
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5.6 VOLUNTARY TERMINATION. Executive shall have the right to
terminate his employment at any time. A voluntary termination that is not a
Termination for Good Reason or disability shall be effective upon 60 days prior
written notice to the Company and shall not constitute a breach of this
Agreement.
5.7 EFFECT OF TERMINATION. (a) In the event of termination of
Executive's employment (i) by the Company for Cause, (ii) by Executive other
than for Good Reason, (iii) by reason of Executive's death or disability, or
(iv) by reason of either party's election not to extend the Term as provided in
Section 2.1 hereof, the Company shall pay to Executive (or his beneficiary in
the event of his death) any base salary or bonus earned but not paid to
Executive prior to the effective date of such termination and Executive shall be
entitled to other or additional benefits in accordance with the applicable plans
and programs of the Company.
(b) In the event of termination of Executive's employment (i) by
the Company other than for Cause, or (ii) by Executive for Good Reason, then in
addition to the amounts and other benefits described in Section 5.7(a) hereof,
the Company shall pay Executive $83,333 per month for the remainder of the Term.
For this purpose, the Term shall include an additional one year renewal
described in Section 2.1 hereof only if the termination of employment occurred
after the date by which notice of non-renewal must be given and no such notice
was given. In addition, Executive shall be entitled to continued participation
in all medical, dental and hospitalization coverage and in other employee
benefit plans or programs in which he was participating on the date of the
termination of his employment until the earlier of (A) the end of the period
during which he is receiving salary continuation payments, and (B) the date, or
dates, he receives similar coverage and benefits under the plans and programs of
a subsequent employer (such coverages and benefits to be determined on a
coverage-by-coverage, or benefit-by-benefit, basis).
(c) In the event of termination of Executive's employment for
disability as described in Section 5.5 hereof, then, in addition to the amounts
and other benefits described in Section 5.7(a) hereof, Executive shall be
entitled to continued participation in medical, dental and hospitalization
coverage and in all other employee plans and programs in which he was
participating on the date of termination of his employment due to disability for
a period of two years following such termination.
(d) In the event of termination of Executive's employment due to
death, then, in addition to the amounts and other benefits described in Section
5.7(a) hereof, his estate or beneficiaries shall be entitled to base salary for
a period of 90 days following the date of death.
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(e)(i) In the event of termination of Executive's employment due
to death or by the Company for Cause or by Executive other than for Good Reason
or disability, the Options, to the extent not vested and exercisable on the date
of such termination, shall be immediately forfeited. To the extent the Options
are vested and exercisable on the date of such termination, they may be
exercised (A) in the event of termination by the Company for Cause, for a period
of ninety (90) days after the date of such termination, or (B) in the event of
termination due to death or by Executive (or his beneficiary, estate or other
legal representative) other than for Good Reason or disability, for a period of
one year after the date of such termination.
(ii) In the event of termination of Executive's employment (A)
by the Company other than for Cause, (B) by Executive for Good Reason, or (C) by
reason of Executive's disability, each Option, to the extent not granted or not
vested and exercisable on the date of termination, shall be immediately granted
and vested and exercisable in full, and may be exercised for a period equal to
the shorter of four years after the date of such termination and the remainder
of the original term of such Option.
(iii) If (A) Executive's employment with the Company has not
terminated prior to December 31, 1998, (B) an IPO has not occurred prior to such
date, (C) the Company's measurement on the consumer satisfaction index recorded
by five of the six Manufacturers (as defined below) has exceeded the average
measurement for all automobile dealerships nationwide and in the applicable
region/zone in at least nine of the twelve months (or three of the four quarters
in the event any of the Manufacturers do not provide consumer satisfaction
reports to the Company on a monthly basis) during each year of the Term
commencing January 1, 1996, provided that, for purposes of this Section 5.7, any
dealership acquired by the Company subsequent to the date hereof shall not be
included in the measurement of consumer satisfaction until one year after the
date such dealership is acquired (for purposes of this Section 5.7, the term
"Manufacturers" shall mean General Motors Corp., Chrysler Corporation, Ford
Motor Co., Toyota Motor Sales Corp., Honda Motors Sales Corp. (USA) and Nissan
Motor Sales Corp. (USA)), and (D) the Company's aggregate annual pre-tax
earnings have during the Term commencing January 1, 1995 exceeded 1 1/2% of the
Company's aggregate gross sales achieved during the Term, provided that, for
purposes of this Section 5.7, the annual pre-tax earnings of any dealership
acquired by the Company subsequent to the date hereof shall not be included in
the calculation of the Company's annual pre-tax earnings until one year after
the date such dealership is acquired, then Executive shall have the right for as
long as an IPO has not occurred, for a period of thirty (30) days immediately
after the date that the Warrants (as defined in the Preferred Stock Purchase
Agreement) would become issuable pursuant to Section 8 of the Preferred Stock
Purchase Agreement,
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to surrender the First Option to the Company (the "Put") for a payment equal to
the product of (I) the number of shares of Common Stock subject to the First
Option and for which the First Option has not been exercised (the "Put Shares"),
and (II) the amount by which the Company's "Book Value per Share" exceeds $10.00
(the "Put Price"). The closing (the "Put Closing") for the purchase by the
Company of the Put Shares upon exercise of the Put shall occur at the Company's
principal office, or at such other place as shall be mutually agreeable to
Executive and the Company, within forty-five (45) days after the Executive has
provided the Company with written notice of his intention to exercise the Put
(such date of closing hereinafter referred to as the "Put Closing Date"). On
the Put Closing Date, the Company shall pay to Executive by wire transfer or
certified or official bank check an amount equal to one-third of the Put Price
with respect to the Put Shares, with the remainder of the Put Price to be
evidenced by a promissory note (the "Put Note") in the form of Exhibit B hereto
issued to Executive for all additional amounts then owing to Executive as a
result of the exercise of the Put. The Put Note shall (i) be repaid in two
equal installments of principal, together with all accrued interest thereon, the
first installment of which shall be made eighteen (18) months after the Put
Closing Date, and the second installment of which shall be made three (3) years
after the Put Closing Date, and (ii) bear interest at a rate equal to the
short-term Applicable Federal Rate in effect on the Put Closing Date. For
purposes of this Section 5.7(e), "Book Value per Share" with respect to one
share of Common Stock shall mean, on the date the Company receives written
notice of Executive's election to surrender the First Option (the "Book Value
Determination Date"), the quotient obtained by dividing (A) the Total Net Asset
Value on the Book Value Determination Date by (B) the number of shares of Common
Stock outstanding on a fully-diluted basis on the Book Value Determination Date
and assuming that all outstanding shares of Preferred Stock have been converted
into Common Stock at the conversion rate in effect on the Book Value
Determination Date. For this purpose, "Total Net Asset Value" shall mean the
value, as reflected on the Company's most recent consolidated balance sheet, of
(x) the total assets of the Company, LESS (y) the current liabilities of the
Company, LESS (z) any long-term liabilities and outstanding equity securities
that are senior to the Common Stock.
5.8 NO MITIGATION; NO OFFSET. In the event of any termination of
employment under this Article V, Executive shall be under no obligation to seek
other employment and there shall be no offset against amounts due Executive
under this Agreement on account of any remuneration attributable to any
subsequent employment that he may obtain except as specifically provided in this
Article V.
5.9 NATURE OF PAYMENTS. Any amounts due under this Article V are
in the nature of severance payments considered to be reasonable by the Company
and are not in the nature of a
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penalty, provided that such payments shall be Executive's exclusive remedy
relating to the termination of his employment hereunder.
ARTICLE VI.
MISCELLANEOUS
6.1 INDEMNIFICATION.
(a) The Company agrees that if Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the written request of the Company as a director, officer,
member, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether or not the basis of such Proceeding is Executive's alleged action
in an official capacity while serving as a director, officer, member, employee
or agent, Executive shall be indemnified and held harmless by the Company to the
fullest extent legally permitted or authorized by the Company's restated
certificate of incorporation or bylaws or resolutions of the Company's Board of
Directors against all cost, expense, liability and loss (including, without
limitation, reasonable attorney's fees, judgments, fines or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
Executive in connection therewith, and such indemnification shall continue as to
Executive even if he has ceased to be a director, officer, member, employee or
agent of the Company or other entity and shall inure to the benefit of
Executive's heirs, executors and administrators. The Company shall advance to
Executive all reasonable costs and expenses incurred by him in connection with a
Proceeding within twenty (20) days after receipt by the Company of a written
request for such advance. Such request shall include an undertaking by
Executive to repay the amount of such advance if it shall ultimately be
determined that he is not entitled to be indemnified against such costs and
expenses.
(b) Neither the failure of the Company (including the Board,
independent legal counsel or stockholders) to have made a determination prior to
the commencement of any Proceeding concerning payments of amounts claimed by
Executive under Section 6.1(a) above that indemnification of Executive is proper
because he has met the applicable standard of conduct, nor a determination by
the Company (including the Board, independent legal counsel or stockholders)
that Executive has not met such applicable standard of conduct, shall create a
presumption that Executive has not met the applicable standard of conduct.
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(c) The Company agrees to maintain a directors' and officers'
liability insurance policy covering Executive to the extent the Company provides
such coverage for its other executive officers.
6.2 BENEFIT OF AGREEMENT; ASSIGNMENT; BENEFICIARY. (a) This
Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns. No rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company except that such rights
or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or sale of all
or substantially all of the assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities, obligations and
duties of the Company, as contained in this Agreement, either contractually or
as a matter of law. This Agreement shall also inure to the benefit of, and be
enforceable by, Executive and his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amount would still be payable to the Executive
hereunder if he had continued to live, all such amounts shall be paid in
accordance with the terms of this Agreement to Executive's beneficiary, devisee,
legatee or other designee, or if there is no such designee, to Executive's
estate. Without limiting the foregoing, Executive shall be entitled, to the
extent permitted under any applicable law, to select and change a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
Executive's death by giving the Company written notice thereof. In the event of
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative.
6.3 NOTICES. Any notice required or permitted hereunder shall be
in writing and shall be sufficiently given if personally delivered or if sent by
telegram or telex or by registered or certified mail, postage prepaid, with
return receipt requested, addressed: (a) in the case of the Company to 375 Park
Avenue, New York, New York 10022, Attention: GENERAL COUNSEL, or to such other
address and/or to the attention of such other person as the Company shall
designate by written notice to Executive; and (b) in the case of Executive, to
720 Park Avenue, New York, New York 10022, or to such other address as Executive
shall designate by written notice to the Company. Any notice given hereunder
shall be deemed to have been given at the time of receipt thereof by the person
to whom such notice is given.
6.4 AMENDMENT. This Agreement may not be changed or modified
except by an instrument in writing signed by both of the parties hereto.
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6.5 WAIVER. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a continuing
waiver or as a consent to or waiver of any subsequent breach hereof. Any waiver
must be in writing and signed by Executive or an authorized officer of the
Company, as the case may be.
6.6 HEADINGS. The Article and Section headings herein are for
convenience of reference only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof.
6.7 GOVERNING LAW. This Agreement shall be governed by, and
construed and interpreted in accordance with, the internal laws of the State of
New Jersey without reference to the principles of conflict of laws.
6.8 AGREEMENT TO TAKE ACTIONS. Each party hereto shall execute and
deliver such documents, certificates, agreements and other instruments, and
shall take such other actions, as may be reasonably necessary or desirable in
order to perform his or its obligations under this Agreement or to effectuate
the purposes hereof.
6.9 SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
6.10 VALIDITY. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision or provisions of this Agreement, which shall remain in
full force and effect.
6.11 RESOLUTION OF DISPUTES. Any disputes arising under or in
connection with this Agreement shall, at the election of either Executive or the
Company, be resolved by binding arbitration, to be held in New York City in
accordance with the rules and procedures of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof. Each party shall bear his or
its own costs of the arbitration or litigation. Pending the resolution of any
arbitration or court proceeding, the Company shall continue payment of all
amounts due Executive under this Agreement and all benefits to which Executive
is entitled at the time the dispute arises.
6.12 ENTIRE AGREEMENT. This Agreement contains the entire
understanding and agreement between the parties concerning the subject matter
hereof and supersedes all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, between the parties with
respect thereto.
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6.13 REPRESENTATIONS. The Company represents that it is fully
authorized and empowered to enter into this Agreement and that the performance
of its obligations under this Agreement will not violate any agreement to which
it is a party or by which it is bound. Executive represents that there is no
agreement to which he is a party or by which he is bound that would be violated
by the performance of his obligations under this Agreement.
6.13.1 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement
effective as of the date first above written.
UNITED AUTO GROUP, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Philip N. Smith, Jr.
Vice President, Secretary
and General Counsel
/s/ Carl Spielvogel
------------------------------------
Carl Spielvogel
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EXHIBIT A
[FORM OF]
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is dated as of April 3,
1996, and is entered into between United Auto Group, Inc. (formerly EMCO Motor
Holdings, Inc.), a Delaware corporation (the "Company"), and Carl Spielvogel
("Executive").
W I T N E S S E T H:
WHEREAS, Executive and the Company entered into a Stock Option
Agreement dated as of October 18, 1994 (the "Original Agreement");
WHEREAS, on April 3, 1996, Executive and the Company entered into an
amendment to the Original Agreement; and
WHEREAS, the Company is entitled to the services of Executive as set
forth in that certain employment agreement between Executive and the Company,
dated as of June 21, 1996 (as amended, supplemented or otherwise modified from
time to time, the "Employment Agreement"); and
WHEREAS, pursuant to the Employment Agreement, the Company and
Executive agreed to enter into this Agreement in order to embody herein all the
terms and conditions of the First Stock Option (as defined in the Employment
Agreement) as so amended.
NOW, THEREFORE, the parties hereby agree that this Agreement
supersedes and supplants the Original Agreement in all respects and further
agree as follows:
1. GRANT OF OPTIONS. The Company hereby grants to the Executive an
option (the "Option") to purchase, at the exercise price of $10.00 per share, up
to 400,000 shares of the Company's Voting Common Stock, par value $0.0001 per
share ("Common Stock"), such number to be adjusted as provided in Section 7(b).
2. EXERCISABILITY OF OPTIONS. Subject to earlier vesting,
exercisability and forfeiture as provided in Article V of the Employment
Agreement, the Option will vest and become exercisable ratably in four
installments as follows: one-fourth of the number of shares covered thereby on
each of the first, second, third and fourth anniversaries of October 18, 1994.
3. METHOD OF EXERCISING OPTIONS. (a) The Executive may exercise the
Option by delivering to the Company a written notice stating the number of
shares that the Executive has elected to purchase at that time from the Company
and full payment of the purchase price of the shares then to be purchased.
Payment of the purchase price of the shares may be made (i) by certified or bank
cashier's check payable to the order of the Company, or (ii) in the discretion
of the Board of Directors of the Company or duly authorized committee thereof,
by such other method as may be approved by such board or committee from time to
time.
(b) At the time of exercise, the Executive shall pay to the
Company such amount as is necessary to satisfy the Company's obligation to
withhold Federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of shares thereupon.
4. ISSUANCE OF SHARES. As promptly as practicable after receipt of
notification of exercise, full payment of purchase price and satisfaction of tax
withholding as provided in Section 3, the Company shall issue or transfer to the
Executive the number of shares as to which the Options have been so exercised
and shall deliver to the Executive a certificate or certificates therefor,
registered in his name.
5. TERMS AND CONDITIONS OF EXERCISE. (i) The Option shall have a
term expiring on October 18, 2004, subject to earlier termination as provided in
Article V of the Employment Agreement.
(ii) The Company and certain of its stockholders are parties to
a stockholders agreement (the "Stockholders Agreement") delivered pursuant to
Sections 4.7 and 5.3 of each of the Class A Preferred Stock Purchase Agreement
and the Common Stock Purchase Agreement, each dated as of October 15, 1993. For
so long as the Stockholders Agreement shall be in effect, it shall be a
condition precedent to the exercise of the Option by Executive that Executive
execute and deliver a counterpart of the Stockholders Agreement as a result of
which he shall be deemed to be a "Stockholder" thereunder and bound by all of
the applicable provisions of the Stockholders Agreement.
(iii) Upon the request of the Company's underwriters managing
any underwritten public offering of the Common Stock, Executive shall not sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any shares of Common Stock acquired upon exercise of the Option for
such period of time from the effective date of such offering as the Company or
the underwriters may specify, but not to exceed 180 days.
(iv) The Option shall not be transferable, except by will or the
laws of descent and distribution, provided that Executive may at any time
transfer all or a portion of the Option to his spouse, any of his descendants or
trusts for the benefit of Executive, his spouse or his descendants, subject to
all of the terms and conditions of the Option.
(v) Executive's rights with respect to the Option shall be
subject to the terms and provisions of Article V of the Employment Agreement.
-2-
(vi) Whenever the word "Executive" is used in any provision of
this Agreement under circumstances where the provision should logically be
construed to apply to the executors, the administrators, personal
representatives, or the person or persons to whom the Option may be transferred
pursuant to clause (iv) of this Section 5, the word "Executive" shall be deemed
to include such person or persons.
6. RIGHTS AS STOCKHOLDER. The Executive or a transferee of the
Option shall have no rights as a stockholder with respect to any shares of
Common Stock covered by the Option until he shall have become the holder of
record of such shares.
7. RECAPITALIZATIONS, REORGANIZATIONS, ETC. (a) The existence of the
Option shall not affect the power of the Company or its stockholders to
accomplish adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business, or any merger or consolidation
of the Company, or any issue of stock or of options, warrants or rights to
purchase stock or securities ahead of or affecting any of the shares of Common
Stock or the rights thereof or convertible into or exchangeable for shares of
Common Stock, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act.
(b) Upon any change in the outstanding shares of Common Stock by
reason of any recapitalization, merger, consolidation, spin-off, combination or
exchange of shares or other corporate change, or any distributions to common
shareholders other than ordinary cash dividends, the Company shall make such
substitutions or adjustments as are appropriate and equitable, as to the number
or kind of shares of Common Stock or other securities covered by the Option and
the exercise price thereof.
8. NOTICE. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
telegram, telex, facsimile transmission or by registered or certified mail,
postage prepaid, with return receipt requested, as follows:
(a) If to the Company:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile: (212) 223-5148
Attn: General Counsel
or to such other address or to the attention of such other person as the Company
shall designate by written notice to the Executive; and
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(b) If to the Executive:
Mr. Carl Spielvogel
720 Park Avenue
New York, NY 10021
or to such other address as the Executive shall designate by written notice to
the Company. Any notice given hereunder shall be deemed to have been given at
the time of receipt thereof by the party to whom such notice is given.
9. DISPUTES. Any disputes arising under or in connection with this
Agreement shall be resolved as provided in Section 6.11 of the Employment
Agreement.
10. NON-QUALIFIED OPTION. The Option is not an "incentive stock option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNITED AUTO GROUP, INC.
By:
Philip N. Smith, Jr.
Vice President, Secretary and
General Counsel
Carl Spielvogel
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EXHIBIT B
[FORM OF]
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is dated as of ________,
and is entered into between United Auto Group, Inc. (formerly EMCO Motor
Holdings, Inc.), a Delaware corporation (the "Company"), and Carl Spielvogel
("Executive").
W I T N E S S E T H:
WHEREAS, the Company is entitled to the services of Executive as set
forth in that certain employment agreement between Executive and the Company,
dated as of June 21, 1996 (as amended, supplemented or otherwise modified from
time to time, the "Employment Agreement"); and
WHEREAS, pursuant to the Employment Agreement, the Company is granting
the Executive options to purchase shares of voting common stock, par value
$0.0001 per share (the "Common Stock"), of the Company, on the terms and
conditions set forth herein and in the Employment Agreement.
NOW, THEREFORE, the parties hereby agree:
1. GRANT OF OPTIONS. The Company hereby grants to the Executive an
option (the "Option") to purchase, at the exercise price of $_____ per share, up
to 100,000 shares of Common Stock, such number to be adjusted as provided in
Section 3.1(c)(viii) of the Employment Agreement and Section 7(b) hereof.
2. EXERCISABILITY OF OPTIONS. Subject to earlier vesting,
exercisability and forfeiture as provided in Article V of the Employment
Agreement, the Option will vest and become exercisable ratably in four
installments as follows: one-fourth of the number of shares covered thereby on
each of the first, second, third and fourth anniversaries of the date hereof.
3. METHOD OF EXERCISING OPTIONS. (a) The Executive may exercise the
Option by delivering to the Company a written notice stating the number of
shares that the Executive has elected to purchase at that time from the Company
and full payment of the purchase price of the shares then to be purchased.
Payment of the purchase price of the shares may be made (i) by certified or bank
cashier's check payable to the order of the Company, or (ii) in the discretion
of the Board of Directors of the Company or duly
authorized committee thereof, by such other method as may be approved by such
board or committee from time to time.
(b) At the time of exercise, the Executive shall pay to the
Company such amount as is necessary to satisfy the Company's obligation to
withhold Federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of shares thereupon.
4. ISSUANCE OF SHARES. As promptly as practicable after receipt of
notification of exercise, full payment of purchase price and satisfaction of tax
withholding as provided in Section 3, the Company shall issue or transfer to the
Executive the number of shares as to which the Options have been so exercised
and shall deliver to the Executive a certificate or certificates therefor,
registered in his name.
5. TERMS AND CONDITIONS OF EXERCISE. (i) The Option shall have a
term of ten years from the date hereof, subject to earlier termination as
provided in Article V of the Employment Agreement.
(ii) The Company and certain of its stockholders are parties to
a stockholders agreement (the "Stockholders Agreement") delivered pursuant to
Sections 4.7 and 5.3 of each of the Class A Preferred Stock Purchase Agreement
and the Common Stock Purchase Agreement, each dated as of October 15, 1993. For
so long as the Stockholders Agreement shall be in effect, it shall be a
condition precedent to the exercise of the Option by Executive that Executive
execute and deliver a counterpart of the Stockholders Agreement as a result of
which he shall be deemed to be a "Stockholder" thereunder and bound by all of
the applicable provisions of the Stockholders Agreement.
(iii) Upon the request of the Company's underwriters managing
any underwritten public offering of the Common Stock, Executive shall not sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any shares of Common Stock acquired upon exercise of the Option for
such period of time from the effective date of such offering as the Company or
the underwriters may specify, but not to exceed 180 days.
(iv) The Option shall not be transferable, except by will or the
laws of descent and distribution, provided that Executive may at any time
transfer all or a portion of the Option to his spouse, any of his descendants or
trusts for the benefit of Executive, his spouse or his descendants, subject to
all of the terms and conditions of the Option.
(v) Executive's rights with respect to the Option shall be
subject to the terms and provisions of Article V of the Employment Agreement.
-2-
(vi) Whenever the word "Executive" is used in any provision of
this Agreement under circumstances where the provision should logically be
construed to apply to the executors, the administrators, personal
representatives, or the person or persons to whom the Option may be transferred
pursuant to clause (iv) of this Section 5, the word "Executive" shall be deemed
to include such person or persons.
6. RIGHTS AS STOCKHOLDER. The Executive or a transferee of the
Option shall have no rights as a stockholder with respect to any shares of
Common Stock covered by the Option until he shall have become the holder of
record of such shares.
7. RECAPITALIZATIONS, REORGANIZATIONS, ETC. (a) The existence of the
Option shall not affect the power of the Company or its stockholders to
accomplish adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business, or any merger or consolidation
of the Company, or any issue of stock or of options, warrants or rights to
purchase stock or securities ahead of or affecting any of the shares of Common
Stock or the rights thereof or convertible into or exchangeable for shares of
Common Stock, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act.
(b) Upon any change in the outstanding shares of Common Stock by
reason of any recapitalization, merger, consolidation, spin-off, combination or
exchange of shares or other corporate change, or any distributions to common
shareholders other than ordinary cash dividends, the Company shall make such
substitutions or adjustments as are appropriate and equitable, as to the number
or kind of shares of Common Stock or other securities covered by the Option and
the exercise price thereof.
8. NOTICE. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
telegram, telex, facsimile transmission or by registered or certified mail,
postage prepaid, with return receipt requested, as follows:
(a) If to the Company:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile: (212) 223-5148
Attn: General Counsel
or to such other address or to the attention of such other person as the Company
shall designate by written notice to the Executive; and
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(b) If to the Executive:
Mr. Carl Spielvogel
720 Park Avenue
New York, NY 10021
or to such other address as the Executive shall designate by written notice to
the Company. Any notice given hereunder shall be deemed to have been given at
the time of receipt thereof by the party to whom such notice is given.
9. DISPUTES. Any disputes arising under or in connection with this
Agreement shall be resolved as provided in Section 6.11 of the Employment
Agreement.
10. NON-QUALIFIED OPTION. The Option is not an "incentive stock option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended.
-4-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNITED AUTO GROUP, INC.
By:
Philip N. Smith, Jr.
Vice President, Secretary and
General Counsel
Carl Spielvogel
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