UNITED AUTO GROUP, INC.
STOCK OPTION PLAN
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ARTICLE I
PURPOSE
This Stock Option Plan (the "Plan") is intended to encourage stock
ownership in United Auto Group, Inc. (the "Company") by employees of the Company
and its subsidiaries and affiliates in order to increase their proprietary
interest in the Company's success and to encourage such employees to remain in
the employ of the Company and its subsidiaries or affiliates.
ARTICLE II
CERTAIN DEFINITIONS
"BOARD" shall mean the Board of Directors of the Company.
"CLASS A PREFERRED STOCK" shall mean the Class A Convertible Preferred
Stock of the Company, par value $0.0001 per share.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITTEE" shall mean the Stock Option Committee of the Board.
"COMMON STOCK" shall mean the voting common stock of the Company, par
value $0.0001 per share.
"ELIGIBLE EMPLOYEE" shall mean (i) any person employed on a full-time
basis by the Company or any of its subsidiaries or (ii) any person employed by
an affiliate of the Company who performs services for the Company or any of its
subsidiaries.
"EXERCISE PRICE" shall have the meaning assigned to such term in
Article VI hereof.
"IPO" shall mean a "Qualified Public Offering" as such term is defined
in the Company's Restated Certificate of Incorporation as in effect on the date
the Plan is adopted by the
Board or the completion of a sale of capital stock of the Company (or a
subsidiary of the Company) pursuant to a registration statement which has become
effective under the Securities Act of 1933, as amended, and which has been
deemed to be a Qualified Public Offering by the holders of a majority of the
outstanding shares of the Class A Preferred Stock of the Company.
"ISO" shall mean an "incentive stock option" within the meaning of
Section 422 of the Code.
"OPTION" shall mean any option granted under the Plan.
"OPTIONEE" shall mean any holder of an Option.
"OPTION AGREEMENT" shall mean the agreement between an Optionee and
the Company governing Options granted under the Plan, the forms of which shall
be consistent with the terms of the Plan but need not be identical.
"NON-QUALIFIED OPTION" shall mean an Option which is not an ISO.
ARTICLE III
STOCK
The stock to be issued upon the exercise of Options shall be shares of
authorized but unissued Common Stock or previously issued shares of Common Stock
reacquired by the Company. The aggregate number of shares of Common Stock as to
which Options may be granted under the Plan at any time shall not exceed
1,500,838, subject to adjustment from time to time in accordance with the
provisions of Article X hereof.
The number of shares of Common Stock available for grant of Options at
any time under the Plan shall be decreased by the sum of (i) the number of
shares with respect to which Options have been issued and have not lapsed or
been cancelled, in each case, prior to such time and (ii) the number of shares
issued prior to such time upon exercise of Options. In the event that any
outstanding Option under the Plan lapses in accordance with Articles VII or VIII
hereof, prior to the end of the period during which Options may be granted, the
shares of Common Stock subject to the unexercised portion of such Option shall
again be available for the granting of Options under the Plan.
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ARTICLE IV
PARTICIPATION
Optionees shall be limited to Eligible Employees who have received
written notice of their selection to participate in the Plan and who have
entered into an Option Agreement. Each Option Agreement shall state the total
number of shares of Common Stock which are subject to the Option granted. No
Eligible Employee shall at any time have a right to be selected as a
participant.
ARTICLE V
ADMINISTRATION
The Plan shall be administered by the Committee which shall have sole
authority, in its absolute discretion: (a) to select which Eligible Employees
shall be granted Options; (b) to determine the number of Options to be granted
to such Eligible Employees and whether such Options shall be ISOs or Non-
Qualified Options; (c) to prescribe the form or forms of the Option Agreements
under the Plan; (d) to adopt, amend or rescind such rules and regulations as, in
its opinion, may be advisable for the administration of the Plan; and (e) to
construe and interpret the Plan, and all such rules and regulations, and to make
all other determinations deemed necessary or advisable for the administration of
the Plan. All decisions, determinations and interpretations of the Committee
made in good faith shall be final and binding on all participants. Neither the
Committee nor any member of the Committee shall be liable for any act, omission,
interpretation, construction or determination made in connection with the Plan
in good faith, and the members of the Committee shall be entitled to
indemnification and reimbursement by the Company in respect of any claim, loss,
damage or expense (including, without limitation, counsel fees) arising
therefrom to the full extent permitted by Delaware law and under any directors'
and officers' liability insurance coverage which may be in effect from time to
time.
ARTICLE VI
EXERCISE PRICE
The Exercise Price per share of Common Stock covered by Options
granted under the Plan shall be established on or prior to the date of grant by
the Committee and shall be set forth in
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the Optionee's Option Agreement. Payment shall be made in full upon exercise of
the Option by delivering to the Company at its principal executive offices cash
or a certified check, bank draft or money order payable to the order of the
Company in the aggregate amount of the Exercise Price, or in accordance with any
cashless exercise procedures adopted by the Committee from time to time.
ARTICLE VII
VESTING OF OPTIONS
All Options granted under the Plan shall vest and become exercisable in
accordance with vesting schedules established by the Committee at the time of
grant.
ARTICLE VIII
TERMINATION OF EMPLOYMENT
Each Option will have a ten-year term from the date of grant, subject
to earlier termination upon termination of the Optionee's employment, as
determined by the Committee. The Committee may also provide that the Company
shall have the right prior to the IPO to repurchase any shares of Common Stock
held by an Optionee whose employment has terminated, at such price as shall be
established by the Committee at the time of grant.
ARTICLE IX
TRANSFERABILITY
Options shall not be transferable, except by will or the laws of
descent and distribution. During the lifetime of the Optionee, Options shall be
exercisable only by the Optionee.
ARTICLE X
ADJUSTMENT FOR RECAPITALIZATION, MERGER, ETC.
The aggregate and maximum number of shares of Common Stock which may
be purchased or acquired pursuant to Options granted hereunder, the number of
shares of Common Stock to which each Option relates and the Exercise Price in
respect of such Option shall be appropriately adjusted for any increase or
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decrease in the number of outstanding shares of Common Stock resulting from a
stock split or other subdivision or consolidation of shares of Common Stock or
for other capital adjustments or payments of stock dividends or stock
distributions or other increases or decreases in the outstanding shares of
Common Stock effected without receipt of consideration in any form permitted
under Delaware law. Any adjustment shall be conclusively determined by the
Committee.
Except as otherwise provided in the Optionee's Option Agreement:
(i) If the Company is the surviving corporation of any merger,
reorganization or other business combination with any person or entity (such
merger, reorganization or other business combination referred to as a "Merger
Event"), the Optionee shall be entitled to receive, with respect to Options,
substitute stock options to purchase shares of the surviving corporation on such
terms and conditions, both as to the number of shares and otherwise, which shall
substantially preserve the value, rights and benefits of any Option granted
hereunder, as of the date of the execution of the agreement evidencing the
Merger Event.
(ii) If the Company is not the surviving corporation in a Merger
Event, the Committee may at its election cause payment to be made to each
Optionee, in cash, an amount equal to the excess of the fair market value, on
the date of the Merger Event, of the Common Stock subject to such Optionee's
Options (whether vested or unvested, as determined by the Committee) over the
Exercise Price of such Options on such date, and all such Options shall be
cancelled upon receipt by the Optionee of such cash payment, without the need
for obtaining the consent of the Optionee. If, upon such a Merger Event, the
Committee declines to make such cash payment, the surviving or resulting
corporation, as the case may be, or any parent or acquiring corporation thereof,
shall, as a condition to the occurrence of the Merger Event, be obligated by the
Company to grant substitute options to purchase its shares on such terms and
conditions, both as to the number of shares and otherwise, which shall
substantially preserve (in the discretion of the Committee) the value, rights
and benefits of any Option granted hereunder, as of the date of the execution of
the agreement evidencing the Merger Event.
Upon receipt by the Optionee of any substituted options in the
surviving corporation in any Merger Event, all Options for which substituted
options were received shall be cancelled.
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The foregoing adjustments and the manner of application of the
foregoing provisions, including, without limitation, the issuance of any
substitute Options and any determination of the fair market value of the Common
Stock, shall be determined in good faith by the Committee in its sole
discretion. Any such adjustment may provide for the elimination of any
fractional share which might otherwise become subject to an Option.
ARTICLE XI
RIGHTS AS A STOCKHOLDER
An Optionee or a transferee of an Option shall have no rights as a
stockholder with respect to any shares covered by his Option until he shall have
become the holder of record of such shares, and he shall not be entitled to any
dividends or distributions or other rights in respect of such shares for which
the record date is prior to the date on which he shall have become the holder of
record thereof.
ARTICLE XII
EMPLOYMENT RIGHTS
Nothing in the Plan or in any Option Agreement entered into hereunder
shall confer on any Optionee who is an employee of the Company or any of its
subsidiaries or affiliates any right to continue in the employ of the Company or
any of its subsidiaries or affiliates or to interfere in any way with the right
of the Company or any of its subsidiaries or affiliates to terminate the
Optionee's employment at any time.
ARTICLE XIII
TRANSFER RESTRICTIONS
Appropriate legends shall be placed on the stock certificates
evidencing shares issued upon exercise of Options to reflect any relevant
transfer restrictions.
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ARTICLE XIV
AMENDMENT OR DISCONTINUANCE OF PLAN
The Board may from time to time, to the extent permitted by applicable
law, amend, suspend, or discontinue the Plan; provided, however, that the Board
may not take any action which would have a material adverse effect on
outstanding Options or any unexercised rights under outstanding Options without
the consent of the Optionee whose options would be adversely affected thereby.
ARTICLE XV
CANCELLATION OF OPTIONS
The Committee, in its discretion, may, with the express written
consent of the Optionee to be affected, cancel any Option held by such
consenting Optionee hereunder.
ARTICLE XVI
MISCELLANEOUS
(a) The Company may, in its discretion, require that an Optionee pay
to the Company, at the time of exercise, such amount as the Company deems
necessary under law to satisfy its obligations to withhold Federal, state, or
local income or other taxes incurred by reason of the exercise or the transfer
of shares thereupon.
(b) Anything in the Plan or any Option Agreement entered into
pursuant to the Plan to the contrary notwithstanding, if, at any time specified
herein or therein for the making of any issue of shares of Common Stock, any
law, regulation or requirement of any governmental authority having jurisdiction
in the premises shall require either the Company or the Optionee (or the
Optionee's personal legal representative or transferee) to take any action in
connection with any such shares to be issued, the issue of such shares shall be
deferred until such action shall have been taken, provided, however, that the
Company shall not be required to take such action.
(c) The Plan shall be governed by and construed in accordance with
the laws of the State of Delaware without reference to the principles of
conflicts of law thereof.
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(d) No provision of the Plan shall require the Company, for the
purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor shall the Company maintain separate bank
accounts, books, records or other evidence of the existence of a segregated or
separately maintained or administered fund for such purposes.
(e) Except as otherwise specifically provided in the relevant plan
document, no payment under the Plan or other amount required to be reported as
income for Federal income tax purposes shall be taken into account in
determining any benefits under any pension, retirement, profit sharing, group
insurance or other benefit plan of the Company.
(f) The expenses of administering the Plan shall be borne by the
Company. The proceeds received by the Company from the exercise of any Options
pursuant to the Plan will be used for general corporate purposes.
(g) Masculine pronouns and other words of masculine gender shall
refer to both men and women.
(h) The titles and headings of the sections in the Plan are for
convenience of reference only, and in the event of any conflict, the text of the
Plan, rather than such titles or headings, shall control.
ARTICLE XVII
SPECIAL PROVISIONS FOR ISOS
(a) ISOs must be granted within ten years from the date the Plan is
adopted, or the date the Plan is approved by the shareholders of the Company,
whichever is earlier.
(b) ISOs may not be exercised after the expiration of ten years from
the date such ISOs are granted.
(c) The Exercise Price of ISOs may not be less than the fair market
value of a share of Common Stock at the time such ISOs are granted, as
determined by the Committee. In such case, fair market value shall be
determined in a manner consistent with the rules and regulations under Section
422 of the Code.
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(d) ISOs may not be granted to a person who owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any "subsidiary corporation" of the Company within the meaning of
Section 424(f) of the Code.
(e) To the extent the aggregate fair market value of the Common Stock
with respect to which ISOs are exercisable for the first time by any Optionee
during a calendar year (under all plans of the Company and all "subsidiary
corporations" of the Company within the meaning of Section 424(f) of the Code)
exceeds $100,000, such ISOs shall be treated as Non-Qualified Options. For
purposes of the preceding sentence, the fair market value of the Common Stock
shall be determined by the Committee at the time the ISO covering such stock is
granted.
(f) No ISOs may be granted under the Plan unless the Plan has been
approved by the shareholders of the Company within 12 months before or after the
date of the Plan's adoption by the Board.
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