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EXHIBIT 10.31.5
March 1, 2001
UAG Connecticut I, LLC
13400 Outer Drive West, B-36
Detroit, MI 48239
UAG Realty, LLC Automotive Group Realty, LLC
13400 Outer Drive West, B-36 13400 Outer Drive West
Detroit, MI 48239 Detroit, MI 48239
UAG Connecticut, LLC The Miller Continental Group LLC
13400 Outer Drive West, B-36 342 West Putnam Avenue
Detroit, MI 48239 Greenwich, CT 06838
RE: Operating Agreement (the "Agreement") dated March 1, 2001, by and
between The Miller Continental Group LLC ("Miller") and UAG
Connecticut, LLC ("UAG") relating to the ownership of limited liability
company membership interests of UAG Connecticut I, LLC (the "Company").
Gentlemen:
In connection with the captioned Agreement, and to induce Miller to
enter into and complete the transactions contemplated by the captioned
Agreement, Automotive Group Realty, LLC, a wholly owned subsidiary of Penske
Corporation ("AGR"), UAG, UAG Realty, LLC ("UAG Realty") and the Company have
all agreed to execute and deliver to Miller this letter setting forth certain
understandings with respect to the real property underlying the business
operations of the Company and its subsidiaries.
On December 19, 2000, AGR purchased from UAG Realty the real property
(referred to herein, together with any property subsequently acquired by AGR in
connection with the Company's operations, as the "Property") described on the
attached Schedule A for the purchase prices listed for each parcel on the
attached Schedule A (such purchase prices being referred to both individually
with respect to each parcel of Property and collectively with respect to all or
a portion of the parcels of Property as the "2000 Property FMV"). The Property
is leased by UAG Realty from AGR pursuant to a Lease Agreement dated September
29, 2000 as amended, and as may be amended from time to time, (the "Lease"), and
the Company subleases the Property from UAG Realty.
In connection with the execution and delivery of this letter, Miller,
UAG and the Company each entered into the Agreement which, among other things,
conveys a 20% ownership interest in the Company to Miller. The parties hereto
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intend to convey to Miller a 20% share of appreciation in the Property for
Miller's guarantee of up to twenty percent (20%) of the rent payments due under
the Lease, on the terms and conditions set forth below.
So long as Miller is not in default of its obligations under the
Agreement and UAG Realty is not in default of its obligations under the Lease,
upon the sale and transfer of all or any of the Properties by AGR, AGR shall pay
to Miller promptly upon completion of any such sale or transfer an amount equal
to twenty percent (20%) of the positive difference between (i) the actual
proceeds received by AGR on the date of the sale or transfer of the Property as
sales price, net of all sales related costs including, but not limited to,
transfer taxes, broker commissions and title policies, of the Property or
Properties sold or otherwise transferred by AGR (the "Net Sale Proceeds") and
(ii) the 2000 Property FMV with respect to each parcel or parcels of Property
sold or otherwise transferred by AGR. If the amount calculated pursuant to the
immediately preceding sentence is less than zero, then Miller agrees to pay to
AGR promptly upon completion of any such sale or transfer or an amount equal to
twenty percent (20%) of the difference between (i) the 2000 Property FMV with
respect to each parcel or parcels of Property sold or otherwise transferred by
AGR, and (ii) the Net Sales Proceeds; provided, however, that the foregoing
obligations of Miller may only be satisfied from proceeds from the Collateral
(as defined below), if any, and except for the Collateral or proceeds therefrom
AGR shall have no recourse against Miller or any other person for the foregoing
obligations of Miller.
In consideration for the interest conveyed herein, Miller agrees to
guarantee to AGR the payment of up to twenty percent (20%) of the monthly
payment obligation of Base Annual Rent (as defined in the Lease) made by UAG
Realty in accordance with the terms of the Lease as such Base Annual Rent may be
increased or decreased from time to time. This guarantee shall terminate with
respect to each Property upon the sale and transfer of that Property by AGR.
This guaranty is secured by Miller's limited liability ownership interest in the
Company (the "Collateral") which is pledged to AGR and UAG in accordance with a
Pledge Agreement of even date herewith. UAG Realty will use its best commercial
efforts to make timely lease payments. AGR shall copy Miller on any written
notice of an Event of Default (as defined in the Lease) provided to UAG Realty
under the Lease with respect to all or any of the Properties and agrees to
provide Miller with an opportunity to cure such default on the same terms that
the Lease permits UAG Realty the opportunity to cure an Event of Default.
The parties acknowledge that the amount of the payments made under the
Lease to AGR has been structured to provide AGR with sufficient funds to pay the
interest only on its mortgage loan relating to the Property together with a
reasonable sum above such interest costs to reimburse AGR for expenses incurred
in connection with its administration of the Property. While this Agreement is
in effect, Miller shall have the right to participate in any net refinancing
proceeds relating to the Property on the twenty percent (20%) basis set forth
above, provided that Miller agrees to apply its guarantee to any additional
amount of Lease payments made as a result of the refinancing.
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The obligations of AGR and Miller hereunder shall terminate upon the
expiration of the term of the Lease, as extended from time to time.
This agreement shall not serve to eliminate, modify or alter the
obligations of UAG Realty under the Lease and UAG Realty hereby reaffirms its
obligations thereunder.
UAG CONNECTICUT I, LLC AUTOMOTIVE GROUP REALTY, LLC
/s/ Robert H. Kurnick, Jr. /s/ Peter E. Mogk
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By: Robert H. Kurnick, Jr. By: Peter E. Mogk
Its: Secretary Its: Treasurer
UAG REALTY, LLC THE MILLER CONTINENTAL
GROUP LLC
/s/ Robert H. Kurnick, Jr. /s/ Richard S. Koppelman
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By: Robert H. Kurnick, Jr. By: Richard S. Koppelman
Its: Secretary Its: Manager
UAG CONNECTICUT, LLC
/s/ Robert H. Kurnick, Jr.
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By: Robert H. Kurnick, Jr.
Its: Assistant Secretary
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SCHEDULE "A"
Property Agreed Upon Current
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Fair Market Value
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165 Commerce Drive $3,500,000
415-445 Commerce Drive $4,000,000
475 Commerce Drive $2,500,000
102 Linwood $3,500,000
80 Commerce Drive $ 305,000
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$13,805,000