SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or 240.14a-12
------------------------------------------
UNITED AUTO GROUP, INC.
(Name of Registrant as Specified In Its Charter)
------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(I) and
0-11.
1) Title of each class of securities to which transaction applies:
---------------------------------------------
2) Aggregate number of securities to which transaction applies:
---------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
---------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------
5) Total fee paid:
---------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
---------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------------------------------
3) Filing Party:
---------------------------------------------
4) Date Filed:
---------------------------------------------
[UNITED AUTO LOGO]
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1998
---------------------
The Annual Meeting of Stockholders of United Auto Group, Inc., a Delaware
corporation (the "Company"), will be held at the offices of the Regency Hotel,
540 Park Avenue, Ballroom, New York, New York, on Thursday, May 21, 1998, at
9:00 a.m., local time, for the purpose of considering and acting upon the
following matters, which are described more fully in the accompanying Proxy
Statement:
(a) To elect three Class II directors to serve until the 2001 annual
meeting of stockholders or until their respective successors are duly
elected and qualified;
(b) To approve an amendment to the Company's Stock Option Plan;
(c) To ratify the selection of Coopers & Lybrand L.L.P. as the Company's
independent auditors for the year ending December 31, 1998 ("Fiscal
1998"); and
(d) To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
Holders of Common Stock of record at the close of business on April 21,
1998 (the "Record Date") are entitled to vote at the Annual Meeting and any
adjournment thereof. A list of stockholders of the Company as of the Record
Date will be available for inspection during business hours from May 7 through
May 20, 1998 at 375 Park Avenue, 11th Floor, New York, New York 10152, and will
also be available for inspection at the Annual Meeting.
STOCKHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHICH HAS BEEN PROVIDED
FOR YOUR CONVENIENCE AND WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. THE PROMPT RETURN OF PROXY CARDS WILL ENSURE A QUORUM. ANY STOCKHOLDER
PRESENT AT THE ANNUAL MEETING MAY REVOKE HIS OR HER PROXY, AND VOTE PERSONALLY
ON ALL MATTERS BROUGHT BEFORE THE ANNUAL MEETING.
By Order of the Board of Directors,
/s/ Tambra S. King
----------------------
TAMBRA S. KING
SECRETARY
UNITED AUTO GROUP, INC.
375 PARK AVENUE
NEW YORK, NEW YORK 10152
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of United Auto Group, Inc., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders of
the Company (the "Annual Meeting") to be held on Thursday, May 21, 1998, at
9:00 a.m., local time, at the Regency Hotel, 540 Park Avenue, Ballroom, New
York, New York, or at any adjournment or postponement thereof, for the purposes
set forth in the accompanying Notice of Annual Meeting of Stockholders. It is
expected that the Notice of Annual Meeting of Stockholders, this Proxy
Statement and the enclosed proxy card will be mailed to stockholders entitled
to vote at the Annual Meeting commencing on or about May 4, 1998.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or accommodation to allow him or her to
participate at the Annual Meeting may request reasonable assistance or
accommodation from the Company by contacting United Auto Group, Inc., Investor
Relations, 375 Park Avenue, New York, New York 10152, (212) 230-0400. To
provide the Company sufficient time to arrange for reasonable assistance,
please submit all requests by May 15, 1998.
RECORD DATE AND VOTING SECURITIES
Stockholders can ensure that their shares are voted at the Annual Meeting
by signing and returning the enclosed proxy card in the envelope provided. The
submission of a signed proxy will not affect a stockholder's right to attend
the Annual Meeting and vote in person. Stockholders who execute proxies retain
the right to revoke them at any time before they are voted by filing with the
Secretary of the Company a written revocation or a proxy bearing a later date.
The presence at the Annual Meeting of a stockholder who has signed a proxy does
not itself revoke that proxy unless the stockholder attending the Annual
Meeting files written notice of revocation of the proxy with the Secretary of
the Company at any time prior to the voting of the proxy.
Proxies will be voted as specified by the stockholders. Where specific
choices are not indicated, proxies will be voted FOR the proposals submitted
for approval. The proxy card provides space for a stockholder to withhold
voting for any or all nominees to the Board of Directors or to abstain from
voting for any proposal if the stockholder chooses to do so.
Under Delaware law and the Company's Bylaws, the presence of a quorum is
required to transact business at the Annual Meeting. A quorum is defined as the
presence, either in person or by proxy, of a majority of the shares entitled to
vote. Proxies marked "abstain" will be included in determining a quorum. On
routine matters, brokers who hold customer shares in "street name" but have not
timely received voting instructions from such customers ("broker non-votes")
have discretion to vote such shares. Accordingly, the presence of such shares
will be included in determining a quorum for all matters other than the
proposal to approve the amendment to the Company's stock option plan, which is
considered a non-routine matter.
Under Delaware law and the Company's Bylaws, proposals must be approved by
the affirmative vote of a majority, or, in the case of the election of
directors, a plurality, of the shares present, either in person or by proxy, at
the Annual Meeting and entitled to vote. Accordingly, abstentions have the same
effect as votes "against" a proposal, whereas "broker non-votes" with respect
to the proposal to approve the amendment to the Company's stock option plan and
instructions to withhold voting on the election of any nominee for director
have no effect on the outcome of such votes.
The Board of Directors has fixed the close of business on April 21, 1998
as the record date (the "Record Date") for the determination of the
stockholders of the Company who are entitled to receive
1
notice of and to vote at the Annual Meeting. At the close of business on the
Record Date, the Company had outstanding 19,621,310 shares of voting common
stock, par value $0.0001 per share (the "Common Stock"), excluding treasury
shares. The holders of Common Stock are entitled to one vote for each share
held on the Record Date.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors is responsible for the management and direction of
the Company and for establishing broad corporate policies. The Board of
Directors held four meetings during the year ended December 31, 1997 ("Fiscal
1997"). No director attended less than 75% of the board and committee meetings
scheduled during Fiscal 1997.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has four standing committees: the Executive
Committee, the Audit Committee, the Compensation Committee and the Stock Option
Committee. The Company does not have a standing committee on nominations. The
principal responsibilities of each committee are described in the following
paragraphs.
Executive Committee. In Fiscal 1997, the Executive Committee was comprised
of Marshall S. Cogan, who served as its Chairman, Carl Spielvogel, who resigned
in April 1997, Michael R. Eisenson and John J. Hannan. The Executive
Committee's primary function is to assist the Board of Directors by acting upon
matters when the Board is not in session. The Executive Committee has the full
power and authority of the Board, except to the extent limited by law or the
Company's Certificate of Incorporation or Bylaws. The Executive Committee did
not hold any meetings in Fiscal 1997.
Audit Committee. In Fiscal 1997, the Audit Committee was comprised of
Richard Sinkfield, who served as its Chairman, John J. Hannan and Jules B.
Kroll. Mr. Sinkfield resigned from the committee upon his election as an
officer of the Company in July 1997, at which time Mr. Hannan was elected to
serve as the committee's Chairman. The Audit Committee is responsible for
overseeing the Company's financial reporting process. The Audit Committee
consults with management and the Company's independent accountants during the
year on matters related to the annual audit, internal controls, the published
financial statements and the accounting principles and auditing procedures
being applied. The Audit Committee also recommends a firm of certified
independent accountants to serve as the Company's independent accountants,
authorizes all audit fees and other professional services rendered by the
accountants and periodically reviews the independence of the accountants. The
Audit Committee held one meeting in Fiscal 1997.
Compensation Committee. In Fiscal 1997, the Compensation Committee was
comprised of Marshall S. Cogan, who served as its Chairman, Michael R.
Eisenson, John J. Hannan and Robert H. Nelson. The Compensation Committee has
the authority to determine all matters relating to the compensation of the
Company's executive officers and management employees. The Compensation
Committee held one meeting during Fiscal 1997.
Stock Option Committee. In Fiscal 1997, the Stock Option Committee was
comprised of Michael R. Eisenson, who served as its Chairman, and John J.
Hannan, each of whom is a non-employee director. The Stock Option Committee
administers and makes awards under the Company's Stock Option Plan. The Stock
Option Committe did not hold any meetings during Fiscal 1997 but acted by
unanimous written consent five times during Fiscal 1997.
COMPENSATION OF DIRECTORS
The Company has a compensation plan (the "Non-Employee Director
Compensation Plan") to provide compensation to the directors of the Company who
are not paid employees of the Company (the "Outside Directors"). Pursuant to
the Non-Employee Director Compensation Plan, each Outside Director receives an
annual retainer of $15,000, a $1,000 fee for each meeting of the Board of
Directors attended in person, $750 for each meeting of a committee of the Board
of Directors attended in person
2
and $500 for each such meeting participated in by telephone. These fees are
payable at the option of each Outside Director in cash or in Common Stock at
the current market price. All directors are entitled to reimbursement for their
reasonable out-of-pocket expenses in connection with their travel to and
attendance at meetings of the Board of Directors or committees thereof. As of
December 31, 1997, there were four Outside Directors of the Company and four
employee directors. In accordance with the internal policies of their
employers, certain directors assign their director compensation to the
organizations that employ them. Directors who are also employees of the Company
or its subsidiaries receive no cash compensation for serving as Directors or as
members of Board committees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Marshall S. Cogan, Chairman and Chief Executive Officer of the Company,
and Robert H. Nelson, Executive Vice President -- Operations of the Company,
are members of the Compensation Committee. The Commission requires issuers to
disclose the existence of any other company in which both (i) an executive
officer of the Company serves on the board of directors and/or compensation
committee and (ii) a director of the Company serves as an executive officer.
Mr. Cogan served as Chairman of the Board and Chief Executive Officer of Foamex
International Inc. ("Foamex") until May 1997, and Carl Spielvogel, the
Company's Chief Executive Officer until April 1997, served on the compensation
committee of Foamex until March 1997.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes serving staggered
three-year terms, the term of one class of directors to expire each year. The
term of the present Class II directors expires at the Annual Meeting. At the
Annual Meeting, the stockholders will elect three Class II directors to hold
office, subject to the provisions of the Company's Bylaws, until the Annual
Meeting of Stockholders in 2001 and until their respective successors shall
have been duly elected and qualified.
Unless contrary instructions are given, the persons named in the enclosed
proxy or their substitutes will vote FOR the election of the three Class II
director nominees named below. The Board of Directors believes that the
nominees are willing to serve as directors. However, if any nominee at the time
of election is unable to serve or is otherwise unavailable for election, and as
a result other nominees are designated by the Board of Directors, the persons
named in the enclosed proxy or their substitutes intend to vote for the
election of such designated nominees.
The nominees for election as Class II directors to serve until the Annual
Meeting of Stockholders in 2001 and the Class I and Class III directors, whose
terms of office continue until the Annual Meeting of Stockholders in 2000 and
1999, respectively, together with certain information about them, are set forth
below:
CLASS II DIRECTORS
- -------------------------------
JULES B. KROLL Jules B. Kroll, 56, has served as a director of the Company since
Chairman and Chief Executive December 1993. He has served as Chairman and Chief Executive
Officer of The Kroll-O'Gara Officer of The Kroll-O'Gara Company ("Kroll-O'Gara"), an
Company. international corporate investigation and consulting firm, since
December 1997. Prior thereto, Mr. Kroll served as Chairman of
Kroll Associates, a predecessor company to Kroll-O'Gara. Mr.
Kroll is also a director of Presidential Life Corporation.
3
ROBERT H. NELSON Robert H. Nelson, 52, has served as a director of the Company
Executive Vice President -- since January 1996 and as Executive Vice President -- Operations
Operations of the Company of the Company since January 1997. He has also served as Vice
and Senior Vice President, Chairman of UnitedAuto Finance, Inc. since March 1996, Chief
Chief Financial Officer and Financial Officer of Trace International Holdings, Inc. ("Trace")
Chief Operating Officer of since 1987 and Senior Vice President, Chief Operating Officer and
Trace International Holdings, a director of Trace since 1994.
Inc.
RICHARD SINKFIELD Richard Sinkfield, 55, has served as a director of the Company
Executive Vice President and since December 1993 and as Executive Vice President and Chief
Chief Administrative Officer of Administrative Officer of the Company since July 1997. He is a
the Company and Senior Senior Partner with the law firm of Rogers & Hardin in Atlanta,
Partner with the law firm of Georgia, which he joined in 1976. Mr. Sinkfield is also a director of
Rogers & Hardin. Weyerhaeuser Company.
CLASS III DIRECTORS
MICHAEL R. EISENSON Michael R. Eisenson, 42, has served as a director of the Company
President and Chief Executive since December 1993. He is the President and Chief Executive
Officer of Harvard Private Officer of Harvard Private Capital Group, Inc., which he joined in
Capital Group, Inc. 1986. Harvard Private Capital Group, Inc. manages the private
equity and real estate portfolios of the Harvard University
endowment fund. Mr. Eisenson is also a director of Harken Energy
Corporation, ImmunoGen, Inc., Playtex Products, Inc. and The
WMF Group, Ltd.
JOHN J. HANNAN John J. Hannan, 45, has served as a director of the Company since
Principal of Apollo Advisors, December 1993. Mr. Hannan is one of the founding principals of
L.P. and of Apollo Real Estate Apollo Advisors, L.P., which together with an affiliate has acted
Advisors, L.P. since 1991 as managing general partner of Apollo Investment
Fund, L.P., AIF II, L.P. and Apollo Investment Fund III, L.P.,
private securities investment funds, and of Apollo Real Estate
Advisors, L.P., which since 1993 has acted as managing general
partner of the Apollo Advisors, L.P. real estate investment funds,
and of Lion Advisors, L.P., which since 1991 has acted as financial
advisor to and representative for certain institutional investors
with respect to securities investments. Mr. Hannan is also a
director of Aris Industries, Inc., Converse, Inc., and The Florsheim
Shoe Company, Inc.
4
CLASS I DIRECTORS
MARSHALL S. COGAN Marshall S. Cogan, 60, has served as Chairman of the Board and
Chairman of the Board and Chief Executive Officer since April 1997, prior to which he served
Chief Executive Officer of the as Vice Chairman of the Board, and as a director of the Company
Company and Chairman of the since December 1990. Since 1974, Mr. Cogan has been the
Board and Chief Executive principal stockholder, Chairman or Co-Chairman of the Board of
Officer of Trace International Directors and Chief Executive Officer or Co-Chief Executive
Holdings, Inc. Officer of Trace. Trace has acquired many companies in various
consolidating industries and conceived the concept for the
Company, which it founded in December 1990. Since May 1997,
Mr. Cogan has been the Vice Chairman of Foamex. Prior thereto,
he served as its Chairman from September 1993 and its Chief
Executive Officer from January 1994. He has also been a director
of Recticel s.a. since February 1993. Mr. Cogan served as Chairman
and a director of other companies formerly owned by Trace,
including General Felt Industries, Inc., Knoll International, Inc.
and Sheller-Globe Corporation. Prior to forming Trace, he was a
senior partner at Cogan, Berlind, Weill & Levitt and subsequently
CBWL-Hayden Stone, Inc., both predecessor companies to
Lehman Brothers Inc. Additionally, Mr. Cogan serves on the
Board of Trustees of The Museum of Modern Art, the Boston
Latin School and New York University Medical Center and the
Board of Directors of the American Friends of the Israel Museum.
He also serves on several committees of Harvard University.
SAMUEL X. DIFEO Samuel X. DiFeo, 48, has served as President and Chief Operating
President and Chief Operating Officer and as a director of the Company since January 1998 and
Officer of the Company served as Executive Vice President of certain subsidiaries of the
Company, the assets of which were formerly owned by Mr. DiFeo
and certain members of his family (the "DiFeo Group"), from
October 1992 to January 1998. Prior to the Company's acquisition
of the DiFeo Group, Mr. DiFeo co-managed the operations of the
DiFeo Group from 1972.
JOHN M. SALLAY John M. Sallay, 42, has served as a director of the Company since
Managing Director of Harvard December 1993. He is a Managing Director of Harvard Private
Private Capital Group, Inc. Capital Group, Inc., which he joined in 1990. Mr. Sallay is also a
director of E-Z Serve Corporation.
VOTE REQUIRED
The affirmative vote of a plurality of the shares of Common Stock present,
either in person or by proxy, at the Annual Meeting and entitled to vote is
required for the election of Class II directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION OF THE NOMINEES LISTED
ABOVE.
EXECUTIVE OFFICERS
Executive officers are elected by the Board of Directors and hold office
until their successors have been duly elected and qualified or until their
earlier resignation or removal from office. A brief biography of each executive
officer of the Company as of March 31, 1998 is provided below (other than
Messrs. Cogan, DiFeo, Nelson and Sinkfield, whose biographies are set forth
above).
George G. Lowrance, 53, served as Executive Vice President, Secretary and
General Counsel of the Company from January 1993 to June 1996 and has served as
Senior Vice President -- Development since June 1996. Prior thereto, he was a
dealer principal for 13 years, representing Pontiac, Chevrolet, Volvo, Nissan,
Saab, Range Rover, Porsche, Audi, Volkswagen, Peugeot, Rolls Royce and
Maserati. He also co-authored the current dealer agreements for Volkswagen and
Porsche. Mr. Lowrance served as Chairman of the National Dealer Council for
Audi from 1984 to 1987 and served in the same role for Porsche from 1987 to
1990.
5
Philip N. Smith, Jr., 55, served as Vice President, Secretary and General
Counsel of the Company from June 1996 until August 1997 and as Senior Vice
President and General Counsel since August 1997. Mr. Smith has also served as
Vice President or Senior Vice President and General Counsel of Trace since
January 1988 and as Vice President, Secretary and General Counsel of Foamex
since October 1993. Prior to joining such companies, he was the sole
stockholder of a professional corporation that was a partner of the law firm of
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Karl H. Winters, 39, served as Vice President and Treasurer of the Company
from March 1997 and has served as Executive Vice President and Chief Financial
Officer of the Company since August 1997. He currently serves as Vice President
- -- Finance of Trace, which he joined in September 1993. Prior thereto, Mr.
Winters served as a senior audit manager for Coopers & Lybrand L.L.P., an
accounting, financial advisory services and management consulting firm, which
he joined in 1983.
James R. Davisdon, 52, served as Senior Vice President -- Finance of the
Company from February 1997 and has served as Executive Vice President --
Accounting and Fixed Operations of the Company since August 1997. Prior to
joining the Company, Mr. Davidson served as an audit partner for Ernst & Young
L.L.P., an accounting, financial advisory services and management consulting
firm, which he joined in 1973.
EXECUTIVE COMPENSATION
The following table contains information concerning annual and long-term
compensation of each individual who served as chief executive officer during
Fiscal 1997 and each of the other four most highly compensated executive
officers of the Company who were serving as executive officers at the end of
Fiscal 1997 (the "Named Executive Officers") for services rendered in all
capacities during the fiscal years 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------ ----------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- ---------------------------- ------ ----------- ---------- ---------------- ----------------
Marshall S. Cogan .......... 1997 663,440 -- -- --
Chairman of the Board 1996 -- -- 100,000 --
and Chief Executive Officer 1995 -- -- --
Carl Spielvogel ............ 1997 401,443 -- 100,000(1) 595,617(1)
Chairman of the Board 1996 750,000 375,000 500,000 --
and Chief Executive Officer 1995 750,000 250,000 -- --
Samuel X. DiFeo ............ 1997 720,000 -- 20,000 --
President and Chief 1996 203,600 303,682 41,267 --
Operating Officer 1995 203,600 -- -- --
James R. Davidson .......... 1997 230,191 200,000 20,000 --
Executive Vice President -- 1996 -- -- -- --
Administration 1995 -- -- -- --
Robert H. Nelson ........... 1997 388,865 100,000 -- --
Executive Vice President -- 1996 -- -- 34,000 --
Operations 1995 -- -- -- --
George G. Lowrance ......... 1997 329,374 100,000 33,000 --
Senior Vice President -- 1996 251,846 57,880 34,000 --
Development 1995 207,677 20,000 -- --
- ----------
(1) Represents payments under a Consulting Agreement, dated March 7, 1997,
which provides for Mr. Spielvogel to perform consulting services for the
Company during the period beginning on April 17, 1997 and ending on
December 31, 2000 in exchange for a monthly fee in the amount of $83,333,
certain welfare benefits and an expense allowance. The Consulting
Agreement was entered into in connection with Mr. Spielvogel's
resignation as the Chairman of the Board and Chief Executive Officer,
which resignation became effective on April 17, 1997.
6
STOCK OPTION GRANTS
The following table sets forth information concerning individual grants of
options to purchase Common Stock made to the Named Executive Officers during
Fiscal 1997.
OPTION GRANTS IN FISCAL 1997
POTENTIAL REALIZABLE
PERCENT OF VALUE AT
TOTAL ASSUMED ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE APPRECIATION
SECURITIES GRANTED TO FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM (1)
OPTIONS IN FISCAL BASE PRICE EXPIRATION -----------------------
NAME GRANTED YEAR 1997 ($/SHARE) DATE 5%($) 10%($)
- ----------------------------- ---------------- ----------- ------------ ----------- ---------- ------------
Marshall S. Cogan ........... -- -- -- -- -- --
Carl Spielvogel ............. 100,000(2) 18.4 30.00 4/17/01 646,519 1,392,300
Samuel X. DiFeo ............. 20,000(3) 3.7 17.00 5/14/07 213,824 541,872
James R. Davidson ........... 20,000(3) 3.7 17.00 5/14/07 213,824 541,872
Robert H. Nelson (4) ........ -- -- -- -- -- --
George G. Lowrance .......... 33,000(3) 6.0 17.00 5/14/07 352,810 894,090
- ----------
(1) Amounts reflect certain assumed rates of appreciation set forth in the
Commission's executive compensation disclosure rules. Actual gains, if
any, on stock option exercises will depend on future performance of the
Common Stock. No assurance can be made that the amounts reflected in
these columns will be achieved. The values in these columns assume that
the fair market value on the date of grant of each option was equal to
the exercise price thereof.
(2) Options were granted, vested and became exercisable on April 17, 1997.
(3) Options were granted on May 14, 1997 and vest and become exercisable in
five equal annual installments beginning on May 14, 1998.
(4) Mr. Nelson was not granted any options during Fiscal 1997.
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning options to purchase
Common Stock exercised by the Named Executive Officers during Fiscal 1997 and
the number and value of options held by them on December 31, 1997.
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND FY-END OPTION VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-
OPTIONS AT MONEY OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END
(#) (1) ($)(2)
----------------- -----------------
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---------------------------------- -------------- ------------- ----------------- -----------------
Marshall S. Cogan................. -- -- 25,000/75,000 --
Carl Spielvogel .................. 424,300 3,512,783 175,700/ -- 85,162/ n/a
Samuel X. DiFeo .................. -- -- 37,267/24,000 134,500/50,500
Robert H. Nelson ................. -- -- 27,200/ 6,800 221,000/55,250
George G. Lowrance ............... 3,500 48,688 29,800/32,000 195,925/76,825
James R. Davidson ................ -- -- 4,000/16,000 4,500/18,000
- ----------
(1) Except as otherwise noted, these options are for Common Stock of the
Company and were granted pursuant to the Stock Option Plan.
(2) The closing price of the Company's Common Stock on December 31, 1997 was
$18-5/16.
7
Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933, as amended (the "Securities Act"), or
the Securities Exchange Act or 1934, as amended (the "Exchange Act"), that
might incorporate filings by reference, including this Proxy Statement, in
whole or in part, the following Report of the Compensation Committee (the
"Compensation Committee") and Stock Option Committee (the "Stock Option
Committee") on Executive Compensation and the Performance Graph shall not be
incorporated by reference into any such filings.
REPORT OF THE COMPENSATION COMMITTEE AND THE STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee's responsibilities include establishing the
Company's policies governing the compensation of officers and other key
executives of the Company. The Compensation Committee approves all elements of
compensation for executive officers. The Stock Option Committee is responsible
for the administration of the Stock Option Plan.
EXECUTIVE COMPENSATION The Company's compensation program consists of base
salary, annual incentive payments, stock options and employee benefits. The
goal of the Company's compensation program is to motivate and reward its
executive officers and other key employees to improve long-term stockholder
value and to attract and retain the highest quality executive and key employee
talent available. The Company's executive compensation program is designed to
align executive compensation practices with increasing the value of the
Company's Common Stock and to foster adherence to, and promotion of, the
Company's business mission, values, strategic goals and annual objectives.
The Compensation Committee meets at least annually to review salary
increases for the current year and incentive payments to be made in connection
with the previous year's performance. The Compensation Committee will consider
an executive's scope of responsibilities, level of experience, individual
performance and attainment of pre-established goals as well as the Company's
business plan and general economic factors. In making its decisions, and to
maintain the desired levels of competitiveness and congruity with the Company's
long-term performance goals, the Compensation Committee will receive input from
the Company's Chief Executive Officer, President, Executive Vice President --
Administration and Chief Financial Officer.
BASE SALARY AND BONUS The salary levels for executive officers are
determined by such officer's level of job responsibility and experience, job
performance and attainment of pre-established goals. Additional consideration
is given to salaries for a comparable position within the industry and the
Company's ability to pay. Bonus payouts to executive officers and other key
employees of the Company are based on the attainment of corporate earnings
goals.
OPTIONS THE STOCK OPTION Committee believes strongly that the interests of
senior management must be closely aligned with those of the stockholders.
Long-term incentives in the form of stock options provide a vehicle to reward
executive officers only if there is an increase in stockholder value. Stock
options are granted on a discretionary basis within a guideline range that
takes into account the position responsibilities of executive officers and key
employees of the Company whose contributions and skills are important to the
long-term success of the Company. Stock options to purchase Common Stock
providing long-term incentives may be granted to executive officers with a
maximum term of ten years.
During Fiscal 1997, the Stock Option Committee granted 544,800 options to
purchase Common Stock to officers or key employees of the Company or its
affliates. Such options were granted at exercise prices equal to the fair
market value of the Common Stock on the dates of grant.
CHIEF EXECUTIVE OFFICER In Fiscal 1997, Mr Cogan received $663,440 in
compensation from the Company. Mr. Cogan's salary was based upon a review of
market data for similar positions, the exceptional contribution already made by
Mr. Cogan to the Company, as well as his leadership in positioning the Company
to take advantage of growth opportunities in the industry.
POLICY REGARDING QUALIFYING COMPENSATION Section 162(m) of the Internal
Revenue Code of 1986, as amended, (the "Code") imposes a $1,000,000 ceiling on
tax-deductible remuneration paid to any one of the five most highly compensated
executive officers of a publicly-held corporation, unless the
8
compensation is treated as performance related or is otherwise exempt from the
provisions of Section 162(m). The Compensation Committee does not anticipate
the compensation paid to any the Named Executive Officers to be affected by
Section 162(m) in the near term and therefore expects that all such
compensation will be fully deductible. Because of the current inapplicability
of Section 162(m) to the compensation paid to the Named Executive Officers, the
Compensation Committee has not yet made any policy decisions with respect to
the Section 162(m) limit.
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
Marshall S. Cogan, Chairman Michael R. Eisenson, Chairman
Michael R. Eisenson John J. Hannan
John J. Hannan
Robert H. Nelson
9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information, as of April 21, 1998,
regarding the beneficial ownership of Common Stock by (i) each stockholder who
is known by the Company to own more than 5% of the outstanding shares of Common
Stock, (ii) each director, (iii) each Named Executive Officer and (iv) all
directors and executive officers as a group.
SHARES BENEFICIALLY
OWNED
----------------------
BENEFICIAL OWNER NUMBER(1) PERCENT
- ----------------------------------------------------------------------- ----------- --------
Trace International Holdings, Inc. .................................... 4,016,110 20.5
375 Park Avenue
New York, New York 10152
Aeneas Venture Corporation ............................................ 2,843,656 14.5
(as affiliate of Harvard Private Capital Group, Inc.)
600 Atlantic Avenue
Boston, Massachusetts 02210
AIF II, L.P. .......................................................... 1,843,656 9.4
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577
Marshall S. Cogan (2) ................................................. 4,107,110 20.9
Samuel X. DiFeo (3) ................................................... 147,467 *
Richard Sinkfield ..................................................... 10,400 *
Robert H. Nelson (4) .................................................. 31,200 *
James R. Davidson (5) ................................................. 5,500 *
Carl Spielvogel (6) ................................................... 175,700 *
George G. Lowrance (7) ................................................ 78,800 *
Michael R. Eisenson (8) ............................................... 2,843,656 14.5
John J. Hannan (9) .................................................... 1,843,656 9.4
Jules B. Kroll ........................................................ 104,474 *
John M. Sallay (10) ................................................... 2,843,656 14.5
All directors and executive officers, without duplication (13 persons) 9,363,963 47.7
- ----------
* Less than 1%.
(1) Pursuant to the regulations of the Securities and Exchange Commission
(the "Commission"), shares are deemed to be "beneficially owned" by a
person if such person directly or indirectly has or shares the power to
vote or dispose of such shares, whether or not such person has any
pecuniary interest in such shares, or the right to acquire the power to
vote or dispose of such shares within 60 days, including any right to
acquire through the exercise of any option, warrant or right.
(2) Includes 25,000 shares issuable upon exercise of options that are vested
and exercisable within 60 days, 4,016,110 shares held by Trace and 1,000
shares held by Mr. Cogan's wife. Mr. Cogan disclaims beneficial ownership
of all shares held by Trace, or his wife.
(3) Includes 41,267 shares issuable upon exercise of options that are vested
and exercisable within 60 days.
(4) Includes 27,200 shares issuable upon exercise of options that are vested
and exercisable within 60 days.
(5) Includes 4,000 shares issuable upon exercise of options that are vested
and exercisable within 60 days.
(6) Includes 175,700 shares issuable upon exercise of options that are vested
and exercisable within 60 days.
(7) Includes 29,800 shares issuable upon exercise of options that are vested
and exercisable within 60 days and 10,000 shares held by Mr. Lowrance's
wife. Mr. Lowrance disclaims beneficial ownership of all shares owned by
his wife.
(8) Represents the shares held by Aeneas Venture Corporation ("Aeneas"). Mr.
Eisenson is the Managing Director, President and Chief Executive Officer
of Harvard Private Capital Group, Inc. ("Harvard Private Capital"), the
investment advisor of Aeneas. Mr. Eisenson disclaims beneficial ownership
of all shares held by Aeneas.
(9) Represents the shares held by AIF II, L.P. Mr. Hannan is a director of
Apollo Capital Management, Inc., which is the general partner of Apollo
Advisors, L.P., which is the managing general partner of AIF II, L.P. Mr.
Hannan disclaims beneficial ownership of all shares held by AIF II, L.P.
(10) Represents the shares held by Aeneas. Mr. Sallay is a Managing Director
of Harvard Private Capital. Mr. Sallay disclaims beneficial ownership of
all shares held by Aeneas.
10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Jules B. Kroll, a director of the Company, is Chairman of Kroll-O'Gara, a
corporate investigation and consulting firm which performs services for the
Company from time to time.
Richard Sinkfield, Executive Vice President -- Administration and Director
of the Company, is a member of the law firm of Rogers & Hardin, which
represents the Company in connection with various business transactions.
Pursuant to stock purchase agreements, dated October 15, 1993 (as amended,
the "Equity Facility"), among the Company and the investors named therein (the
"Initial Stockholders"), the Initial Stockholders purchased an aggregate of
8,504,750 shares of Common Stock in multiple closings between 1993 and 1996 and
were granted registration rights in respect of such shares. Such registration
rights also apply to an additional 306,346 shares of Common Stock subsequently
purchased by the Initial Stockholders and to 10,000 shares of Common Stock held
by Richard Sinkfield. Among the Initial Stockholders are Carl Spielvogel,
former Chairman of the Board and Chief Executive Officer of the Company, Jules
B. Kroll, a director of the Company, Trace, Aeneas and AIF II, L.P. In January
1997, Trace was also granted the right, subject to certain conditions, to have
its shares of Common Stock registered in connection with a pledge of such
shares to a lender. In December 1997, the Company registered shares of Common
Stock on a "shelf" registration statement on behalf of its stockholders who
have registration rights, including several Initial Stockholders. In addition,
the Company incurred $0.3 million in fees payable to Trace for services
provided in the ordinary course of business. The Company believes that the fees
for all such services are on terms no less favorable to the Company than would
be obtained in arm's-length negotiations with unaffiliated third parties.
As of January 1, 1997, the Company entered into an agreement whereby the
Company's exposures with respect to the majority of the extended service
contracts sold by UnitedAuto Care. Inc., a wholly owned subsidiary of the
Company, are to be assumed by a subsidiary of Trace in exchange for certain
fees. The Company believes that the fees relating to these transactions are on
terms no less favorable to the Company than would be obtained in arm's-length
negotiations with an affiliated third party. Aggregate fees paid by the Company
during 1997 relating to this agreement totaled approximately $3.2 million.
The Company is the tenant under a number of lease agreements with Mr.
DiFeo and members of his family. The Company believes all such leases are on
terms no less favorable to the Company than would be obtained in arm's-length
negotiations with unaffiliated third parties.
APPROVAL OF THE UNITED AUTO GROUP, INC. STOCK OPTION PLAN, AS AMENDED
The United Auto Group, Inc. Stock Option Plan (the "Option Plan") has been
adopted by the Board of Directors (the "Board") and the stockholders of the
Company. Effective April 29, 1998, the Board amended the Stock Plan (as so
amended, the "Amended Option Plan") to increase the number of shares of the
Company's Common Stock, that may be granted under the Amended Option Plan from
1,500,838 to 2,000,838 and to limit the number of shares of Common Stock with
respect to which options may be granted to any eligible person in any single
calendar year to 500,000. The Amended Option Plan is being submitted for
approval by the Company's stockholders.
The Amended Option Plan provides for the grant of non-qualified options
("NQOs") and incentive stock options ("ISOs"), as defined in Section 422 of the
Code. The Amended Option Plan is administered by the Stock Option Committee of
the Board. The Board believes that the Amended Option Plan is important to
provide an inducement to obtain and retain the services of employees of the
Company, its subsidiaries and affiliates, and to increase their proprietary
interest in the Company's success.
At present, all full-time employees of the Company and its subsidiaries,
as well as employees of its affiliates who perform services for the Company and
its subsidiaries, are eligible to participate in the Amended Option Plan. The
total number of eligible employees, as of the date of this Proxy Statement, is
approximately 5,300. The aggregate number of shares of Common Stock as to which
stock options ("Options") may be granted under the Amended Option Plan may not
exceed 2,000,838, subject to adjustment as provided in the Amended Option Plan.
The number of shares of Common Stock available
11
for grant of Options at any time under the Amended Option Plan will be
decreased by the sum of the number of shares for which Options have been issued
and have not yet lapsed or canceled and the number of shares already issued
upon exercise of Options. The aggregate number of shares of Common Stock with
respect to which Options may be granted to any eligible employee is 500,000 per
calendar year. As of December 31, 1997, Options to purchase up to 1,217,800 had
been granted under the Stock Option Plan, of which 839,925 were still
outstanding. On April 29, 1998, the closing sale price of a share of Common
Stock on the New York Stock Exchange was $17-3/4.
Recipients of Options under the Amended Option Plan ("Optionees") are
selected by the Stock Option Committee, which has sole authority (i) to
determine the number of Options to be granted to such recipient, (ii) to
prescribe the form or forms of the option agreements, (iii) to adopt, amend or
rescind rules and regulations for the administration of the Amended Option
Plan, (iv) to construe and interpret the Amended Option Plan rules and
regulations, (v) to determine the exercise price of shares subject to Options,
(vi) to determine the dates on which Options become exercisable, (vii) to
determine the expiration date of each Option and (viii) to cancel any Option
held with the express written consent of the Optionee to be affected. Options
granted under the Amended Option Plan will be evidenced by a written Option
agreement between each Optionee and the Company which will set forth, among
other things, the exercise price and the vesting schedule of the Options, as
established by the Committee.
The exercise price of the shares of Common Stock subject to Options will
be fixed by the Stock Option Committee, in its discretion, at the time Options
are granted, provided that the per share exercise price of an ISO may not be
less than the fair market value of a share of Common Stock on the date of
grant. All Options 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. Options are not transferable, except by will or
the laws of descent and distribution. During the lifetime of the Optionee,
Options will be exercisable only by the Optionee.
Optionees will have no voting, dividend or other rights as stockholders
with respect to shares of Common Stock covered by Options prior to becoming the
holders of record of such shares. All Option grants will permit the exercise
price to be paid in cash or by certified check, bank draft or money order or by
"cashless" exercise. The number of shares covered by Options will be
appropriately adjusted in the event of any merger, recapitalization or similar
corporate event (a "Merger Event"). If the Company is the surviving corporation
of any Merger Event, the Optionee will receive substitute Options to purchase
shares of the surviving corporation so as to preserve the value, rights and
benefits of any Option granted hereunder. If the Company is not the surviving
or resulting corporation of any Merger Event, the Committee may elect to pay in
cash the difference between the fair market value of the Common Stock on the
date of the Merger Event and the exercise price of such Options. If the
Committee does not elect to make a cash payment, the surviving corporation will
be required, as a condition to the Merger Event, to grant substitute Options to
purchase shares of the surviving or resulting corporation so as to preserve the
value, rights and benefits of any Option granted hereunder.
The Board may at any time terminate the Amended Option Plan or from time
to time make such modification or amendments to the Amended Option Plan as it
may deem advisable, provided that the Board may not, without the consent of the
Optionee, take action which would have a material adverse effect on outstanding
Options or any unexercised rights under outstanding Options.
The following is a brief discussion of the federal income tax consequences
of transactions under the Amended Option Plan based on the Code. The Amended
Option Plan is not qualified under Section 401(a) of the Code. This discussion
is not intended to be exhaustive and does not describe the state or local tax
consequences.
Incentive Options. No taxable income is realized by an Optionee upon the
grant or exercise of an ISO. If Common Stock is issued to an Optionee pursuant
to the exercise of an ISO, and if no disqualifying disposition of such shares
is made by such Optionee within two years after the date of grant or within one
year after the transfer of such shares to such Optionee, then (i) upon sale of
such shares, any amount realized in excess of the Option price will be taxed to
such Optionee as a long-term capital gain and any loss sustained will be a
long-term capital loss and (ii) no deduction will be allowed to the Optionee's
employer for federal income tax purposes.
12
If the Common Stock acquired upon the exercise of an ISO is disposed of
prior to the expiration of either holding period described above, generally (i)
the Optionee will realize ordinary income in the year of disposition in an
amount equal to the excess (if any) of the fair market value of such shares at
exercise (or, if less, the amount realized on the disposition of such shares)
over the Option price paid for such shares and (ii) the Company will be
entitled to deduct such amount for federal income tax purposes if the amount
represents an ordinary and necessary business expense. Any further gain (or
loss) realized by the Optionee will be taxed as short-term, mid-term or
long-term capital gain (or loss), as the case may be, and will not result in
any deduction by the Company.
Non-Qualified Options. With respect to NQOs, (i) no income is realized by
an Optionee at the time the Option is granted, (ii) generally, at exercise,
ordinary income is realized by the Optionee in an amount equal to the
difference between the Option price paid for the shares and the fair market
value of the shares, if unrestricted, on the date of exercise, and the Company
is generally entitled to a tax deduction in the same amount subject to
applicable tax withholding requirements and (iii) at sale, appreciation (or
depreciation) after the date of exercise is treated as either short-term,
mid-term or long-term capital gain (or loss) depending on how long the shares
have been held.
Deductions for compensation attributable to NQOs (or disqualified ISOs)
granted to the Company's Named Executive Officers may be subject to the
deduction limits of Section 162(m) of the Code, unless such compensation
qualifies as "performance-based" (as defined therein).
NEW PLAN BENEFITS
Inasmuch as Options will be granted to participants under the Amended
Option Plan at the sole discretion of the Committee, and no Options have been
granted subject to shareholder approval, benefits under the Amended Option Plan
are not determinable. The Company has therefore omitted a tabular presentation
of such benefits. Compensation paid and other benefits granted in respect of
Fiscal 1997 to the Named Executive Officers are set forth in the Summary
Compensation Table on page 6.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDED OPTION
PLAN.
RATIFICATION OF INDEPENDENT ACCOUNTANTS
Subject to stockholder ratification, the Board of Directors upon
recommendation of the Audit Committee, has appointed the firm of Coopers &
Lybrand L.L.P. as the independent accountants of the Company for Fiscal 1998.
This firm has examined the accounts of the Company since 1992. If the
stockholders do not ratify this appointment, the Board will consider other
independent accountants. One or more members of Coopers & Lybrand L.L.P. is
expected to be present at the Annual Meeting, will have the opportunity to make
a statement if they so desire and will be available to respond to questions.
Vote Required
The affirmative vote of a majority of the shares of Common Stock present,
either in person or by proxy, at the Annual Meeting and entitled to vote is
required for the ratification of the independent accountants.
The Board of Directors recommends a vote "FOR" ratification of the
appointment of Coopers & Lybrand L.L.P. as independent accountants.
SHARE INVESTMENT PERFORMANCE
The following graph compares the cumulative total stockholder returns on
the Common Stock based on an investment of $100 after the close of the market
on (i) October 23, 1996, the date of commencement of the Company's initial
public offering, and (ii) the close of the market on December 31 of each year
thereafter against the Standard & Poor's Index ("S&P 500") and an industry peer
group consisting of the following companies: Cross-Continent Auto Retailers,
Inc., Ugly Duckling Corporation and Republic Industries Inc.
PERFORMANCE GRAPH
[Note: The performance graph has been omitted from the electronic version of
this Proxy Statement. A tabular representation of the omitted material is
set forth below.]
10/23/96 12/31/96 12/31/97
-------- -------- --------
United Auto Group, Inc. $100 $85.83 $61.04
S&P 500 Index 100 105.13 140.21
Peer Group 100 107.08 77.79
13
FILINGS UNDER SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires executive officers, directors
and persons who beneficially own more than 10% of the Common Stock to file
initial reports of ownership and reports of changes of ownership with the
Commission and the New York Stock Exchange. Executive officers, directors and
greater than 10% beneficial owners are required by Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms furnished
to the Company and written representations from the executive officers,
directors and greater than 10% beneficial owners, the Company believes that all
Section 16(a) filing requirements applicable to its executive officers,
directors and greater than 10% owners were complied with during Fiscal 1997.
STOCKHOLDER NOMINATIONS AND PROPOSALS FOR 1997
Any proposals intended to be presented to stockholders at the Company's
1998 Annual Meeting of Stockholders must be received by the Company for
inclusion in the proxy statements for such annual meeting by, December 31,
1998. Such proposals must also meet other requirements of the rules of the
Commission relating to stockholders' proposals.
OTHER BUSINESS
It is not anticipated that there will be presented to the Annual Meeting
any business other than the election of directors, the stock option plan
amendment and the ratification of accountants, and the Board of Directors was
not aware, a reasonable time before this solicitation of proxies, of any other
matters which might properly be presented for action at the meeting. If any
other business should come before the Annual Meeting, the persons named on the
enclosed proxy card will have discretionary authority to vote all proxies in
accordance with their best judgment.
Proxies in the form enclosed are solicited by or on behalf of the Board of
Directors. The cost of this solicitation will be borne by the Company. In
addition to the solicitation of the proxies by use of the mails, some of the
officers and regular employees of the Company, without extra remuneration, may
solicit proxies personally, or by telephone or otherwise. In addition,
arrangements will be made with brokerage houses and other custodian, nominees
and fiduciaries to forward proxies and proxy material to their principals, and
the Company will reimburse them for their expenses in forwarding soliciting
materials, which are not expected to exceed $5,000.
It is important the proxies be returned promptly. Therefore, stockholders
are urged to sign, date and return the enclosed proxy card in the accompanying
stamped and addressed envelope.
By Order of the Board of Directors,
/s/ Tambra S. King
Tambra S. King
April 30, 1998
14
APPENDIX A
AMENDMENT ONE TO THE
UNITED AUTO GROUP, INC.
STOCK OPTION PLAN
Effective April 29, 1998, the Board of Directors of United Auto
Group, Inc. amended the United Auto Group, Inc. Stock Option Plan as follows:
1. The reference to "1,500,838" in the second sentence of Article III
shall be replaced with a reference to "2,000,838."
2. The following shall be added to the end of the first paragraph of
Article III:
The aggregate number of shares of Common Stock with respect
to which Options may be granted during any calendar year to
any Eligible Employee is 500,000.
3. The first paragraph of Article X shall be deleted and the
following shall be inserted in its place:
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, the Exercise Price in respect of
such Option, and the maximum number of shares which may be
granted to each Eligible Employee during any calendar year
shall be appropriately adjusted for any increase or 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.
UNITED AUTO GROUP, INC.
STOCK OPTION PLAN
* * *
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.
-2-
"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.
-3-
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 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.
-4-
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 tenyear 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 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.
-5-
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.
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.
-6-
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.
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.
-7-
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.
(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.
-8-
(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.
(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.
-9-
APPENDIX B
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
UNITED AUTO GROUP, INC.
The undersigned hereby revokes all prior proxies and appoints Karl H. Winters
and Philip N. Smith, Jr., and each of them, as proxies with full power of
substitution, to vote on behalf of the undersigned the same number of shares of
Voting Common Stock of United Auto Group, Inc. which the undersigned is then
entitled to vote, at the Annual Meeting of Stockholders to be held on Thursday,
May 21, 1998 at 9:00 a.m., local time, at the Regency Hotel, 540 Park Avenue,
Ballroom, New York, New York, and at any postponements or adjournments thereof,
on any matter properly coming before the meeting, and specifically the matters
described on the reverse side hereof:
Date: ------------------- , 1998.
--------------------------
(Signature of Stockholder)
--------------------------
(Signature of Stockholder)
Note: Please sign your
name exactly as it is
shown at the left. When
signing as attorney,
executor, administrator,
trustee, guardian or
corporate officer, please
give your full title as
such. EACH joint owner is
requested to sign.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED POSTAGE PAID ENVELOPE.(Continued on reverse side)
Please mark
your votes as [X]
indicated in
this example
1. To elect three Class II directors to serve until the 2001 annual meeting of
stockholders or until their respective successors are duly elected and
qualified;
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary) (to vote for all nominees listed below)
Jules B. Kroll, Robert H. Nelson, Richard Sinkfield
(Instructions: To withhold authority to vote for any nominee, write that
nominee's name in the space provided below:)
----------------------------------------------------------------------------
2. To approve an amendment to the Company's Stock Option Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To ratify the selection of Coopers & Lybrand L.L.P. as the Company's
independent accountants for the year ended December 31, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
THE PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, IT WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES NAMED HEREIN, FOR THE AMENDMENT TO THE
COMPANY'S STOCK OPTION PLAN, FOR THE RATIFICATION OF ACCOUNTANTS AND ACCORDING
TO THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER MATTERS THAT MAY PROPERLY
COME BEFORE THE MEETING OR ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.