October __, 1996
Xxxxxx Xxxxxxxxxxxxx
0000 X. XxXxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Xxxxxx X. Xxxxxxxx
0000 X. XxXxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Xxx Xxxxxxx
0000 X. XxXxxxxx xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Re: Indemnification Agreement
All capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in that certain Stock Purchase Agreement between
United Auto Group, Inc., UAG West, Inc., Scottsdale Jaguar, Ltd., SA Automotive,
Ltd., SL Automotive, Ltd., SPA Automotive, Ltd., LRP, Ltd., Sun BMW, Ltd.,
Scottsdale Management Group, Ltd., 6725 Dealership, Ltd., Xxxxxx Xxxxxxxxxxxxx
Revocable Trust Dated April 15, 1983 as amended, Brochick 6725 Trust Dated
December 29, 1992, Beskind 6725 Trust Dated December 29, 1992, Xxxxxxxxxxxxx
6725 trust Dated December 29, 1992, Xxxxxx Xxxxxxxxxxxxx, Xxx X. Xxxxxxx and
Xxxxxx X. Xxxxxxxx Dated as of June 6, 1996, as thereafter amended (the "Stock
Purchase Agreement").
In consideration for the Stockholders entering into certain amendments
to the Stock Purchase Agreement:
1. Scottsdale Jaguar shall indemnify and hold the Stockholders
harmless from any Costs arising out of any claim by Jaguar Cars ("Jaguar") or
Aston Xxxxxx or any parent or affiliate against the Stockholders as a result of
or arising out of transactions and agreements between UAG West and Scottsdale
Jaguar, including that certain Management Agreement between UAG West and
Scottsdale Jaguar of even date herewith and that certain Lease Agreement between
Scottsdale Audi and Scottsdale Jaguar of even date herewith. This
indemnification is limited to claims by Jaguar or Aston Xxxxxx alleging that the
Stockholders are personally liable to Jaguar or Aston Xxxxxx and does not
include indemnification for any Costs incurred by Scottsdale Jaguar. UAG, UAG
West, Scottsdale Jaguar, and the Stockholders acknowledge and agree that there
can be no assurance that Jaguar or Aston Xxxxxx will continue the Jaguar
franchise currently held by Scottsdale Jaguar, Ltd. ("Scottsdale Jaguar").
October ___, 1996
Page 2
2. Additionally, Scottsdale Jaguar shall indemnify and hold harmless
from, and promptly pay upon request to, each of the Stockholders and Xx.
Xxxxxxxxxxxxx (without regard to the limitations relating to Xx. Xxxxxxxxxxxxx
set forth on the signature page to the Stock Purchase Agreement) (collectively,
the "Indemnified Parties") any and all liabilities for Taxes incurred at any
time by one or more of the Indemnified Parties in connection with each and all
of the transactions contemplated by the Stock Purchase Agreement, as amended or
supplemented (as the case may be) by (1) that certain Amendment No. 1 to Stock
Purchase Agreement dated as of October __, 1996 ("Amendment No. 1"),. (2) that
certain Amendment No. 2 to Stock Purchase Agreement dated as of October __, 1996
("amendment No. 2"), (3) that certain Shareholders' Agreement dated as of
October __, 1996, (4) that certain Management Agreement dated as of October __,
1996 (the "Management Agreement"), (5) that certain Lease Agreement dated as of
October __, 1996, (6) any documentation reflecting the grant of an option with
respect to the stock of Scottsdale Jaguar, (7) any documentation relating to the
transfer by 6725 Dealership, Ltd. of its interest in 6725 Agent, an Arizona
general partnership, to Scottsdale Audi, Ltd., and (8) any and all additional
documentation or transactions amending or supplementing the provisions of the
Stock Purchase Agreement (the matters referred to in the preceding clauses (1)
through (8) hereafter collectively referred to as the "Additional Agreements"),
IN EXCESS OF the liabilities for Taxes which would have been due and owing by
the Indemnified Parties had the transactions contemplated by the Stock Purchase
Agreement been consummated without regard to the Additional Agreements.
3. Notwithstanding the foregoing, it is expressly provided that with
respect to the initial $100,000 of increased liabilities for Taxes of the
Indemnified Parties collectively attributable to (a) the acquisition of 19% of
the stock of SK Motors, Ltd., an Arizona corporation, by the Xxxxxxxxxxxxx Trust
in accordance with Amendment No. 1 and (b) the transfer of the Porsche Assets
and the Audi Assets by Scottsdale Jaguar to SK Motors, Ltd. and Scottsdale Audi,
Ltd. in accordance with Amendment No. 1 and Amendment No. 2 (excluding for such
latter purpose the transfer by Scottsdale Jaguar of Scottsdale Jaguar's interest
in 6725 Agent, an Arizona general partnership, to Scottsdale Audi, Ltd. (the
"Partnership Transfer")), the liability of Scottsdale Jaguar hereunder shall be
50% of the amount of increased liabilities for Taxes of the Indemnified Persons
collectively attributable thereto.
4. Anything hereinabove to the contrary notwithstanding, if, in
connection with either (a) the acquisition by the Xxxxxxxxxxxxx Trust of 19% of
the Porsche Shares (the "19% Shares") or (b) the Partnership Transfer, (i) the
Indemnified Parties, in conjunction with other transactions the subject hereof,
recognize income in excess of the income that
October ___, 1996
Page 3
would have been recognized had the transactions contemplated by the Agreement
been consummated without regard to the Additional Agreements, (ii) payment is
made by Scottsdale Jaguar hereunder in connection with the resulting increased
liability for Taxes, and (iii) solely by reason of the recognition of such
income, the Indemnified Parties reduce their liability for Taxes payable in
connection with a subsequent disposition of the 19% Shares or the stock of
Scottsdale Jaguar (a "Disposition") to an amount smaller than would otherwise be
paid by the Indemnified Parties on such a Disposition, the Indemnified Parties
shall, promptly following any Disposition, pay to Scottsdale Jaguar the amount
by which its liabilities for Taxes in connection with such Disposition are
actually reduced. Anything in this paragraph to the contrary notwithstanding,
with respect to the initial $100,000 of reduced liabilities for Taxes in
connection with any Disposition of the 19% Shares, the liability of the
Xxxxxxxxxxxxx Trust to Scottsdale Jaguar pursuant to this paragraph shall be 50%
of the amount of any such reduction in liabilities for Taxes. It is expressly
provided herein that in determining the actual amount of the reduction of the
Indemnified Parties' liabilities for Taxes in connection with a Disposition, the
liabilities shall be determined by taking into account, to the extent
applicable, any basis adjustments occurring by reason of paragraph 7 below.
5. Anything hereinabove to the contrary notwithstanding, Scottsdale
Jaguar shall not be required to indemnify the Indemnified Parties for any
liability for Taxes arising out of or relating to (a) any dividends or other
distributions received by the Xxxxxxxxxxxxx Trust with respect to the 19%
Shares, (b) any consideration received by the Xxxxxxxxxxxxx Trust in connection
with a disposition of the 19% Shares, (c) any dividends or other distributions
with respect to the stock of Scottsdale Jaguar received by an Indemnified Party
following the Closing Date (excluding distributions of the consideration paid to
Scottsdale Jaguar by UAG West for the Porsche Shares, the Audi Shares, and the
Partnership Transfer), and (d) any consideration received by an Indemnified
Party in connection with the grant of an option on, or a sale or other
disposition of, the stock of Scottsdale Jaguar.
6. It is expressly provided herein that UAG and UAG West shall
guaranty the obligations of Scottsdale Jaguar set forth herein and, accordingly,
shall, at the direction of the Indemnified Parties, pay either to the
Indemnified Parties directly or to Scottsdale Jaguar, any portion of the
obligations of Scottsdale Jaguar set forth herein if Scottsdale Jaguar fails to
pay such obligations directly to the Indemnified Parties. It is further
expressly agreed that any amounts paid, at the direction of the Indemnified
Parties, by UAG or UAG West to Scottsdale Jaguar in accordance with the
preceding sentence, shall be immediately distributed by Scottsdale Jaguar to the
Indemnified Parties. The parties acknowledge and agree that
October___, 1996
Page 4
(a) Scottsdale Jaguar shall make reasonable efforts to make such payments due
hereunder but that any such payments shall be subject to maintenance of
appropriate working capital levels and (b) UAG West may, to facilitate
Scottsdale Jaguar's ability to make such payments, defer the management fees due
under the Management Agreement; provided, however, that nothing herein shall be
deemed to limit the foregoing guaranty.
7. It is expressly agreed that any and all amounts paid by
Scottsdale Jaguar to the Indemnified Parties hereunder which occur within
Scottsdale Jaguar's "post-termination transition period" (within the meaning of
Section 1377(b)(1) of the Internal Revenue Code of 1986, as amended (the
"Code")) shall be treated by Scottsdale Jaguar as distributions within the
purview of Section 1368(e)(1)of the Code.
Sincerely,
SCOTTSDALE JAGUAR, LTD.
__________________________________
By:
Its:
UNITED AUTO GROUP, INC.
(with respect to the guaranty herein)
__________________________________
By:
Its:
UAG WEST, INC.
(with respect to the guaranty herein)
__________________________________
By:
Its:
October ___, 1996
Page 5
ACCEPTED AND AGREED:
______________________________
Xxxxxx Xxxxxxxxxxxxx
XXXXXX XXXXXXXXXXXXX REVOCABLE
TRUST DATED APRIL 15, 1983,
AS AMENDED
By:___________________________
Xxxxxx Xxxxxxxxxxxxx, Trustee
______________________________
Xxx X. Xxxxxxx
______________________________
Xxxxx X. Xxxxxxx, Spouse of
Xxx X. Xxxxxxx
______________________________
Xxxxxx X. Xxxxxxxx
______________________________
Xxxxxxxxx X. Xxxxxxxx, Spouse
of Xxxxxx Xxxxxxxx
BROCHICK 6725 TRUST DATED
DECEMBER 29, 1992
By:___________________________
Xxxxxx X. Xxxxxxxx, Trustee
BESKIND 6725 TRUST DATED
DECEMBER 29, 1992
By:____________________________
Xxxxxx X. Xxxxxxxx, Trustee
October ___, 1996
Page 6
XXXXXXXXXXXXX 6725 TRUST DATED
DECEMBER 29, 1992
By:____________________________
Xxxxxx X. Xxxxxxxx, Trustee
