EXHIBIT 10.11
EXECUTION COPY
NON-COMPETITION AND STANDSTILL AGREEMENT
THIS NON-COMPETITION AND STANDSTILL AGREEMENT (this "Agreement")
is entered into as of this 12th day of April, 1999, between United Auto Group,
Inc., a Delaware corporation (the "Company") and Xxxxxxxx X. Xxxxx ("Xxxxx").
WHEREAS, on the date hereof, the Company has entered into a
Securities Purchase Agreement (the "Securities Purchase Agreement") with
International Motor Cars Group I, L.L.C. and International Motor Cars Group II,
L.L.C. (together, the "Purchaser");
WHEREAS, in connection with the transactions contemplated under
the Securities Purchase Agreement and the other agreements referred to therein,
the parties hereto wish to set forth the agreements herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein without being
otherwise defined shall have the meanings assigned thereto in the Securities
Purchase Agreement.
2. Resignation. Subject to Section 5(b) below, Xxxxx shall resign
as the Chief Executive Officer of the Company effective as of the date of the
Initial Closing.
3. Non-Competition.
(a) No Competing Business. Xxxxx acknowledges that (i) the
agreements and covenants contained in this Section 3 are essential to
protect the value of the Company's business and assets and (ii) by
virtue of his employment and affiliation with the Company, Xxxxx has
obtained knowledge, trade secrets, know-how, financial or other data,
business plans, customer and supplier lists, training and experience
(collectively, "Proprietary Information"), and there is a substantial
probability that such Proprietary Information
could be used to the substantial advantage of a competitor of the
Company and to the Company's substantial detriment. Xxxxx also
acknowledges that the Company has entered into this Agreement and that
the Purchaser has entered into the Securities Purchase Agreement in
reliance, in part, on the covenants made by Xxxxx in this Section 3.
Therefore, Xxxxx agrees that, for the period commencing on the date of
the Initial Closing and ending on December 31, 2005 (the "Restricted
Period"), Xxxxx shall not, (a) in any location where the Company or any
subsidiary of the Company or any predecessor to the business of the
Company or such subsidiary has conducted business during the Restricted
Period, (b) in any location in which the Company or any of its
subsidiaries then specifically intends to conduct business, or (c)
within the continental United States or Puerto Rico, participate or
engage, directly or indirectly, for himself or on behalf of or in
conjunction with any person, corporation, partnership or other entity,
whether as an employee, agent, or investor with a greater than ten
percent (10%) equity interest, in any business activities (a
"Competitive Activity") if such activity constitutes the production,
distribution, sale, service or provision of products or services that
are similar to products or services then being produced, distributed,
sold, serviced or otherwise provided by the Company or any of its
subsidiaries as of the date of this Agreement.
(b) Nondisclosure of Confidential Information. From and after the
date hereof, Xxxxx shall not disclose to any person (other than members
of the Company's Board of Directors or persons in a confidential
relationship with him, such as his legal or financial advisors) or
entity or use any information not in the public domain, in any form,
acquired or developed by Xxxxx while employed by the Company, relating
to the Company or its Affiliates, including but not limited to the
Proprietary Information.
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Xxxxx agrees and acknowledges that all of such information, in any form,
and copies and extracts thereof are and shall remain the sole and
exclusive property of the Company, and Xxxxx shall, promptly following
the date of this Agreement, return to the Company the originals and all
copies of any such information provided to or acquired by Xxxxx in
connection with the performance of his duties for the Company, in each
case, other than such information reasonably necessary for Xxxxx to
fulfill his ongoing duties as a member of the Company's Board of
Directors.
(c) No Interference. During the Restricted Period, Xxxxx shall
not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business
organization, intentionally solicit, endeavor to entice away from the
Company or any of its subsidiaries, or otherwise interfere with the
relationship of the Company or any of its subsidiaries with, any person
who, to the knowledge of Xxxxx, is employed by or otherwise engaged to
perform services for the Company or any of its subsidiaries.
4. Standstill. (a) Subject to Section 4(b), from and after the
date of this Agreement until the third anniversary of the date of the Initial
Closing, Xxxxx shall not, and shall cause his Affiliates and associates not to,
either alone or as part of a "group" (as such term is used in Section 13d-5 (as
such rule is currently in effect) of the Exchange Act), directly or indirectly:
(i) acquire or seek to acquire, by purchase or otherwise,
ownership (including, but not limited to, Beneficial Ownership (such
term, as used herein, being used as defined in Rule 13d-5 promulgated
under the Exchange Act)) of (A) any capital stock of the Company, or
direct or indirect rights (including convertible securities) or options
to acquire such capital stock or (B) any of the
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assets or businesses of the Company, or direct or indirect rights or
options to acquire such assets or businesses;
(ii) offer, seek or propose to enter into any transaction of
merger, consolidation, sale of substantial assets or any other business
combination involving the Company or any of its Affiliates;
(iii) make, or in any way participate, directly or indirectly, in
any "solicitation" of "proxies" (as such terms are defined or used in
Regulation 14A under the Exchange Act) or become a "participant" in any
"election contest" (as such terms are defined or used in Rule 14a-11
under the Exchange Act) to vote, or seek to advise or influence any
person or entity with respect to the voting of, any voting securities of
the Company of any of its Affiliates, except as set forth in Article II
of the Stockholders Agreement to be entered into on the date of the
Initial Closing by and among the Company, the Purchaser, and certain of
the Company's other stockholders (the "Stockholders Agreement");
(iv) initiate or propose any stockholder proposals for submission
to a vote of stockholders, whether by action at a stockholder meeting or
by written consent, with respect to the Company or any of its
Affiliates, or except as provided in the Stockholders Agreement propose
any person for election to the Board of Directors of the Company;
(v) disclose to any third party, or make any filing under the
Exchange Act, including, without limitation, under Section 13(d)
thereof, disclosing, any intention, plan or arrangement inconsistent
with the foregoing;
(vi) form, join or in any way participate in a group to take any
actions otherwise prohibited by the terms of this Agreement;
(vii) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the
foregoing; or
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(viii) make any public announcement with respect to any of the
foregoing.
(b) Notwithstanding Section 4(a) hereof, the provisions of such
Section 4(a) shall not prohibit:
(i) any transaction approved by either (A) a majority of the
members of the Company's Board of Directors who are neither designated
by or otherwise Affiliated with Trace International Holdings, Inc.
("Trace"), or (B) a majority of the stockholders of the Company other
than Trace and its Affiliates;
(ii) any shares of capital stock or options or other rights to
acquire such capital stock granted or to be granted pursuant to
agreements between the Company and Xxxxx or his Affiliates in effect on
the date hereof;
(iii) the issuance to Xxxxx of any shares of the Company's
capital stock or options or other rights to acquire such capital stock
pursuant to a dividend or other distribution to the holders of such
capital stock generally;
(iv) the issuance to Xxxxx of any shares of the Company's capital
stock or options or other rights to acquire such capital stock as
compensation for Xxxxx'x service as a member of the Company's Board of
Directors or any committee thereof; or
(v) the issuance to Xxxxx of the options described in Section 6
of this Agreement and the receipt of Common Stock upon exercise of stock
options.
5. Termination. In the event that (i) the Second Closing does not
occur on or prior to December 31, 1999 or (ii) the Purchaser exercises its right
under Sections 7.2 or 7.4 of the Securities Purchase Agreement, then, in either
case: (a) this Agreement (including, without limitation, the Company's payment
obligations to Xxxxx pursuant to Section 6 hereof and the restrictions imposed
on Xxxxx in Section 3 hereof) shall terminate from and after the date of such
termination or such exercise as applicable, and thereafter shall be of no
further effect and (b) the Company shall reinstate Xxxxx as Chief
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Executive Officer of the Company, with the same salary, bonus, benefits and
other compensation (in each case, commencing as of the date of such
reinstatement) as Xxxxx was entitled to for the 1999 fiscal year.
6. Consideration. In consideration for the terms herein, the
Company shall pay Xxxxx: (a) from and after the date of Xxxxx'x resignation
pursuant to Section 2 above until December 31, 1999, Xxxxx'x current base
salary; (b) from and after January 1, 2000 until December 31, 2005, an amount
equal to $750,000 per annum, payable bi-weekly; (c) on the date of the Second
Closing, (i) a cash payment of $250,000 and (ii) fully vested options to
purchase 400,000 shares of the Company's common stock at an exercise price of
$10.00 per share. In addition, the Company shall pay to Xxxxx 25% of any
compensation or bonus directly or indirectly paid by the Company to or applied
for Mr. Xxxxx Xxxxxx during the Restricted Period in cash, stock, options,
warrants or other remuneration; provided however, that this provision shall not
apply to the initial grant of 400,000 options to Mr. Penske. Xxxxx acknowledges
that no amounts shall be payable to Xxxxx pursuant to the immediately preceding
sentence unless and until any such bonus payment is actually made to or applied
for the benefit of Mr. Penske. The Company shall, during the Restricted Period,
provide semi-annual statements to Xxxxx showing all compensation received by Mr.
Penske in the two preceding quarters not later than thirty (30) days after the
conclusion of such period. In the event that the Company defaults under this
Agreement, Xxxxx shall be entitled to accelerate and demand the immediate
payment of all remaining amounts due to him under this Agreement, provided that
such acceleration and demand shall not take place until 30 days following
receipt by the Company of written notice from or on behalf of Xxxxx specifying
such default, and only if such default is not cured as of the end of such 30-day
period. If such default is not so cured as of the end of such 30-day period,
Xxxxx shall thereafter no longer be subject to any obligations or restrictions
hereunder (including, without limitation, Xxxxx'x covenants and agreements in
Section 3
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and 4 hereof) until such time as the Company pays in full to Xxxxx all amounts
due (following acceleration, as described in the immediately preceding
sentence).
7. Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes as
shall be required pursuant to any law or government regulation or ruling.
8. Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given (a) when delivered
personally to the recipient, (b) when sent to the recipient by telecopy (receipt
electronically confirmed by sender's telecopy machine) if during normal business
hours of the recipient, otherwise on the next business day, (c) one business day
after the date when sent to the recipient by reputable express courier service
(charges prepaid), or (d) seven business days after the date when mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid. Such notices, demands and other communications shall be sent to the
parties at the addresses indicated below:
If to Xxxxx, to:
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
With a copy to:
Xxxxxxx Xxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopy: (000) 000-0000
(which shall not
constitute notice)
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If to the Company, to:
United Auto Group, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Xx., Esq.
General Counsel
With a copy to:
(which shall not
constitute notice)
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
9. Amendments; Waiver. The terms, provisions and conditions of
this Agreement may not be changed, modified, waived or amended in any manner
except by an instrument in writing duly executed by both of the parties hereto.
10. Prior Agreements. Effective upon the date of the Initial
Closing, any and all agreements relating to the subject matter hereof previously
entered into between the Company and Xxxxx are hereby mutually terminated and
canceled, and each of the parties mutually releases and discharges the other
from any and all obligations and liabilities whatsoever existing under it by
reason of any such agreements, it being the intention of the Company and Xxxxx
that this Agreement shall supersede and be in place of any and all prior
agreements or understandings between them other than those relating to
indemnification for acts as an officer or director.
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11. Descriptive Headings. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
12. Counterparts. For the convenience of the parties, any number
of counterparts of this Agreement may be executed by any one or more parties
hereto, and each such executed counterpart shall be, and shall be deemed to be,
an original, but all of which shall constitute, and shall be deemed to
constitute, in the aggregate but one and the same instrument.
13. Governing Law; Jurisdiction.
(a) This Agreement and the legal relations between the parties
hereto shall be governed by and construed in accordance with the laws of
the State of New York, applicable to contracts made and performed
therein.
(b) Each of the parties hereto hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of New York and the United States of America located
in the County of New York for any action or proceeding arising out of or
relating to this Agreement and the transactions contemplated hereby (and
agrees not to commence any action or proceeding relating thereto except
in such courts), and further agrees that service of any process,
summons, notice or document by U.S. registered mail to his or its
respective address set forth in Section 8 hereof shall be effective
service of process for any action or proceeding brought against it in
any such court. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any
action or proceeding arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of New York or the United
States of America located in the County of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim
in
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any such court that any such action or proceeding brought in any such
court has been brought in an inconvenient forum.
14. Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument. Furthermore, in lieu of any such invalid
or unenforceable term or provision, the parties hereto intend that there shall
be added as a part of this Agreement a provision as similar in terms to such
invalid or unenforceable provision as may be possible and be valid and
enforceable. If any of the covenants set forth in Section 3 of this Agreement
are held to be unreasonable, arbitrary, or against public policy, such covenants
will be considered divisible with respect to scope, time, and geographic area,
and in such lesser scope, time and geographic area, will be effective, binding
and enforceable against Xxxxx.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
UNITED AUTO GROUP, INC.
By: /s/ Xxxxxx X. XxXxx
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Name: Xxxxxx X. XxXxx
Title: President and
Chief Operating Officer
/s/ Xxxxxxxx X. Xxxxx
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Xxxxxxxx X. Xxxxx
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