Document:

Exhibit 10.21

 

FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

OF PAG GREENWICH M1, LLC

 

This First Amended and Restated Limited Liability Company Agreement of PAG GREENWICH M1, LLC (the “Company”) is dated as of November 15, 2013 by and between PAG GREENWICH HOLDINGS, LLC, a Delaware corporation, (“PAG”) and NOTO AUTOMOTIVE LLC, a Connecticut limited liability company, (“NAL”) (each of the foregoing parties to this Agreement shall be referred to herein collectively as the “Parties”), and the Persons who become Members of the Company in accordance with the provisions of this Agreement.    Certain capitalized terms used herein without definition have the meanings specified in Section 15.

 

WHEREAS, the Company operates a factory authorized retail sales and service Mercedes Benz, dealership located at various premises, principally on West Putnam Ave., Greenwich, Connecticut (the “Business”).

 

WHEREAS, the Company was formed under the Delaware Act in order to hold the entities that own and operate the Business; and

 

WHEREAS, the Parties hereto desire to establish their respective rights and obligations as Members of such limited liability company effective as of the date of this Agreement.

 

NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Members hereby agree as follows:

 

SECTION 1

 

FORMATION OF THE LIMITED LIABILITY COMPANY

 

1.1                               Formation; Filings.

 

(a)                                 Generally.  The Parties agree that the limited liability company formed pursuant to the provisions of the Delaware Act and upon its terms, shall be subject to the conditions, and for the purposes set forth in this Agreement.  Each of the Members shall execute or cause to be executed from time to time all other instruments, certificates, notices and documents, and shall do or cause to be done all such filing, recording, publishing and other acts, in each case, as may be necessary or appropriate from time to time to comply with all applicable requirements for the formation and/or operation and, when appropriate, termination of a limited liability company in the State of Delaware and all other jurisdictions where the Company shall desire to conduct its business.

 

(b)                                 Units; Name; Capital Contributions.  The number of Units, authorized, issued and outstanding are set forth in Schedule A hereto.  The name, mailing address, Capital Contribution and Units held by each Member is listed on Schedule A attached hereto.

 

1.2                               Name.

 

The name of the Company is “PAG GREENWICH M1, LLC” and its business shall be carried on in this name with such variations and changes including, but not limited to “MERCEDES

 

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BENZ OF GREENWICH,” as the Board in its sole judgment deems necessary or appropriate to comply with requirements of the jurisdictions in which the Company’s operations are conducted.

 

1.3                               Term.

 

The term of the Company shall commence on the date of the filing of a Certificate of Formation in the office of the Secretary of State of the State of Delaware and shall continue until dissolved and liquidated in accordance with the provisions of Section 13.

 

1.4                               Registered Agent and Office.

 

The registered agent and office of the Company in Delaware shall be The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware.  The registered agent for service of process on the Company in the State of Delaware shall be The Corporation Trust Company.  At any time, the Managers of the Company may designate another registered agent and/or registered office.

 

1.5                               Principal Place of Business.

 

The principal place of business of the Company shall be at various premises, principally located on West Putnam Ave., Connecticut.

 

1.6                               Qualification in Other Jurisdictions.

 

The Board shall take and/or authorize the taking of such action necessary to cause the Company to be qualified, formed or registered under assumed or fictitious name statutes or similar laws in any jurisdiction in which the Company transacts business and in which such qualification or registration is required by law or deemed advisable by the Company.  The President or any duly qualified officer of the Company, as an authorized person within the meaning of the Delaware Act, shall execute, deliver and file any certificates (and any amendments and/or restatements thereof) necessary for the Company to qualify to do business in any jurisdiction in which the Company may wish to conduct business.

 

SECTION 2

 

PURPOSE AND POWERS

 

2.1                               Business Purposes.

 

The purpose of the Company is to (i) engage for profit in the Business, (ii) engage for profit in any and all other activities reasonably related to or incidental to the Business, and (iii) engage for profit in any other business for which limited liability companies may be formed under the Delaware Act, whether or not related or incidental to the Business, as may be determined from time to time by the act of the Directors constituting fifty and one-tenth percent (50.1%) or more of the total vote of the Board.

 

2.2                           Powers of the Company.

 

Subject to obtaining any requisite Board approval required by Sections 2.1 or 4.2(e), the Company shall have the power and authority to take any and all actions necessary, appropriate, proper, advisable, incidental or convenient to or for the furtherance of the purposes set forth in Section 2.1, to the extent that the same may be lawfully exercised by limited liability companies under the Delaware Act.

 

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SECTION 3

 

MEMBERS

 

3.1                               Powers of Members.

 

Except as otherwise expressly provided herein, the Members shall have no power to transact any business in the Company’s name nor have the power to sign documents for or otherwise bind the Company.  Subject to the provisions of the Delaware Act, the Certificate and this Agreement, the Members hereby delegate any and all such powers to the Board and the officers to carry out the business affairs of the Company on the Members’ behalf.  Any power not reserved to the Members or delegated to the officers of the Company, if any, shall remain with the Board.

 

3.2                               No Priority, etc.

 

Except as otherwise provided herein, no Member shall have priority over any other Member either as to the return of the amount of its Capital Contribution, if any, to the Company or as to any allocation of Net Profit and Net Loss.

 

3.3                               Meetings of Members.

 

(a)                                 Annual Meetings.  An annual meeting of the Members for the election of Directors and the transaction of other proper business shall be held once a year at a time designated by the Company.

 

(b)                                 Special Meetings.  Special meetings of the Members, for any purpose or purposes, may be called by the Company and shall be called by the Company at the request of Members holding Fifty Percent (50%) or more of the aggregate Units.  The business transacted at any special meeting of Members shall be limited to the purposes stated in the notice.

 

(c)                                  Place of Meeting.  All meetings of Members shall be held at such place within or outside the State of Delaware as the Company shall designate.

 

(d)                                 Notice of Meetings.  Notice of all meetings of Members, stating the time, place and purpose of the meeting, shall be given as provided in Section 16.1 at least 10 days and not more than 60 days before the meeting.  Any adjourned meeting may be adjourned without further notice, provided that any adjourned session or sessions are held within 60 days after the date set for the original meeting.  No notice need be given (i) to any Member if a written waiver of notice, executed before or after the meeting by such Member or his attorney thereunto duly authorized, is filed with the records of the meeting, or (ii) to any Member who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him.  A waiver of notice need not specify the purposes of the meeting.

 

(e)                                  Quorum and Voting.  Members constituting at least 50% of the  Voting Units held by all Members must be present in order to constitute a minimum quorum required for the transaction of business at any meeting of Members.  Any question brought before any meeting shall be decided by Members who, at the time in question and in the aggregate, hold, or hold proxies with respect to, a majority of the aggregate Units, unless a different vote is specifically provided for by this Agreement.

 

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(f)                                   Proxies.   Voting Units of Members may be voted in person or by proxy.  A proxy purporting to be executed by or on behalf of a Member shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger.

 

(g)                                  Electronic Communications.  Members may participate in any meeting of Members by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

 

3.4                               Actions of Members Without a Meeting.

 

Any action required to be taken at any annual or special meeting of Members or otherwise, or any action which may be taken at any annual or special meeting of such Members or otherwise, may be taken without a meeting and without a vote, if (i) at least two days advance notice of the intent to take action without a meeting is provided to each Member and (ii) a consent in writing, setting forth the action so taken, shall be signed by Members having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting.  The foregoing two day advance notice period shall be deemed waived with respect to any Member that returns a signed consent to the Company.  Prompt notice of the taking of the action without a meeting by less than unanimous written consent shall be given to each of those Members who have not consented in writing.

 

3.5                               Trade Secrets; Confidentiality.

 

(a)                                 Each Member, to the extent, if any, that it becomes aware of a trade secret of the Company, agrees that it will not at any time reveal, divulge or otherwise make known any such trade secret of the Company to any Person other than a current officer, employee or affiliate of the Company, or such other person as the Board may designate in writing or, with prior notice to the Company, pursuant to court order or other legal process or the order of any governmental agency or entity.  This confidentiality obligation shall survive indefinitely after a Member’s interest in the Company is sold, transferred or otherwise disposed of under this Agreement.

 

(b)                                 Except as required by applicable law (including reporting requirements under generally accepted accounting principles), each Member shall keep secret all material confidential matters of the Company which are not otherwise in the public domain and will not intentionally disclose them to anyone outside of the Company or any Affiliate of the Company during the term of this Agreement.

 

SECTION 4

 

MANAGEMENT

 

4.1                               The Board.

 

(a)                                 General.  The business and affairs of the Company shall be managed by or under the direction of a committee of Managers of the Company (the “Board”) consisting initially of 

 

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three (3) natural persons designated as directors of the Company (“Directors”) pursuant to the terms of this Agreement.  Other than rights and powers expressly reserved to Members by this Agreement or the Delaware Act, the Board shall have full, exclusive and complete discretion to manage and control the business and affairs of the Company, to make all decisions affecting the business and affairs of the Company and to take all such actions as it deems necessary or appropriate to accomplish the purposes of the Company as set forth herein.  Each Director is hereby designated a Manager.  The Directors shall be appointed or elected as provided in Section 4.1(b).  Each Director elected shall hold office until a successor is elected and qualified or until such Director’s earlier death, resignation or removal.  Directors need not be Members.  No appointment or election of a Director shall become effective, however, until the Person named shall have accepted in writing such appointment and agreed in writing to be bound by the terms of this Agreement.

 

(b)                                 Initial Election and Appointment of Directors.  PAG shall be entitled to designate two (2) Directors (the “PAG Designees”) and NAL shall be entitled to designate one (1) Director (the “NAL Designee”). The initial PAG Designees shall be Robert H. Kurnick, Jr. and David K. Jones and the initial NAL Designee shall be Richard S. Koppelman.   PAG shall have the power to remove, with or without cause, a PAG Designee and fill any vacancy created by the death, resignation or removal of any PAG Designee.  NAL shall have to the power to remove, with or without cause, the NAL Designee and fill any vacancy created by the death, resignation or removal of the NAL Designee.

 

(c)                                  Increase or Decrease in Size of Board.  The size of the Board may be increased or decreased from time to time only by an amendment to this Agreement.

 

(d)                                 Restrictions on the Board.  The Board shall not: (i) do any act in contravention of any applicable law or regulation, or provision of this Agreement; or  (ii) admit any Person as a Member except as permitted in this Agreement and the Delaware Act.

 

(e)                                  Meetings of the Board.  The Board may hold meetings, both regular and special, either within or outside the State of Delaware.  The first meeting of each newly elected Board shall be held immediately after the annual meeting of Members and at the same place, and no notice of such meeting shall be necessary to the newly elected Directors in order legally to constitute the meeting, provided a quorum shall be present.  In the event such meeting is not held at that time and place, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board, or as shall be specified in a written waiver signed by all of the Directors.  Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board.  Special meetings of the Board may be called by any Member on two days’ notice to each Director, either personally, by telephone, by mail, by telegram or by any other means of communication; special meetings shall be called by any Member, the Chairman, or the Secretary in like manner and on five days’ notice on the written request of one or more of the Directors.  Notice of a meeting need not be given to any Director if a written waiver of notice, executed by such Director before or after the meeting, is filed with the records of the meeting, or to any Director who attends the meeting without protesting prior thereto or at its commencement, the lack of notice.  A waiver of notice need not specify the purposes of the meeting.

 

(f)                                   Quorum.  At all meetings of the Board, two Directors shall constitute a quorum for the transaction of business.  If a quorum shall not be present at any meeting of the Board, the

 

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Directors present at such meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.  Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, and without a vote, provided that, at least two days advance notice of the intent to take such action without a meeting and without a vote is given to each Director, if a consent in writing, setting forth the action so taken, shall be signed, in the case of action by the Board, by Directors having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting, and in the case of action by a committee, by all members of such committee.

 

(g)                                  Required Board Vote.  The affirmative vote of a majority of the Directors present at any meeting at which there are sufficient Directors present to constitute a quorum (“Majority Board Vote”) shall be the act of the Board, unless another vote is specifically provided by this Agreement.

 

(h)                                 Committees of Directors.  The Board may, by resolution passed by a Majority Board Vote, designate one or more additional committees, each committee to consist of one or more of the Directors.  Any such committee, to the extent and only to the extent expressly provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company.  Each committee shall keep regular minutes of its meetings and report the same to the Board when required.

 

(i)                                     Electronic Communications.  Members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

 

(j)                                    Compensation of Directors.  Directors shall not receive remuneration for services as a Director; provided, that Directors shall be entitled to reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at regular or special meetings of the Board or any committee thereof.

 

(k)                                 Directors Not Agents.  The Directors are not agents of the Company for the purpose of the Company’s business and shall not have the power to sign documents for or otherwise bind the Company.

 

4.2                               Officers.

 

(a)                                 General.  The designated officers of the Company shall be a Chairman, a President who shall be the Chief Executive Officer of the Company, a Secretary and a Treasurer and may include one or more Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 4.2(k) (each, an “Officer,” and together, the “Officers”).  Officers may be, but need not be, Managers.

 

(b)                                 Election, Term of Office, Qualifications.  Officers shall be elected by a Majority Board Vote at any regular or special meeting of the Board, provided that until such elections or appointments have been made, the Officers shall be the natural persons designated on 

 

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Schedule B annexed hereto.  Except as provided in paragraphs (c) and (d) of this Section 4.2, each Officer shall hold office until his or her successor shall have been chosen and qualified.  Any two offices may be held by the same Person, but no Officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument be required by law or this Agreement to be executed, acknowledged or verified by any two or more Officers.

 

(c)                                  Resignations and Removals.  Any Officer may resign his or her office at any time by delivering a written resignation to the President or any Director.  Unless otherwise specified therein, such resignation shall take effect upon delivery.  Executive Officers may be removed from office at any time, with or without cause, by a Majority Board Vote.  All other officers may be removed from offices at any time by the Chairman.  Except to the extent expressly provided in a written agreement with the Company, no Officer resigning and no Officer removed shall have any right to any compensation for any period following his resignation or removal or any right to damages on account of such removal.

 

(d)                                 Vacancies and Newly Created Offices.  If any vacancy shall occur in any office, other than any Executive Officer, by reason of death, resignation, removal, disqualification or other cause, or if any new office shall be created, such vacancies or newly created offices may be filled by the Board at any regular or special meeting or, in the case of any office created pursuant to Section 4.2(k), by any Officer upon whom such power shall have been conferred by the Board.   If any vacancy shall occur in the office of any Executive Officer, such vacancy shall be filled by appointment made by a Majority Board Vote.

 

(e)                                  Authority of Officers; Certain Acts Requiring or Majority Board Vote.  Subject to the provisions of this Agreement and to the directives and policies of the Board not in conflict with this Agreement, the President and the other Officers of the Company shall have the power, acting individually or jointly, to represent and bind the Company in all matters, in accordance with the scope of their respective duties subject to the following restrictions:

 

(i)                                     The following actions or types of transactions shall not be taken or consummated by the President or any other Officer, employee or agent of the Company except pursuant to Majority Board Vote:

 

(1)                                 The merger, consolidation, reorganization or other business combination of any kind involving the Company or sale of all or substantially all the assets of the Company.

 

(2)                                 Amendments to, or the execution or filing of any document or agreement of any kind which would affect the terms of the Certificate.

 

(3)                                 The issuance or sale, or any agreement to issue or sell, directly or indirectly, to any Person, by the Company any interest of any kind in the Company, including, but not limited to, Units, any rights, options or warrants or other securities to acquire any such interest, or any securities convertible into or exchangeable or exercisable for such interest; provided, however, that any such issuance that could or would entitle such person to the rights of a Member or that would cause (or entitle) such person to receive an interest (other than collateral security interests 

 

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granted by the Company to secure its obligations) of 5% or more in the assets or profits of the Company shall also require the approval of the Members of the Company in accordance with Section 13.1(b).

 

(4)                                 Any sale or other transfer of assets of the Company not in the ordinary course of business consistent with past practices (other than as provided in the approved annual Business Plan).

 

(5)                                 The declaration or payment, directly or indirectly, of any distribution, whether in cash, property or securities or a combination thereof, with respect to any Units or Capital Contribution.

 

(6)                                 The redemption, purchase, repurchase, retirement or other acquisition for value of any of the interests in, or securities of, the Company.

 

(7)                                 The dissolution, liquidation, or voluntary bankruptcy of the Company (other than any right of liquidation expressly provided for under this Agreement).

 

(8)                                 Approval of the annual Business Plan.

 

(9)                                 Any investment in the equity or debt of another corporation or in any partnership or other enterprise (other than temporary investments of cash in money market instruments).

 

(10)                          Acceptance of annual financial statements.

 

(11)                          Approval of policies relating to the investment or allocation of surplus funds and creation of reserve accounts.

 

(12)                          Any change in the Company’s accountants or any change in the Company’s material accounting policies, except as required by generally accepted accounting principles.

 

(13)                          Subject to Section 4.2(e)(ii) below, the making of any capital expenditure or acquisition of assets by the Company (including by way of merger) other than capital expenditures or acquisitions of assets provided for in the then current approved annual Business Plan (or any permitted deviations from the capital budget which may be allowed by a current approved Business Plan) provided that, any such capital expenditure or acquisition shall be the subject of discussion and debate by the Members prior to it being submitted to the Board for a vote.

 

(14)                      Incurring, creating, assuming or guaranteeing any indebtedness by the Company, absolute or contingent of any nature whatsoever (other than indebtedness incurred in the ordinary course of business consistent with past practice or as provided for in a current approved Business Plan).

 

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(15)                          The extension of any material credit, including the lending of funds by the Company, to another Person, other than in the normal course of business of the Company.

 

(16)                          Election of Executive Officers; the establishment or change in any Executive Officer’s compensation or benefits of any kind; the establishment or amendment of any employee pension or other benefit programs of any kind; or action taken under any employment agreement.

 

(17)                          The institution, termination or settlement by the Company of any litigation where the amount in controversy exceeds $100,000.

 

(18)                          The formation of any Subsidiary.

 

(19)                          Any change in the Company’s name.

 

(ii)                                  The following action or type of transaction shall not be taken or consummated by the President or any other Officer, employee or agent of the Company except pursuant to a unanimous vote of the Directors:

 

The making of any capital expenditure which would cause the net working capital of the Company, in the aggregate, to fall below the levels of minimum net working capital as is necessary to satisfy the requirements, in the aggregate, of the Franchise Agreements of the Company.

 

(f)                                   Chairman.  The Chairman shall be elected by the Board, but shall have no other duties or powers except as may be determined by the Board from time to time.

 

(g)                                  President.  From time to time as appropriate, pursuant to Section 4.2(b) the Board shall elect a president of the Company who (subject to the terms of any applicable employment agreement) shall serve as such until the earlier of his death or resignation or his removal in accordance with the terms of this Agreement (the “President”).  The President shall be the chief executive officer of the Company,  and shall have the responsibility for managing the day-to-day business operations and affairs of the Company and supervising its other Officers, subject to the direction, supervision and control of the Board.  In general, the President shall have such other powers and (subject to the terms of any applicable employment agreement) perform such other duties as usually pertain to the office of the President, and as from time to time may be assigned to him by the Board, including, without limitation, the authority to retain and terminate employees of the Company (other than Officers).  The powers and duties of the President shall at all times be subject to the provisions of Section 4.2(e).

 

(h)                                 Vice President.  From time to time as appropriate, pursuant to Section 4.2(b), the Board may elect one or more vice presidents of the Company (each a “Vice President”) who (subject to the terms of any applicable employment agreement) shall serve as such until the earlier of such persons death or resignation or his removal in accordance with the terms of this Agreement.  A Vice President shall have such duties as may be prescribed by the Board or the President, under whose supervision the Vice President shall be.

 

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(i)                                     The Secretary and Assistant Secretary.  The Secretary shall attend all meetings of the Board and all meetings of the Members and record all the proceedings of the meetings and all actions of the Members, the Board and the committees of the Board in a book to be kept for that purpose and shall perform like duties for the standing committees when required.  The Secretary shall give, or cause to be given, notice of all meetings of the Members and special meetings of the Board, and shall perform such other duties as may be prescribed by the Board or the President, under whose supervision the Secretary shall be.  The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board (or if there be no such determination, then in order of their election) shall, in the absence of the Secretary or in the event of the Secretary’s inability to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board may from time to time prescribe.

 

(j)                                The Treasurer and Assistant Treasurer.  The Treasurer shall have the custody of the Company’s funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Board.  The Treasurer shall disburse the funds of the Company as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President, under whose supervision the Treasurer shall be, and the Board, at its regular meetings, or when the Board so requires, an account of all of the Treasurer’s transactions and of the financial condition of the Company.  The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of the Treasurer’s inability to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board may from time to time prescribe.

 

(k)                                 Subordinate Officers.  The Board from time to time may appoint such other subordinate Officers, or agents as it may deem advisable, each of whom shall have such title, hold office for such period, have such authority and perform such duties as the Board may determine in its sole discretion subject always to the direction and control of the President.  The Board from time to time may delegate to one or more Officers or agents the power to appoint any such subordinate Officers or agents and prescribe their respective rights, terms of office, authorities and duties.

 

(l)                                     Officers as Agents.  The Officers, to the extent of their powers set forth in this Agreement, are agents of the Company for the purpose of the Company’s business, and the actions of the Officers taken in accordance with such powers shall bind the Company.

 

4.3                               Actions and Determinations of the Company.

 

Whenever this Agreement provides that a determination shall be made or an action shall be taken by the Company, such determination or act may be made or taken by the Board or, pursuant to this Agreement or with the required authorization of the Board, by any committee of the Board or any Officer acting under the supervision of the Board.

 

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SECTION 5

 

OPERATING POLICIES

 

5.1                               Annual Business Plan Process.

 

The President shall prepare and submit, or cause to have prepared and submitted, to the Board for its approval a business plan at least sixty (60) days prior to the beginning of each new Fiscal Year (each such business plan, a “Business Plan”) covering the period of the new Fiscal Year (except for the Initial Business Plan, which shall cover the current Fiscal Year) (such one year period, the “Business Plan Period”).  Each such Business Plan shall set forth, for each of the years covered by the Business Plan Period, the Company’s expense budgets, and a detailed financial plan relating to such new Fiscal Year for the Company.

 

(a)                                 Not more than thirty (30) days following its receipt of an annual Business Plan, the Board shall identify any additional information, clarification and/or modification required for its approval, and the President shall provide such to the Board as soon as practicable.  Any approval granted by the Board shall apply only to the first year of any Business Plan Period and, in the event that the annual Business Plan for the next fiscal year is not approved by the close of the then current Fiscal Year, the then existing Business Plan shall continue as the approved Business Plan for a period of not more than 90 days following the close of the then current Fiscal Year.

 

(b)                                 The President shall prepare and present, or have prepared and presented, at each regular meeting of the Board, or at any special meeting called for this purpose, a review of the Company’s year-to-date progress in comparison to the approved Business Plan.

 

5.2                               Insurance.

 

The Company will maintain insurance at levels and of types consistent with what would be deemed commercially reasonable for a company engaged in business activities substantially similar to that of the Business.

 

5.3                               Fiscal Year.

 

The fiscal year of the Company (the “Fiscal Year”) shall end on the 31st day  of December in each year.  The Company shall have the same fiscal year for income tax and for financial accounting purposes.  To the extent permissible under applicable law, the Fiscal Year may be changed by a Majority Board Vote.

 

5.4                               Initial Accountants; Change of Accountants.

 

The Company’s independent public accountant as of the Closing shall be Deloitte & Touche LLP.  The Company’s independent public accountant may be changed at any time by a Majority Board Vote.

 

5.5                               Loans from Members.

 

Any loan from a member or its affiliate to the Company shall bear interest at a rate defined as 100 basis points in excess of such member’s parent company senior credit facility marginal rate or if there is no such facility, upon a rate to be agreed by the Members.  Repayments of any such loans will be reasonably agreed by PAG and NAL.

 

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SECTION 6

 

CAPITAL CONTRIBUTIONS, UNITS,

CAPITAL ACCOUNTS AND ADVANCES

 

6.1                               Capital Contributions.

 

The value of each Member’s initial capital contribution to the Company shall equal the amount set forth opposite the Member’s name on Schedule A attached hereto.

 

6.2                               Member’s Units.

 

Units held by a Member shall for all purposes be personal property.  A Member has no interest in specific Company property.

 

6.3                               Status of Capital Contributions.

 

(a)                                 Except as otherwise expressly provided herein, no Member shall have the right to withdraw capital from the Company or to receive any distribution or return of such Member’s Capital Contributions.

 

(b)                                 No Member shall receive any interest, salary or drawing with respect to its Capital Contributions, if any, or its Capital Account or for services rendered on behalf of the Company or otherwise in its capacity as a Member, except as otherwise specifically provided in this Agreement.

 

(c)                                  The Members shall be liable only to make their initial Capital Contributions pursuant to Section 6.1, and no Member shall be required to lend any funds to the Company or to make any additional Capital Contributions to the Company except as otherwise set forth herein.

 

6.4                               Capital Accounts.

 

A separate capital account (each a “Capital Account”) for each Member shall be established on the books and records of the Company and such Capital Accounts shall be maintained for each Member in accordance with the following provisions:

 

(a)                                 To each Member’s Capital Account there shall be credited such Member’s Capital Contributions, such Member’s distributive share of Net Profit and items in the nature of income or gain which are specially allocated to such Member pursuant to Section 6.4(f) and Section 7.2 hereof, and the amount of any Company liabilities assumed by such Member or which are secured by any Company property distributed to such Member.

 

(b)                                 To each Member’s Capital Account there shall be debited the amount of cash and the Gross Asset Value of any Company property distributed to such Member pursuant to any provision of the Agreement (including amounts distributed to a Member but required to be paid on such Member’s behalf directly to a creditor or another party pursuant to a separate agreement), such Member’s distributive share of Net Loss and any items in the nature of expenses or losses which are specially allocated pursuant to Section  6.4(f) and Section 7.2 hereof, and the amount of any liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member to the Company.

 

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(c)                                  In the event all or a portion of  the Units held by a Member are  transferred in accordance with the terms of the Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred Units.

 

(d)                                 In determining the amount of any liability for purposes of Sections 6.4(a) and 6.4(b) hereof, there shall be taken into account Code Section 752 and any other applicable provisions of the Code and Treasury Regulations.

 

(e)                                  Immediately prior to the occurrence of an event specified in Treasury Regulation Section 1.704(b)-1(b)(2)(iv)(f)(5)(i) or (ii), the Capital Accounts of the Members shall be adjusted (consistent with the provisions hereof and Treasury Regulations under Section 704 of the Code) upward or downward to reflect any unrealized gain or unrealized loss attributable to property of the Company, as if such unrealized gain or unrealized loss had been recognized upon an actual sale of each asset immediately prior to such event and had been allocated first to equalize the Capital Accounts of the Members in proportion to their Percentage Interest.  In determining such unrealized gain or unrealized loss, the fair market value of the property of the Company as of any date of determination shall be reasonably determined by Majority Board Vote.  This Section 6.4(e) provision is intended to meet the requirements of Treas. Reg. 1.704-1(b)(2)(iv)(f).

 

(f)                                   This Section 6.4 and other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Treasury Regulations.  Notwithstanding that a particular adjustment is not set forth in this Section 6.4, the Capital Accounts of the Members shall be adjusted as required by, and in accordance with, the capital account maintenance rules of Treasury Regulations Section 1.704-1(b).

 

6.5                               Negative Capital Accounts.

 

No Member shall be required to make up an Adjusted Capital Account Deficit nor pay to any Member the amount of any such deficit in any such account.

 

6.6                               Loans From Members.

 

Loans by a Member to the Company shall not be considered Capital Contributions.  If any Member shall advance funds to the Company in excess of the amounts required hereunder to be contributed by such Member to the capital of the Company, the making of such advances shall not result in any increase in the amount of the Capital Account of such Member.  The amounts of any such advances shall be a debt of the Company to such Member and shall be payable or collectible only out of the Company assets in accordance with the terms and conditions upon which such advances are made.  The repayment of loans from a Member to the Company upon liquidation shall be subject to the order of priority set forth in Section 13.2.

 

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SECTION 7

 

ALLOCATIONS OF PROFITS AND LOSSES

 

7.1                               Allocations of Net Profit and Net Loss.

 

(a)                                 After giving effect to the special allocations set forth in Section 6.4(e) and Section 7.2 hereof, Net Profit of the Company for any Fiscal Year shall be allocated to each Member by multiplying the Net Profit of the Company for any Fiscal Year by a fraction, the numerator of which shall be the cumulative Net Losses allocated to the Member pursuant to Section 7.1(b) for all prior fiscal years and the denominator which shall be cumulative Net Losses allocated to all Members pursuant to Section 7.1(b) for all prior Fiscal Years. The balance of the Net Profits, if any, shall be allocated among the Members in proportion to their Percentage Interest.

 

(b)                                 After giving effect to the special allocations set forth in Section 6.4(f) and Section 7.2 hereof, Net Losses of the Company for any Fiscal Year shall be allocated among the Members in proportion to their Percentage Interest.

 

(c)                                  Notwithstanding the foregoing provisions of Section 7.1(b), the Net Losses allocated pursuant to Section 7.1(b) shall not exceed the maximum amount of Net Losses that can be so allocated without causing any Member to have an Adjusted Capital Account Deficit at the end of any Fiscal Year.  In the event some but not all of the Members would have Adjusted Capital Account Deficits as a consequence of an allocation of Net Losses pursuant to Section 7.1(b) hereof, the limitation set forth in this Section 7.1(c) shall be applied on a Member by Member basis so as to allocate the maximum permissible Net Loss amounts to each Member under Treasury Regulations Section 1.704-1(b)(2)(ii)(d).  All Net Loss amounts in excess of the limitation set forth in this Section 7.1(c) shall be allocated  to the Members in proportion to their Percentage Interest

 

7.2                               Special Allocations.

 

(a)                                 Any allocation pursuant to Section 7.1 will be subject to the following adjustments and special allocations which shall be made in the following order of priority and prior to any allocation under Section 7.1:

 

(i)                                     Minimum Gain Chargeback.  Notwithstanding any other provision of this Section 7.2, if there is a net decrease in Company Minimum Gain or Member Minimum Gain during any Fiscal Year, prior to any other allocation pursuant hereto, items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) shall be specially allocated between the Members in accordance with Treasury Regulations Sections 1.704-2(f) and (i).  The items to be so allocated shall be determined in accordance with Treasury Regulations Section 1.704-2(f)(6) and 1.704-2(j)(2)(i) through (iii).

 

(ii)                                  Qualified Income Offset.  If any Member unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain shall be specially allocated to each such Member in an amount and manner sufficient 

 

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to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible, provided that an allocation pursuant to this Section 7.2(a)(ii) shall be made only if and to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Section 7.2(a) have been tentatively made as if this Section 7.2(a)(ii) were not in the Agreement.

 

(iii)                               Special Income Allocation.  If any Member has an Adjusted Capital Account Deficit in its Capital Account at the end of any Fiscal Year or portion thereof that is in excess of the sum of (I) the amount such Member is obligated to restore pursuant to any provision of this Agreement, and (II) the amount such Member is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section 7.2(a)(iii) shall be made only if and to the extent that such Member would have an Adjusted Capital Account Deficit in excess of such sum after all other allocations provided for in this Section 7.2(a) have been made as if this Section 7.2(a)(iii) were not in the Agreement.

 

(iv)                              Non-recourse Deductions.  Non-recourse Deductions, if any, for any Fiscal Year shall be allocated (as nearly as possible) under Treasury Regulations Section 1.704-2(e) among the Members in proportion to their Percentage Interest.

 

(v)                                 Member Nonrecourse Deductions.  In accordance with the principles set forth in Treasury Regulations Section 1.704-2(i), any Member Nonrecourse Deductions for any Fiscal Year shall be allocated to the Members in accordance with the ratios in which they potentially bear the economic risk of loss with respect to such Member Nonrecourse Debt.

 

(vi)                              Section 754 Adjustments.  To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Section 734(b) or 743(b) of the Code is required pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) to be taken into account in determining Capital Accounts as a result of a distribution to a Member in complete liquidation of its interest, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset), or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated in a manner consistent with the manner in which the Capital Accounts of the Members are required to be adjusted pursuant to such Section of the Regulations.

 

(b)                                 Curative Allocations. It is the intent of the parties that, to the extent possible, all allocations pursuant to Sections 7.2(a)(i) through 7.2(a)(vi) (the “Regulatory Allocations”) shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss or deduction pursuant to this Section 7.2(b).  Therefore, notwithstanding any other provision of this Agreement (other than Sections 7.2(a)(i) through 7.2(a)(vi)), the Board shall make such offsetting special allocations of Company income, gain, loss or deductions as are appropriate so that after 

 

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such offsetting allocations are made, each Members Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if Sections 7.2(a)(i) through 7.2(a)(vi) were not part of this Agreement and all Company items were allocated pursuant to Section 7.1 of this Agreement.

 

7.3                               Tax Allocations.

 

Items of income, gain, loss, deduction and credit of the Company shall, for each Fiscal Year, be allocated, for U.S. federal, state and local income tax purposes, among the Members in the same manner as the items of income, gain, loss, deduction and credit were allocated to such Members pursuant to Section 6.4(e), Section 7.1 and Section 7.2 hereof. Notwithstanding the foregoing, in accordance with Code Section 704(c) and the Treasury Regulations thereunder, items of income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted tax basis of such property at the time of contribution to the Company for federal income tax purposes and its Gross Asset Value at the time of contribution using the “remedial allocation method” set forth in Treasury Regulation 1.704-3(d).  In the event the Gross Asset Value of any Company asset is adjusted in accordance with the definition of Gross Asset Value hereof, subsequent allocations of items of income, gain, loss, and deductions with respect to such asset shall take account of any variation between the adjusted tax basis of such asset for federal income tax purposes and its adjusted Gross Asset Value in a manner consistent with the principles of Code Section 704(c) and the Treasury Regulations thereunder.  Allocations pursuant to this Section 7.3 are solely for purposes of U.S. federal, state, and local income taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Net Profit or Net Loss, other items, or distributions pursuant to any provision of this Agreement.

 

7.4                               Transfer or Change in Member Interests.

 

If the respective Units held by the existing Members in the Company change or if a Unit is transferred to any other person or entity, then, for the Fiscal Year of transfer, all income, gains, losses, deductions, tax credits and other tax incidents resulting from the operations of the Company shall be allocated, as between the transferor and the transferee, by taking into account their varying interests in accordance with Section 706 of the Code.

 

SECTION 8

 

DISTRIBUTIONS AND WITHHOLDING

 

8.1                               Distributions.

 

The Company shall not make any distributions to its Members except as determined by the Board in accordance with Section 4.2(e) or except as otherwise provided  herein.  Except as otherwise expressly provided herein, all Distributions shall be made to Members pro rata in accordance with their respective Percentage Interest.

 

8.2                               Limitations on Distribution.

 

Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make a distribution to any Member on account of its interest in the Company if such distribution would violate Section 18-607 of the Delaware Act.

 

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8.3                               Withholding Taxes.

 

If the Company is required to withhold any portion of any amounts distributed or allocated to a Member by applicable U.S. federal, state, local or foreign tax laws, the Company may withhold such amounts and make such payments to taxing authorities as are necessary to ensure compliance with such tax laws.  Any funds withheld by reason of this Section 8.3 shall nonetheless be deemed distributed to the Member in question for all purposes under this Agreement.  If the Company did not withhold from actual distributions any amounts it was required to withhold, the Company may, at its option, (i) require the Member to which the withholding was credited to reimburse the Company for such withholding; or (ii) reduce any subsequent distributions to such Member by the amount of such withholding.  The obligation of a Member to reimburse the Company for taxes that were required to be withheld shall continue after such Member transfers or liquidates its interest in the Company.  Each Member agrees to furnish the Company with any representations and forms as shall reasonably be requested by the Company to assist in determining the extent of, and in fulfilling, any withholding obligations it may have.

 

8.4                               Tax Distributions.

 

At a minimum, the Company shall make annual cash distributions each year to each Member in an amount determined by multiplying (i) such Member’s taxable income resulting from the pass through allocations of the Company’s income and gain to such Member by (ii) the highest rate applicable to any of the Members under applicable state and federal income tax laws. Such amount shall be reduced by the distributions received pursuant to Section 8.5 below.

 

8.5                               Adjusted Net Cash Distributions.

 

The Company shall distribute not less than Eighty Percent (80%) of the Adjusted Net Cash on, at a minimum, a quarterly basis to the Members in proportion to their Percentage Interest.

 

SECTION 9

 

TAX MATTERS

 

9.1                               Tax Matters Member.

 

(a)                                 PAG is hereby designated as the initial “Tax Matters Member” (“TMM”) of the Company under Section 6231 of the Code and the Treasury Regulations thereunder.  Each Member hereby consents to such designation and agrees that upon the request of the Company it will execute, certify, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents as may be necessary or appropriate to evidence such consent.  Upon the resignation or bankruptcy of PAG, or upon the failure of PAG to carry out the responsibilities of a TMM in a timely fashion, a successor to serve in such capacity shall be designated by vote of Members holding a majority of the interests in the Company.  The TMM may employ experienced tax counsel to represent the Company in connection with any audit or investigation of the Company by the Internal Revenue Service (“IRS”), and in connection with all subsequent administrative and judicial proceedings arising out of such audit.  The fees and expenses of such counsel shall be a Company expense and shall be paid by the Company.  Such counsel shall be responsible for representing the Company; it shall be the responsibility of the Members, at their own expense, to employ tax counsel to represent their respective separate interests.  The TMM shall keep the Members informed of all administrative and judicial proceedings as required by Code Section 6223(g) and shall furnish to each Member a copy of each notice 

 

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or other communication received by the TMM from the IRS except such notice or communication sent directly to the Members by the IRS.  All expenses incurred by the TMM in serving in such capacity shall be Company expenses and shall be paid by the Company.

 

(b)                                 Notwithstanding the foregoing, prior to taking any of the following actions the Company shall provide notice to  the Members and shall provide the Members with a reasonable period of time in which to review and approve such action (which approval shall not be unreasonably withheld):

 

(i)                                     Any written correspondence or filings and any settlements in connection with any income tax audit of the Company or any other tax audit involving material taxes of the Company, including administrative settlement and judicial review.

 

(ii)                                  Except as set forth in Section 9.1(a) and Section 9.2, the making of any tax election.

 

(iii)                               Any adjustment to the capital accounts of the Members in connection with Section 6.4(e) and Section 6.4(f).

 

(iv)                              Approval of any income tax return of the Company and any other tax return of the Company which reflects the tax treatment of any item arising in connection with actions described in Section 4.2(e)(i)(1),(4), (5), (6) or (7) or 4.2(e)(ii) (2), (5) or (7).

 

(v)                                 Any allocation made pursuant to Section 7.2, and any decision to revise, alter or otherwise modify the methods of allocation set forth in Section 7 hereof.

 

9.2                               Right to Make Section 754 Election.

 

The TMM  may make an election under Section 754 of the Code to the extent requested by any Member.  Each Member shall, upon request of the TMM, at such Member’s cost, promptly supply the TMM information reasonably necessary to give effect to such election.

 

9.3                               Taxation as Partnership.

 

The Company shall be treated as a partnership for United States federal and state income tax purposes and the Members agree not to take any action inconsistent with the Company’s classification as a partnership for United States federal and State income tax purposes.  By executing this Agreement, each of the Members hereby consents to, and the TMM shall, take any action necessary, including, without limitation, the execution of any forms and documents, for the Company to be treated as a partnership for United States federal and state income tax purposes.

 

SECTION 10

 

BANKING; ACCOUNTING; BOOKS AND RECORDS

 

10.1                        Banking.

 

All funds of the Company may be deposited in such bank, brokerage or money market accounts as shall be established by the Company.  Withdrawals from and checks drawn on any such account 

 

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shall be made upon the President’s signature and/or such other signature or signatures as the Board may designate.

 

10.2                        Maintenance of Books and Records; Accounts and Accounting Method; Inspection.

 

(a)                                 The Company shall keep or cause to be kept at the address of the Company (or at such other place as the Company shall advise the Members in writing) full and accurate accounts of the transactions of the Company in proper books and records of account which shall set forth all information required by the Delaware Act.  Such books and records shall be maintained on the basis of United States generally accepted accounting principles, to the extent that such principles are not inconsistent with the other provisions of this Agreement.  Such books and records shall be available, upon reasonable notice to the Company, for inspection and copying at reasonable times during business hours by a Member or its duly authorized agents or representatives for any purpose reasonably related to such Member’s interest as a member in the Company.

 

(b)                                 Employees, agents and representatives of PAG shall have full access to the plants and properties of the Company and its Subsidiaries for the purpose of inspecting such plants and properties and the operations thereon during normal business hours, in a manner that does not unduly disrupt the business or operations of the Company and upon the prior written notice to the President of the Company of any such inspection.

 

SECTION 11

 

REPORTS TO MEMBERS

 

11.1                        Reports to Current Members.

 

(a)                                 The Company shall use its good faith efforts to prepare and mail to each Member, within 90 days after the end of each Fiscal Year and 45 days after the end of each quarter thereof other than the last quarter of the Fiscal Year, a financial report (upon request of PAG, audited in the case of a report sent as of the end of a Fiscal Year and unaudited in the case of a report sent as of the end of a quarter) setting forth as of the end of such Fiscal Year or quarter (i) the assets and liabilities of the Company as of the end of such Fiscal Year or quarter, (ii) the income or loss of the Company for such Fiscal Year or quarter and (iii) the changes in cash flow during such Fiscal Year or quarter.

 

(b)                                 The Company shall use its good faith efforts to prepare and mail to each Member, within 100 days after the end of each Fiscal Year a financial report setting forth as of the end of such Fiscal Year such Member’s closing Capital Account as of the end of such Fiscal Year, together with a reconciliation of the changes from the previous report.

 

(c)                                  The Company shall distribute monthly unaudited financial information to the members.

 

11.2                        Tax Information.

 

(a)                                 No later than April 10, June 10, September 10 and December 10 of each Fiscal Year, the Company shall deliver to each Person that was a Member at any time during the quarter in which or immediately preceding which such date occurs a statement of such Person’s distributive share, if any, of items of income, gain, loss, deduction and credit of the 

 

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Company for such quarter and such other information as may be reasonably necessary for such Person to make its estimated tax payments.

 

(b)                                 As soon as practicable after the end of the Fiscal Year, but in no event later than 45 days after the end of the Fiscal Year, the Company shall deliver to each Person that was a Member at any time during such Fiscal Year a final statement of such Person’s reasonably determined distributive share, if any, of items of income, gain, loss, deduction and credit of the Company for such Fiscal Year and such other information as may be reasonably necessary for such Person to complete its tax returns (including copies of any tax returns that have been filed by the Company).

 

(c)                                  The Company shall provide each Member with a copy of any tax return described in Section 9.1(b)(iv) hereof for such Member’s review at least twenty (20) business days before the due date of such tax return.

 

11.3                        Additional Information.

 

Upon the request of any Member, the Company shall, at the request of a Member, furnish such additional information about the Company and distributions from the Company reasonably related to such Member’s interest in the Company.  Without limiting the foregoing sentence, the Company agrees to use its good faith efforts to make available to any Member which accounts for its interest on the equity method (whether or not the Company is publicly reporting), such financial information as may be reasonably required by such Member.  The Company agrees to use its good faith efforts to provide such information to any such Member at a date which will allow such Member a reasonable period of time in which to incorporate such information into any filings to be made by such Member.  In the event the Company is subject to the reporting obligations of the Securities and Exchange Act of 1934 resulting from the minority interest owned by NAL, NAL agrees to reimburse the Company for any reasonable out-of-pocket costs incurred in connection with making those filings.

 

SECTION 12

 

LIABILITY, EXCULPATION AND INDEMNIFICATION

 

12.1                        Liability.

 

Except as otherwise provided herein or by the Delaware Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Covered Person shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Covered Person.

 

12.2                        Exculpation.

 

(a)                                 Generally.  No Covered Person shall be liable to the Company or any Member for any act or omission taken or suffered by such Covered Person in good faith and in the reasonable belief that such act or omission is in or is not contrary to the best interests of the Company and is within the scope of authority granted to such Covered Person by this Agreement, provided that such act or omission is not in material violation of this Agreement and does not constitute Disabling Conduct by the Covered Person.  No Member shall be liable to the Company or any Member for any action taken by any other Member.

 

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(b)                             Reliance Generally.  A Covered Person shall incur no liability in acting upon any signature or writing reasonably believed by it to be genuine, and may rely on a certificate signed by an executive officer of any Person in order to ascertain any fact with respect to such Person or within such Person’s knowledge and may rely on an opinion of counsel selected by such Covered Person with respect to legal matters, except to the extent that such liability resulted from the Covered Person having engaged in Disabling Conduct.  Each Covered Person may act directly or through its agents or attorneys.  Each Covered Person may consult with counsel, appraisers, engineers, accountants and other skilled Persons of its choosing, and shall not be liable for anything done, suffered or omitted in good faith in reasonable reliance upon the advice of any of such Persons, except to the extent that such Covered Person engaged in Disabling Conduct.  No Covered Person shall be liable to the Company or any Member for any error of judgment made in good faith by a responsible officer or officers of the Covered Person, except to the extent that such liability resulted from the Covered Person having engaged in Disabling Conduct.  Except as otherwise provided in this Section 12.2, no Covered Person shall be liable to the Company or any Member for any mistake of fact or judgment by the Covered Person in conducting the affairs of the Company or otherwise acting in respect of and within the scope of this Agreement, except to the extent that such liability resulted from the Covered Person having engaged in Disabling Conduct.  No Covered Person shall be liable for the return to any Member of all or any portion of any Member’s Capital Account or Capital Contributions, except to the extent that such liability resulted from the Covered Person having engaged in Disabling Conduct.

 

(c)                                  Reliance on this Agreement.  To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Company or to the Members, any Covered Person acting under this Agreement or otherwise shall not be liable to the Company or to any Member for its good faith reliance on the provisions of this Agreement.  The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Members to replace such other duties and liabilities of such Covered Person.

 

(d)                                 Standard of Care.  Whenever in this Agreement a Person is permitted or required to make a decision (i) except the Directors in connection with the discharge of their duties as Members of the Board in its “sole and absolute discretion,” “sole discretion,” “discretion” or under a grant of similar authority or latitude, the Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting any other Member, the Company or any other Person, or (ii) in its “good faith” or under another express standard, the Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Agreement or other applicable law.

 

12.3                        Indemnification.

 

(a)                             Indemnification Generally.  The Company shall and hereby does, to the fullest extent permitted by applicable law, indemnify, hold harmless and release each Covered Person from and against all claims, demands, liabilities, costs, expenses, damages, losses, suits, proceedings and actions, whether judicial, administrative, investigative or otherwise, of whatever nature, known or unknown, liquidated or unliquidated (“Claims”), that may accrue to or be incurred by any Covered Person, or in which any Covered Person may become involved, as a party or otherwise, or with which any Covered Person may be 

 

21

 

threatened, relating to or arising out of the business and affairs of, or activities undertaken in connection with, the  Company, or otherwise relating to or arising out of this Agreement, including, but not limited to, amounts paid in satisfaction of judgments, in compromise or as fines or penalties and counsel fees and expenses incurred in connection with the preparation for or defense or disposition of any investigation, action, suit, arbitration or other proceeding (a “Proceeding”), whether civil or criminal (all of such Claims and amounts covered by this Section 12.3. and all expenses referred to in Section 12.3(c), are referred to as “Damages”), except to the extent that it shall have been determined ultimately that such Damages arose from Disabling Conduct of such Covered Person or that such Covered Person committed a material breach of this Agreement.  The termination of any Proceeding by settlement shall not, of itself, create a presumption that any Damages relating to such settlement arose from a material violation of this Agreement by, or Disabling Conduct of, any Covered Person.

 

(b)                                 No Direct Member Indemnity.  Members shall not be required directly to indemnify any Covered Person.

 

(c)                                  Expenses, etc.  Expenses incurred by a Covered Person in defense or settlement of any Claim that may be subject to a right of indemnification hereunder may be advanced by the Company prior to the final disposition thereof upon receipt of an agreement by or on behalf of the Covered Person to repay such amount if it shall be determined ultimately that the Covered Person is not entitled to be indemnified hereunder.  The right of any Covered Person to the indemnification provided herein shall be cumulative with, and in addition to, any and all rights to which such Covered Person may otherwise be entitled by contract or as a matter of law or equity and shall extend to such Covered Person’s successors, assigns and legal representatives.

 

(d)                             Notices of Claims, etc.  Promptly after receipt by a Covered Person of notice of the commencement of any Proceeding, such Covered Person shall, if a claim for indemnification in respect thereof is to be made against the Company, give written notice to the Company of the commencement of such Proceeding, provided that the failure of any Covered Person to give notice as provided herein shall not relieve the Company of its obligations under this Section 12.3 except to the extent that the Company is actually prejudiced by such failure to give notice.  In case any such Proceeding is brought against a Covered Person (other than a derivative suit in right of the Company), the Company will be entitled to participate in and to assume the defense thereof to the extent that the Company may wish, with counsel reasonably satisfactory to such Covered Person.  After notice from the Company to such Covered Person of the Company’s election to assume the defense thereof (and corresponding expenses), the Company will not be liable for expenses subsequently incurred by such Covered Person in connection with the defense thereof.  The Company will not consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Covered Person of a release from all liability in respect to such Claim.

 

(e)                                  No Waiver.  Nothing contained in this Section 12.3 shall constitute a waiver by any Member of any right that it may have against any party under United States federal or state securities laws.

 

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SECTION 13

 

TRANSFER OF UNITS; WITHDRAWAL,

BANKRUPTCY, DISSOLUTION; CERTAIN ADMISSIONS OF MEMBERS

 

13.1                        Admission, Substitution and Withdrawal of Members; Assignment.

 

(a)                                 General.  Except as set forth in this Section 13, no Person may be admitted to, and no Member may withdraw from, the Company prior to the dissolution and winding up of the Company.  No Member shall sell, transfer, assign, convey, pledge, mortgage, encumber, hypothecate or otherwise dispose of all or any part of its interest in the Company (a “Transfer”) without first complying with the provisions of this Section 13.1.

 

(b)                                 Admission of New Members and Issuance of Interests.  No person shall be admitted as a new Member and the Company shall not authorize the issuance of interest in the Company of any kind that could or would entitle the recipient thereof to the rights of a Member or that would cause (or entitle) such person to receive an interest (other than collateral security interests granted by the Company to secure its obligations) in the assets or profits of the Company unless approved by a Majority Board Vote as defined in Section 4.1(g).

 

(c)                                  Conditions to Transfer.  Any purported Transfer by a Member pursuant to the terms of this Section 13 shall be subject to the satisfaction of the following conditions:

 

(i)                                     the transferring Member or transferee shall undertake to pay all reasonable expenses incurred by the Company in connection therewith;

 

(ii)                                  the Company shall receive from the transferring Member a legal opinion, in form and substance reasonably satisfactory to the nontransferring Members, to the effect that the transfer will not result (directly or indirectly) in (A) a termination of the Company under any Section of the Code that would require the non-transferring Members to recognize gain under Section 731 of the Code, or (B) treatment of the Company as an entity other than a partnership for purposes of the Code;

 

(iii)                               the Company shall receive from the Person to whom such Transfer is to be made (A) such documents, instruments and certificates as may be requested by the Company, pursuant to which such transferee shall agree to be bound by this Agreement, (B) such other documents, opinions, instruments and certificates as the Company shall reasonably request and (C) a counterpart of this Agreement executed by or on behalf of such Person; and

 

(iv)                              the Company shall have received any approvals required by its Franchise Agreements.

 

(d)                                 Cooperation by the Company.  The Company shall provide reasonable assistance to any Member at such Member’s request seeking to sell its Units in compliance with this Agreement, provided that the Company shall not be required to provide any confidential information to any prospective purchaser who has not executed a confidentiality 

 

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agreement in form reasonably satisfactory to the Company.  Any costs to the Company of providing such assistance shall be paid by the Member seeking to sell its Units.

 

(e)                                  Prohibited Transfers.  No attempted Transfer shall be recognized by the Company unless effected in accordance with and as permitted by this Agreement.

 

(f)                                   Right of First Refusal.  PAG shall have a right of first refusal to purchase all of the NAL interest on the terms that NAL offers such interest to a third party, whether or not pursuant to a written agreement. PAG shall have twenty (20) days after receipt of written notice from NAL that it intends to sell its interest to exercise this right of first refusal and NAL shall furnish PAG with a copy of the proposed sale agreement or other documentation evidencing its intent to sell along with the notice.  If PAG fails to exercise its right, any attempted Transfer of the NAL interest to a third party must still meet the conditions to Transfer set forth in Section 13.1(c) to become effective.

 

(g)                                  Tag Along Right. If PAG intends to enter into an agreement (the “Proposed Sale Agreement”) to sell, assign, transfer or otherwise dispose of its Percentage Interest to a third party purchaser (the “Transaction”) which, as a result of such Transaction, Penske Corporation, Penske Automotive Group, Inc. or an Affiliate thereof, would no longer Control the Company, then NAL shall have the right to sell its Percentage Interest to such third party purchaser as part of the Transaction on a pro rata basis. The purchase price for NAL’s Percentage Interest shall be equal to the purchase price proposed for all or a portion of PAG’s Percentage Interest adjusted on a pro rata basis taking into account NAL’s and PAG’s Percentage Interest in the Company. PAG shall provide NAL with a written copy of a Proposed Sale Agreement, and NAL shall provide PAG with written notice within fifteen (15) days thereafter should it wish to become a party to the Proposed Sale Agreement upon the terms set forth in the Proposed Sale Agreement which shall include the purchase price terms for NAL’s Percentage Interest set forth above.  NAL shall receive the same proportionate consideration (on a pro rata basis) as part of the Transaction that is received by PAG.

 

13.2                        Withdrawal.

 

No Member shall have the right to withdraw from the Company and no Member shall take any action to accomplish its voluntary dissolution.

 

13.3                        Purchase Rights.

 

PAG shall have the right to purchase all, but not less than all, of the Percentage Interest of NAL upon the occurrence of any Buy-Out Event, which right shall be assignable by PAG, exercisable within sixty (60) days of the later of occurrence of the Buy-Out Event or PAG’s becoming aware of the Buy-Out Event (the “PAG Exercise Period”).  If PAG elects to exercise such right, it shall provide notice (including, without limitation, the price to be paid for the Percentage Interest (the “PAG Purchase Price”)) to NAL during the PAG Exercise Period. For a period of fifteen (15) calendar days thereafter (the “PAG Appraisal Period”), if NAL believes that the PAG Purchase Price does not reflect the fair market value of the Percentage Interest, it may elect to have the fair market value of the Percentage Interest determined by a Qualified Appraiser by providing written notice of such election to PAG.  The fees and costs associated with such an appraisal shall be split between the parties.  Within sixty (60) calendar days of (i) the expiration of the PAG Appraisal Period; or (ii) if applicable, the determination of the fair market value by a Qualified Appraiser 

 

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(the “PAG Closing Date”), PAG (or its assignee) shall provide payment of the PAG Purchase Price or, if applicable, the fair market value of the Percentage Interest. If PAG (or its assignee) does not purchase the Percentage Interest of NAL on or before the Closing Date, then all rights to purchase the Percentage Interest pursuant to this section shall terminate. In the event that PAG does not exercise their option to purchase the Percentage Interest upon the occurrence of a Buy-Out Event and, as a result of a Buy-Out Event, the Percentage Interest is Transferred to a transferee, such transferee has no right to become a Member unless admitted to membership in accordance with Section 13.1(b).  Such transferee shall not participate in the management of the business and affairs of the Company and is only entitled to receive the share of profits or other compensation by way of income and the return of contributions, to which NAL would otherwise be entitled.

 

SECTION 14

 

DISSOLUTION AND TERMINATION OF THE COMPANY

 

14.1                        Events Causing Dissolution.

 

(a)                                 Dissolution Events.  There will be dissolution of the Company and its affairs shall be wound up upon the first to occur of any of the following events:

 

(i)                                     the written consent of all Members;

 

(ii)                                  the death, retirement, resignation, expulsion, bankruptcy or dissolution (any of the foregoing, a “Withdrawal”) of any Member (in such capacity, the “Withdrawing Member”) unless, within ninety days after the occurrence of such an event Members holding a majority of the Units of all of the remaining Members agree in writing to continue the business of the Company and to the appointment, if necessary or desired, effective as of the date of such event, of one or more new Members; or

 

(iii)                               the entry of a decree of judicial dissolution under Section 18-802 of the Delaware Act.

 

(b)                                 If the remaining Members decide to continue the Company pursuant only to Section 14.1(a)(ii), the Company shall inform the Withdrawing Member of such decision by written notice delivered within ninety (90) days of the occurrence of the Withdrawal.  If the Members so elect to continue the Company, the Withdrawing Member shall no longer be a Member of the Company and the Company (and/or the other Members) shall make payment in cash in liquidation of the Withdrawing Member’s interest in the Company.  Any such payment shall be equal to the Withdrawing Member’s capital account minus any costs, fees or expenses of the Company and the non-withdrawing members related to the Withdrawal.

 

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14.2                        Liquidation.

 

Upon dissolution of the Company, the Person or Persons approved as provided in Section 14.4(b) to carry out the winding up of the Company (in such capacity, the “Liquidating Trustee”) and shall proceed, subject to the provisions herein, to liquidate the Company and apply the proceeds of such liquidation, or at the discretion of the Members to distribute Company assets, in the following order of priority:

 

(a)                                 First, to creditors (including creditors that are also Members) in satisfaction of debts and liabilities of the Company, whether by payment or the making of reasonable provision for payment (including any loans or advances that may have been made by any of the Members to the Company), and the expenses of liquidation, whether by payment or the making of reasonable provision for payments, any such reasonable reserves (which may be funded by a liquidating trust) to be established by the Liquidating Trustee, as the case may be, in amounts deemed by it to be reasonably necessary for the payment of the Company’s expenses, liabilities and other obligations (whether fixed or contingent); and

 

(b)                                 Second, to the Members in proportion to, and to the extent of, each Member’s Capital Account, as such Capital Account has been adjusted pursuant to Section 6.4, any remainder to be distributed among the Members in accordance with their respective  Percentage Interest.

 

14.3                        Distributions in Cash or in Kind.

 

(a)                                 Upon the dissolution of the Company, the Liquidating Trustee shall use its good faith efforts to liquidate all of the Company assets in an orderly manner and apply the proceeds of such liquidation as set forth in Section 14.2, or if in the good faith business judgment of the Liquidating Trustee a Company asset should not be liquidated, the Liquidating Trustee shall allocate, on the basis of the Value of any Company assets not sold or otherwise disposed of, any unrealized gain or loss based on such Value to the Members’ Capital Accounts as though the assets in question had been sold on the date of distribution and, after giving effect to any such adjustment, distribute said assets in accordance with Section 14.2, provided that the Liquidating Trustee will in good faith attempt to liquidate sufficient Company assets to satisfy in cash (or make reasonable provision for) the debts and liabilities referred to in paragraph First of Section 14.2.

 

14.4                        Time and Manner for Liquidation, etc.

 

(a)                                 A reasonable time period shall be allowed for the orderly winding up and liquidation of the assets of the Company and the discharge of liabilities to creditors so as to enable the Liquidating Trustee to seek to minimize potential losses upon such liquidation.  The provisions of this Agreement shall remain in full force and effect during the period of winding up and until the filing of a certificate of cancellation of the Company with the Secretary of State of the State of Delaware.

 

(b)                                 In the event of a liquidation of the Company, the Members shall jointly approve the Person to act as Liquidating Trustee and shall be entitled to direct the manner and timing under which such Liquidating Trustee shall proceed to liquidate the Company.  All Members shall be promptly informed of any directions given by another Member to the Liquidating Trustee and of the progress of the liquidation.

 

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14.5                        Termination.

 

Upon completion of the foregoing, the Liquidating Trustee shall execute, acknowledge and cause to be filed a certificate of cancellation of the Company with the Secretary of State of the State of Delaware.

 

14.6                        Claims of the Members.

 

The Members and former Members shall, other than for a breach of this Agreement, gross negligence or willful misconduct, look solely to the Company’s assets for the return of their Capital Contributions, and if the assets of the Company remaining after payment of or due provision for all debts, liabilities and obligations of the Company are insufficient to return such Capital Contributions, the Members and former Members shall have no recourse against any Member, any Manager or any Member’s or Manager’s Affiliates.

 

SECTION 15

 

DEFINITIONS

 

15.1                        Definitions.

 

Unless the context otherwise requires, the terms defined in this Section 15.1 shall, for the purposes of this Agreement, have the meanings herein specified.

 

“Adjusted Capital Account Deficit” shall mean, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year after giving effect to the following adjustments:  (a) credit to such Capital Account any amounts that such Member is obligated to restore pursuant to the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and (b) debit to such Capital Account the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).  This definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations and shall be interpreted consistently therewith.

 

“Adjusted Net Cash” means an amount that is reasonably determined by the Chief Financial Officer of Penske Automotive Group, Inc. and the President of the Company.

 

“Affiliate” of any entity or Person shall mean any other entity or person Controlling, Controlled by, or under Common Control with, such entity or Person.

 

“Agreement” shall mean this Limited Liability Company Agreement, as amended, modified, supplemented or restated from time to time.

 

“Associate” shall have the meaning ascribed to such term in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.

 

“Business” is defined in the Recitals to this Agreement.

 

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“Business Day” shall mean any day on which banks located in New York City are not required or authorized by law to remain closed.

 

“Buy-Out Event” means any of the following: (a) NAL institutes or consents to any proceeding under Debtor Relief Laws relating to NAL or to all or any part of NAL’s property; (b) NAL is unable or admits in writing to the inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; (c) NAL applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer or for all or any part of its property; (d) NAL applies for or consents to liquidation or dissolution or all or substantially all of its property; (e) any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of NAL; (f) any proceeding under Debtor Relief Laws relating to NAL or to all or any part of its property is instituted; or (g) NAL is determined to be an Unsuitable Person and it fails to take the necessary steps to change such determination within twenty (20) days’ time.

 

“Capital Account” shall mean, with respect to any Member, the account maintained for such Member in accordance with the provisions of Section 6.4.

 

“Capital Contribution” shall mean, with respect to any Member, the amount of money and the Gross Asset Value of property contributed by such Member to the Company pursuant to Article VI hereof and as set forth on Schedule A.

 

“Certificate” shall mean the Company’s Certificate of Formation and any and all amendments thereto and restatements thereof filed on behalf of the Company with the office of the Secretary of State of the State of Delaware pursuant to the Delaware Act.

 

“Claims” shall have the meaning set forth in Section 12.3(a).

 

“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

“Company Minimum Gain” shall have the meaning of “partnership minimum gain” set forth in Treasury Regulations Sections 1.704-2(b)(2) and 1.704-2(d).

 

“Control” (including the terms “Controlling”, “Controlled by” and “under common Control with”) means the possession, directly or indirectly, or the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of securities, by contract or otherwise.

 

“Covered Person” shall mean a Member, a Manager, a Director, an Officer, any Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the Company, a Member or a Manager; any officers, directors, shareholders, controlling Persons, partners, employees, representatives or agents of a Member or a Manager, or their respective Affiliates; or any officer, employee or agent of the Company or its Affiliates; or any Person who was, at the time of the act or omission in question, such a Person.

 

“Damages” shall have the meaning set forth in Section 12.3(a).

 

“Debtor Relief Laws” means any laws generally affecting the right of creditors and the relief of debtors now or hereafter in effect, including, without limitation, bankruptcy and insolvency laws, and laws pursuant to which a receiver, liquidator, assignee, custodian, trustee, sequestrator or other 

 

28

 

similar agent is appointed for the person or for any substantial part of the person’s assets or property.

 

“Delaware Act” shall mean the Delaware Limited Liability Company Act, 6 Del. C. ” 18-101, et seq., as amended from time to time.

 

“Depreciation” shall mean, for each Fiscal Year, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such Fiscal Year, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Fiscal Year, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Year bears to such beginning adjusted tax basis; provided, however, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Member.

 

“Directors” shall have the meaning set forth in Section 4.1(a).

 

“Disabling Conduct” shall mean conduct that constitutes fraud, a willful violation of this Agreement or law, gross negligence or reckless disregard of duty in the conduct of the duties of the Person referred to which results in a material loss to the Company.

 

“Executive Officer” shall mean the President of the Company and all officers and employees of the Company who directly report to, or are directly supervised by, the President.

 

“Financial Statements” with respect to the Company shall mean the financial statements of the Company that reflect the assets, liabilities, retained capital, operations and cash flows of the Company.

 

“Fiscal Year” shall have the meaning set forth in Section 5.3.

 

“Franchise Agreements” means, the agreement entered into with Mercedes-Benz USA or other applicable manufacturer which serve to establish the rights and obligations of the Company and the manufacturer to each other with respect to the sale and service of new motor vehicles.

 

“Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

 

(a)                                 The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the fair market value of such asset at the time it is accepted by the Company, unreduced by any liability secured by such asset, as determined by the Members.

 

(b)                                 The Gross Asset Values of all Company assets shall be adjusted to equal their respective fair market values, unreduced by any liabilities secured by such assets, as determined by the Members as of the following times:  (i) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution; (ii) the distribution by the Company to a Member of more than a de minimis amount of Property as 

 

29

 

consideration for an interest in the Company; and (iii) the liquidation of the Company within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g).

 

(c)                                  The Gross Asset Values of any Company asset distributed to any Member shall be adjusted to equal the fair market value of such asset, unreduced by any liability secured by such asset, on the date of distribution as determined by the Members.

 

(d)                                 The Gross Asset Values of the Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b); but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and paragraph (vi) of the definition of “Net Profits” and “Net Losses”.

 

If the Gross Asset Value of an asset has been determined or adjusted pursuant to paragraphs (a), (b) or (d) of this definition, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Net Profits and Net Losses.

 

“Liquidating Trustee” shall have the meaning set forth in Section 14.2.

 

“Manager” shall mean a “manager” (within the meaning of the Delaware Act) of the Company.

 

“Member” shall mean any Person named as a member of the Company on Schedule A hereto or admitted subsequently as an additional Member pursuant to the provisions of this Agreement, in such Person’s capacity as a member of the Company, and “Members” shall mean two or more of such Persons when acting in their capacities as members of the Company.

 

“Member Minimum Gain” shall mean a Member’s share of Company Minimum Gain as set forth in Treasury Regulations Section 1.704-2(g) and member nonrecourse debt minimum gain as described in Treasury Regulations Section 1.704-2(i).

 

“Member Nonrecourse Debt” shall have the meaning of “partner nonrecourse debt” as set forth in Treasury Regulations Section 1.704-2(b)(4).

 

“Member Nonrecourse Deductions” shall have the meaning of “partner nonrecourse deductions” set forth in Treasury Regulations Section 1.704-2(i).

 

“Nonrecourse Deductions” shall have the meaning set forth in Treasury Regulations Section 1.704-2(b)(1).

 

“Net Profit” or “Net Loss” shall mean, for each Fiscal Year, an amount equal to the Company’s taxable income or loss for such Fiscal Year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

 

30

 

(a)                                 any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this definition shall be added to such taxable income or loss;

 

(b)                                 any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this definition shall be subtracted from such taxable income or loss;

 

(c)                                  in the event the Gross Asset Value of any Company asset is adjusted pursuant to paragraphs (b) or (c) of the definition of “Gross Asset Value,” the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Profits or Net Losses;

 

(d)                                 gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;

 

(e)                              in lieu of depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss there shall be taken into account Depreciation with respect to each asset of the Company for such Fiscal Year, computed in accordance with the definition of “Depreciation” above;

 

(f)                                   to the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Treasury Regulations 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in complete liquidation of a Member’s Interest, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Net Profits or Net Losses; and

 

(g)                                  notwithstanding any other provision of this definition, any items which are specially allocated pursuant to Section 7.2(a) of this Agreement shall not be taken into account in computing Net Profits or Net Losses.

 

The amounts of the items of Company income, gain, loss, or deduction available to be specially allocated pursuant to Sections 7.2(a) hereof shall be determined by applying rules analogous to those set forth in paragraphs (a) through (f) above.

 

“Percentage Interest” shall mean the percentage of the total Units held by a Member.

 

“Officer” shall have the meaning set forth in Section 4.2(a).

 

“Person” shall mean any individual, corporation, association, partnership (general or limited), joint venture, trust, joint-stock company, estate, limited liability company, unincorporated organization or other legal entity or organization.

 

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“Proceeding” shall have the meaning set forth in Section 12.3(a).

 

“Qualified Appraiser” means an independent outside qualified appraiser appointed by the Board (and reasonably acceptable to NAL) to determine the fair market value of certain Units, or the Company itself. Any determination by  a Qualified Appraiser regarding the fair market value of certain Units or the Company itself, shall be binding upon all parties.

 

“Secretary” shall mean the person or persons duly appointed as Secretary of the Company.

 

“Subsidiary” of any Person shall mean a corporation or other entity a majority of whose capital stock with voting power or the majority ownership interest of which is at the time owned or controlled, directly or indirectly, by such Person.

 

“TMM” shall have the meaning set forth in Section 9.1(a).

 

“Transfer” shall have the meaning set forth in Section 13.1(a).

 

“Treasurer” shall mean the person or persons duly appointed as Treasurer of the Company.

 

“Treasury Regulations” shall mean the Income Tax Regulations, including Temporary Regulations, promulgated under the Code, as the same may be amended hereafter from time to time (including corresponding provisions of succeeding Income Tax Regulations).

 

“Units” shall mean the total limited liability company interests of the Company.  The number of Units authorized to be issued and outstanding is specified in Schedule A, as amended from time to time in accordance with this Agreement.

 

“Unsuitable Person” means a Member (which shall be deemed to include an Affiliate of such Person) whose continued involvement in the business of the Company as a manager, director, officer, agent or employee causes the Company to lose or to be threatened with the loss of any Franchise Agreement.

 

“Withheld Amount” shall have the meaning set forth in Section 7.4(c).

 

SECTION 16

 

AMENDMENTS; MERGER OR SALE

 

16.1                        Amendments Generally.

 

Notwithstanding any other provision of this Agreement, the terms of this Agreement shall not be amended except in a writing signed by all Members, provided that, without the consent of any of the Members, the Company:

 

(i)                                     may enter into agreements with Persons who are transferees of the interests in the Company of Members, pursuant to the terms of this Agreement, providing in substance that such Persons will be bound by this Agreement; and

 

32

 

(ii)                                  may amend this Agreement as may be required to implement (A) transfers of interests of Members or (B) any admission of new Members.

 

16.2                        Merger or Sale.

 

The Company may merge with, or consolidate into, a Delaware limited liability company or another business entity (as defined in Section 18-209(a) of the Delaware Act) or may sell all or substantially all of its assets only upon the approval of the Company and all Members of the Company.

 

SECTION 17

 

MISCELLANEOUS PROVISIONS

 

17.1                        Notices.

 

Each notice relating to this Agreement shall be in writing and shall be delivered (a) in person, by registered or certified mail, private courier, confirmed overnight delivery or (b) by telecopy or other facsimile transmission, confirmed by telephone to an executive officer of the recipient.  In addition, all notices to any Member shall be addressed to such Member at their respective addresses set forth on Schedule A or at such other address as the Member may have designated by notice in writing.  Any Member may designate a new address by notice to that effect given to the Company.  The Company may designate a new address by notice to that effect given to each Member.  Unless otherwise specifically provided in this Agreement, a notice given in accordance with the foregoing clause (a) shall be deemed to have been effectively given when mailed by registered or certified mail, return receipt requested, to the proper address, or when delivered in person.  Any notice to the Company or to a Member by telecopy or other facsimile transmission shall be deemed to be given when sent and confirmed by telephone in accordance with the foregoing clause (b).

 

17.2                        Counterparts.

 

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together shall constitute a single agreement.

 

17.3                        Headings.

 

The headings and subheadings of the sections of this Agreement are inserted for convenience and identification only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision thereof.

 

17.4                        Successors and Assigns; Assignment.

 

This Agreement shall inure to the benefit of the Members and the Covered Persons, and shall be binding upon the parties, and their respective successors and permitted assigns.

 

17.5                        Severability.

 

Every provision of this Agreement is intended to be severable.  If any term or provision of this Agreement is illegal or invalid for any reason whatsoever, such term or provision will be enforced to the maximum extent permitted by law and, in any event, such illegality or invalidity shall not affect the validity of the remainder of the Agreement.

 

33

 

17.6                        Non-Waiver.

 

No provision of this Agreement shall be deemed to have been waived except if the giving of such waiver is contained in a written notice given to the party claiming such waiver and no such waiver shall be deemed to be a waiver of any other or further obligation or liability of the party or parties in whose favor the waiver was given.

 

17.7                        Applicable Law.

 

This agreement and the rights and obligations of the parties hereunder shall be interpreted and enforced in accordance with and governed by the laws of the state of Delaware, and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws.

 

17.8                        Waiver of Jury Trial.

 

Each party to this Agreement waives to the fullest extent permitted by applicable law any right it may have to a trial by jury in respect of any action, suit or proceeding arising out of or relating to this Agreement.

 

17.9                        Survival of Certain Provisions.

 

The obligations of each Member pursuant to Sections 3.5, 6.5 and 12.3 shall survive the termination or expiration of this Agreement and the winding-up, liquidation and dissolution of the Company.

 

17.10                 Limitation on Damages; Legal Disputes.

 

(a)                                 In no event will any party to this Agreement be liable to any other party for special, indirect, punitive or incidental damages, or any other consequential damages except for lost profits and lost savings, even if such party has been advised of the possibility of such damages resulting from the breach by it of any of its obligations hereunder or from the use of any confidential or other information.

 

(b)                                 Subject to the limitations of subsection (a), immediately above, the rights and remedies of the parties under this Agreement are cumulative and are not exclusive of any rights or remedies which the parties would otherwise have for equitable relief, including the remedies of specific performance and injunction.

 

17.11                 Waiver of Partition.

 

Except as may otherwise be provided by law in connection with the winding-up, liquidation and dissolution of the Company, each Member hereby irrevocably waives any and all rights that it may have to maintain an action for partition of any of the Company’s property.

 

17.12                 Entire Agreement.

 

This Agreement and agreements executed in connection therewith constitute the entire agreement among the Members with respect to the subject matter hereof, and supersede any prior agreement or understanding among them with respect to such subject matter.

 

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17.13                 Further Actions.

 

Each Member shall execute and deliver such other certificates, agreements and documents, and take such other actions, as may reasonably be requested by the Company in connection with the achievement of its purposes, including, without limitation all such agreements, certificates, tax statements and other documents as may be required to be filed in respect of the Company.

 

17.14                 No Partnership.

 

Nothing contained in this Agreement shall be deemed or construed to make any Member partners or joint venturers with each other, for any purposes other than for federal and state tax purposes.  The only business association to be formed by the Members will be the Company, which will be a limited liability company under Delaware law, to be organized pursuant to this Agreement.  The Company shall not be a general partnership, a limited partnership or a joint venture, and no Member shall be considered a partner or joint venturer of or with any other Member for any purposes other than for federal and state tax purposes.

 

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IN WITNESS WHEREOF, the undersigned have duly executed this Limited Liability Company Agreement of PAG GREENWICH M1, LLC on the 15th day of November, 2013.

 

 

	
 
    	
PAG   GREENWICH HOLDINGS, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David K. Jones
    
	
 
    	
Name: David K.   Jones
    
	
 
    	
Title: Assistant   Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NOTO   AUTOMOTIVE LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Richard S. Koppleman
    
	
 
    	
Name: Richard S. Koppelman
    
	
 
    	
Title: Manager
    

 

36

 

Schedule A

 

Member Information

 

	
Name/Address
    	
 
    	
Capital
   Contribution
    	
 
    	
Units
    	
 
    	
Voting Percentage
    	
 
    
	
PAG Greenwich Holdings,   LLC 
   2555 Telegraph Road 
   Bloomfield Hills, MI 48302-0954 
    	
 
    	
$
    	
15,050,000
    	
 
    	
80
    	
 
    	
80
    	
%
    
	
Noto Automotive LLC 
   342 West Putnam Avenue 
   Greenwich, CT 06830
    	
 
    	
$
    	
3,762,000
    	
 
    	
20
    	
 
    	
20
    	
%
    
	
TOTAL
    	
 
    	
$
    	
18,812,000
    	
 
    	
100
    	
 
    	
100
    	
%
    

 

37

 

Schedule B

 

Initial Directors

 

Robert H. Kurnick, Jr.

 

David K. Jones

 

Richard S. Koppelman

 

Initial Officers

 

	
Chairman
    	
 
    	
John   Cragg
    
	
President
    	
 
    	
Brian   Beanland
    
	
Vice   President
    	
 
    	
Jason   Hoover
    
	
Secretary/Treasurer
    	
 
    	
Anthony   Sciorilli
    
	
Assistant   Treasurer
    	
 
    	
David   K. Jones
    
	
Assistant   Secretary
    	
 
    	
Robert   H. Kurnick, Jr.
    
	
Assistant   Secretary
    	
 
    	
Maggie   Feher
    

 

38Exhibit 10.25

 

VMC HOLDING CORPORATION

AMENDED AND RESTATED

STOCKHOLDERS’ AGREEMENT

 

This Agreement is executed as of the 5th day of November, 2013 (the “Effective Date”), by and among VMC Holding Corporation, a Delaware corporation (the “Company”), Penske Automotive Group, Inc. (“PAG”), Penske Truck Leasing Co., L.P. (“PTL”), PCP Holdings, Inc. (“PCP”) and QEKGS Investment Holdings, LLC (“QEKGS”) and Phoenix Life Insurance Company (“Phoenix”) (each of PAG, PTL, PCP, QEKGS and Phoenix, together with any transferee of their respecting Shares that is permitted hereunder, a “Stockholder” and collectively, the “Stockholders”).

 

WHEREAS, the Company has 10,000 shares of authorized capital stock (these shares together with any other class or series of common or preferred stock that may be authorized, designated or issued by the Company from time to time, the “Shares”);

 

WHEREAS, the Shares currently consist of: 10,000 Shares of Common Stock (the “Common Shares”), of which 4309.74 Common Shares are issued and outstanding;

 

WHEREAS, the Stockholders are the collective holders of all issued and outstanding Shares; and

 

WHEREAS, the Stockholders desire to provide for the ongoing management of the Company in accordance with the wishes of the Stockholders, for certain restrictions on the transfer of Shares, and otherwise to establish their relationship as Stockholders and their and the Company’s rights and obligations with respect to the Shares; and

 

WHEREAS, the Stockholders desire that this Agreement amend and restate that Stockholders Agreement of the Company dated April 28, 2005.

 

NOW, THEREFORE, in consideration of the mutual agreements contained herein and for other valuable consideration, and intending to be legally bound, the parties hereby agree as follows:

 

ARTICLE 1.  ELECTION OF DIRECTORS

 

1.1                               Composition of Board; Voting Agreement.  Subject to the terms of this Agreement, the Board of Directors of the Company shall have six (6) members and one (1) observer.  PCP and PTL shall each have the right to designate one director and PAG and QEKGS shall each have the right to designate two (2) directors.  If it holds of record no less than 3% of the issued and outstanding Common Stock, Phoenix shall have the right to designate one (1) observer (without participation or voting rights of any kind) (the “Observer”) to all Board meetings.  Each of the Stockholders shall vote all Shares held by it (including any Shares that may be hereafter acquired and Shares, if any, in respect of which that Stockholder has been granted a proxy) at any meeting of the Stockholders of the Company called and held for that purpose, and shall sign any

 

 

consent of Stockholders presented for that purpose, in favor of the election of the Stockholder’s (other than Phoenix) designee(s) as a director(s) of the Company and in favor of Phoenix’ designee as Observer as set forth in this Section 1.1.

 

The right of each of PCP and PTL to designate one director and each of PAG and QEKGS to designate two (2) directors, as set forth above shall terminate at the time that the relevant Stockholder (together with its Controlled Affiliates as defined below) holds of record less than 5% of the issued and outstanding Common Shares and shall not thereafter be restored by any subsequent acquisition of Common Shares, except that (subject to the second succeeding paragraph below) if a Stockholder whose rights to nominate one or more directors have lapsed subsequently acquires all of the Common Shares held by another Stockholder having a right to nominate one or more directors at the time of transfer, the transferee of such Shares shall acquire also that right.

 

Subject to the next succeeding paragraph below, if the right of any Stockholder to designate one or more directors under this Section 1.1 ceases in accordance with the terms of these Sections, the director position(s) that that Stockholder had a right to designate shall be nominated by the Company’s Board of Directors and elected by the affirmative vote of a majority of the then outstanding Common Shares voting as a single class.  Any Stockholder (other than Phoenix) that loses its right to appoint one or more directors pursuant to this Section 1.1, due to holding of record less than 5% of the issued and outstanding Common Shares, shall have the right to appoint one observer (without participation or voting rights of any kind) to all Board meetings as long as such Stockholder holds of record 3% of the issued and outstanding Common Shares, after which the right to appoint an observer shall cease.

 

1.2                               Transferability.  Any person’s right to designate one or more directors (or appoint an observer) under Section 1.1 may be transferred only in connection with a transfer of all of the Common Shares then held by the person having that right.

 

1.3                               Removal of Directors.  The directors designated (or observers appointed) pursuant to Section 1.1 may be removed with or without cause by, and only by, the affirmative vote of a majority of the Common Shares entitled to vote for their election, given either at a special meeting of the holders of such Shares duly called for that purpose, or by written consent of those holders in accordance with Delaware law, provided that such majority must include the applicable nominating Stockholder.

 

ARTICLE 2.  CERTAIN COMPANY ACTIONS REQUIRING SPECIAL APPROVAL; 

CERTAIN AGREEMENTS

 

2.1                               Special Approval Rights.  In addition to any requirements that may from time to time be imposed under the Company’s Certificate of Incorporation or Bylaws or under applicable law, each of the following actions shall require special approval as set forth below:

 

A.                                    PAG, QEKGS, PCP, PTL.  The following actions shall require the approval of a director nominated by PAG, a director nominated by QEKGS, and at least one of the directors nominated by PCP or PTL and, if requested by a director, the approval of 85% of the then

 

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outstanding Common Shares then held by PAG, QEKGS, PCP and PTL, voting as a single class by written consent or at a special meeting called for that purpose in accordance with Delaware law:

 

(i)                                     Any material change to the Company’s Certificate of Incorporation or Bylaws, without regard as to whether the change would otherwise require the approval of the Company’s Stockholders;

 

(ii)                                  The declaration or payment by the Company of any dividend or distribution on its Common Shares, other than a distribution payable solely in cash or Common Shares ratably to all holders of Common Shares;

 

(iii)                               The redemption, acquisition, or purchase by the Company of any Shares of its capital stock or any options, warrants, or rights exercisable for or convertible into such Shares, other than redemptions, purchases, or acquisitions effected pursuant to the terms of issuance of such Shares or other securities or rights, and that were approved at the time of such issuance by a PAG, QEKGS, and PCP director designee (if PAG or QEKGS or PCP were a shareholder at the time of issuance) or a redemption pursuant to Section 4.6;

 

(iv)                              Any acquisition of or investment in any person, including an acquisition or investment that, in the reasonable business judgment of PAG, competes, directly or indirectly, with the business of PAG as at the date of investment or acquisition or that could reasonably be expected to impair that PAG’s business relationships with original equipment manufacturers;

 

(v)                                 The guarantee by the Company or a subsidiary of the obligations of any person other than a wholly-owned direct or indirect subsidiary;

 

(vi)                              Except in accordance with a divestiture otherwise specifically contemplated by Article 4 of this Agreement, any material change in the principal business of the Company and its direct or indirect subsidiaries, determined on a consolidated basis, the divestiture by the Company of any material direct or indirect subsidiary (whether by means of a sale of stock, a merger, or a sale of substantially all of the assets of such material direct or indirect subsidiary) or the divestiture by the Company or any material direct or indirect subsidiary of any material business unit thereof;

 

(vii)                           Any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange, or lease of assets, property, or services) with any Affiliate unless (x) such transaction or series of related transactions is on terms that are no less favorable to the Company or its subsidiary, as applicable, than would be available in a comparable transaction in arm’s-length dealings with an unrelated third party and (y) such transaction or series of related transactions involves payments of not more than $100,000 in the aggregate; provided, however, that this restriction shall not apply to the payment of reasonable and customary fees to directors of the Company or its subsidiaries; to the Company’s employee compensation and other benefit arrangements, or to payments, or services provided, under the Management Agreement among the Company, PTL, PAG, PCP, and Gates Group Capital Partners LLC (an Affiliate of QEKGS),  dated

 

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as of the date hereof as such may be amended or amended and restated from time to time in accordance with the terms thereof;

 

(viii)                        The Company or any subsidiary incurring any indebtedness for borrowed money that exceeds amounts permitted under the then-existing credit facilities of the Company and its subsidiaries, including any renewals thereof, in any one (1) year in excess of $1,000,000 outstanding at any one time except as set forth in the business plan approved by the Board of Directors of the Company;

 

(ix)                              Creating liens or security interests, other than liens or security interests granted to secure indebtedness permitted under the Section 2.1(viii), upon any of the real or personal property of the Company or its subsidiaries representing obligations in excess of $250,000;

 

(x)                                 The issuance of Equity Securities (other than a distribution ratably to all holders of Common Shares or an issuance to avoid the occurrence or continuance of an event of default under the Company’s credit facilities), the issuance of any options, restricted stock, stock appreciation rights or similar equity interests (other than pursuant to the Option Plan) or effecting any recapitalization, reclassification or reorganization of the Company or any material subsidiary;

 

(xi)                              The Company or any subsidiary incurring any capital expenditures that, individually or in the aggregate, exceed the capital expenditure budget by more than $250,000 in any year;

 

(xii)                           The Company or any subsidiary entering into any joint venture;

 

(xiii)                        Effecting the dissolution or liquidation of the Company or any subsidiary;

 

(xiv)                       Entering into any vendor contract or agreement with a term in excess of 60 months or which obligates the Company or any subsidiary to pay amounts in the aggregate in excess of $500,000, net of customer reimbursements, in any twelve (12) month period;

 

(xv)                          The Company or any subsidiary entering into any lease of real or personal property with a term in excess of sixty (60) months (excluding renewal option terms) or which obligates the Company to pay rental amounts in the aggregate in excess of $250,000, net of customer reimbursements and in excess of budget in any twelve (12) month period;

 

(xvi)                       The execution of any agreement or the adoption by the Company of any resolution to do any of the foregoing unless such agreement or resolution is expressly conditioned on receipt of the requisite approval.

 

The rights of PAG, PCP, PTL and QEKGS under this Section 2.1A are not transferable.

 

B.                                    Expansion or Contraction of Board.  The expansion or contraction of the Board of Directors to a number above or below six, shall require the approval of the directors nominated by each of PAG, PTL, PCP and QEKGS, and if requested by any of those directors, the

 

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approval of 85% of the then outstanding Common Shares then held by PAG, QEKGS, Phoenix, PCP and PTL respectively, voting as separate classes by written consent or at a special meeting called for that purpose in accordance with Delaware law.

 

C.                                    Compensation and Audit Committees.  The Board shall form and maintain a Compensation Committee and an Audit Committee, each comprised of a PAG Designee, a PCP Designee and a QEKGS Designee.  The Compensation Committee and the Audit Committee shall have authority and responsibilities of the sort typically associated with private company compensation and audit committees, which shall be set forth in a committee charter reasonably acceptable to QEKGS.

 

2.2                               Certain Security Issuances.  If the holders of 50.1% of the then outstanding Common Shares, in their reasonable business judgment, conclude that it is necessary for the Company to raise additional equity capital in order for the Company to avoid a covenant default under its then principal credit facility or to comply with legal regulations applicable to it, then each of the directors and Stockholders shall vote to approve such issuance and take such other actions, such as approving an amendment to the Company’s Certificate of Incorporation to increase or change its authorized capital to effect the offering, as may be reasonably necessary to effectuate the offering; provided that the securities offered are offered at fair market value, as determined in accordance with reasonable procedures and methods established by the Board of Directors, and each Stockholder is offered the pre-emptive rights provided for in Article 3 of this Agreement.

 

2.3                               Certain Definitions and Clarifications.  For the purposes of this Agreement:

 

A.                                    The term “Affiliate” shall have the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934, as amended.

 

B.                                    The term “Controlled Affiliate” shall mean an Affiliate of which the pertinent person has the right by virtue of the ownership of Equity Securities in that Affiliate or by voting agreement to elect a majority of the Board of Directors or similar governing body.

 

C.                                    The term “Equity Securities” shall mean, as applicable, any Common or Preferred Stock of the Company, and any security, right or interest, directly or indirectly convertible into or exchangeable or exercisable for Common or Preferred Stock of the Company, including, without limitation, rights, warrants, or options to subscribe for or to purchase Common or Preferred Stock.

 

D.                                    The term “hold of record” shall include for any Stockholder, Shares held of record by a Controlled Affiliate of such Stockholder.

 

E.                                     For the purposes of subsection 2.1(A)(vi) above, the term “material” shall mean assets constituting 10.0% or more of the Company’s consolidated assets as of the end of the immediately preceding fiscal quarter, or assets or operations accounting for 10% of the Company’s consolidated revenues for the twelve (12) months ending on the last day of the immediately preceding fiscal quarter determined in each case by reference to the Company’s regularly prepared financial statements .

 

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F.                                      The term “Option Plan” shall mean any employee option plan (providing, together with all other such plans previously adopted by the Company) for the issuance of not more than 10% of the Company’s then outstanding Common Shares, whether as options, restricted stock, stock appreciation rights, or similar equity interests to employees and service providers to the Company approved by the Board of Directors.

 

ARTICLE 3.  PRE-EMPTIVE AND RELATED RIGHTS

 

3.1                               Grant of Rights.  If the Company hereafter proposes to issue or sell any Equity Securities (other than (A) as a dividend payable solely and ratably in Common Stock on its outstanding shares of Common Stock or (B) pursuant to an Option Plan), the Company shall first offer to each of the Stockholders a portion of the number or amount of such securities proposed to be so sold equal to the product of (x) the number of Shares or amount proposed to be so issued and sold (on an as converted basis, if applicable) multiplied by (y) a fraction, the numerator of which is the number of issued and outstanding Shares then owned by such Stockholder prior to such issuance and the denominator of which is the total number of issued and outstanding Shares then issued and outstanding and held by persons having pre-emptive and related rights under this Section 3.1, for the same price and upon the same terms and conditions as the securities are being offered in such transaction.

 

3.2                               Procedures.

 

A.                                    If, in accordance with this Article 3, the Company determines to issue additional Equity Securities, it shall cause an officer to give each Stockholder notice, specifying in reasonable detail the nature and type of securities being offered and the price at which they are being offered, at least twenty-one (21) days before issuing any such securities.  Within twenty (20) days of the receipt of that notice, each Stockholder shall have the right, by giving notice to the designated officer, but not the obligation, to purchase the securities being offered as provided herein.

 

B.                                    Any Stockholder desiring to exercise its pre-emptive and related rights hereunder must give to the Company written notice of its election to purchase up to a specified number of the securities proposed to be offered by the close of business on the twentieth (20th) day after the notice required by Section 3.2 was given to it.  Such response shall set forth the Stockholder’s acceptance of the offer and designate a number of Shares (or, if applicable, a value of securities) to be purchased by such Stockholder, which number may be fewer than, equal to, or more than the number of Shares that such Stockholder has a right to purchase under Section 3.1.  If any Stockholder does not elect to purchase all of the offered Equity Securities that it has right to purchase under Section 3.1, the securities remaining shall be allocated to each other electing Stockholder in one or more successive allocations, up to the number or amount of securities specified in the election, pro rata, in the same proportion as the total number of Common Shares held by that electing Stockholder bears to the total number of issued and outstanding Shares held by all electing Stockholders electing to purchase more than the maximum number of shares that they are entitled to purchase.

 

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C.                                    Not later than ten (10) days after the date on which this offer of rights expires, the Company shall notify each electing Stockholder of the time and place of closing, the number or amount of securities allotted to it, and the purchase price therefor, whereupon each such electing stockholder shall become legally obligated to purchase such securities at the price and on the terms offered.

 

D.                                    Following the expiration of the offer and the giving of the notice required by Section 3.2A, the Company may thereafter offer and sell any of the Equity Securities not purchased by the Stockholders for a period of one hundred twenty (120) days on the terms and conditions set forth in the original notice to the Stockholders.  Any of the Equity Securities not sold during that period may not thereafter be sold without first complying with the requirements of this Article 3.

 

ARTICLE 4.  PROVISIONS RESTRICTING AND RELATING 
 TO THE TRANSFER OF SHARES

 

4.1                               General Restriction on Transfer.  In addition to any other restriction under applicable federal or state securities laws, no Stockholder shall transfer, give, donate, pledge, hypothecate, or otherwise encumber, alienate, or dispose of (or agree to do any of the foregoing) (“Transfer”) to any person, whether voluntarily or by operation of law (subject to Article 5), any Shares now held or hereafter acquired by such Stockholder, except for Permitted Transfers under Section 4.2 or sales made in accordance with the terms and conditions hereafter set forth in this Agreement.  Notwithstanding any other provision of this Agreement, except with respect to Sections 4.4, 4.5, or 4.6, a Stockholder, other than PAG, will not, except by operation of law, Transfer any Shares of Common Stock that it may hold prior to the sixth (6th) annual anniversary of the Effective Date.

 

4.2                               Permitted Transfers.  Subject to all provisions of this Article 4 relevant to the Transfer, any Stockholder may Transfer Shares held by it to a Controlled Affiliate or to the Company or among the Stockholders.  Any person to whom Shares held by a Stockholder are transferred in accordance with this Section 4.2 is hereinafter referred to as a “Permitted Transferee.”  The Transfer to a Permitted Transferee shall activate only Sections 4.8 and 4.9 of this Article 4.

 

4.3                               Rights of First Offer.

 

A.                                    Subject to the terms and conditions specified in this Section 4.3, and applicable securities laws, in the event any Stockholder proposes to offer or sell any Shares other than to a Permitted Transferee or other than in a transaction to which Sections 4.4, 4.5 or 4.6 applies, the selling Stockholder shall no less than thirty (30) days prior to effecting such sale make an offer of such Shares to each of the other Stockholders in accordance with the following provisions of this Section 4.3.  A Stockholder shall be entitled to apportion the right of first offer hereby granted it among itself and its Controlled Affiliates in such proportions as it deems appropriate.

 

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B.                                    The selling Stockholder shall deliver a notice (the “Offer Notice”) to each of the other Stockholders stating (i) its bona fide intention to offer such Shares, and (ii) the number of such Shares to be offered and the terms and price on which they will be offered.

 

C.                                    By written notification received by the Company, within twenty (20) calendar days after mailing of the Offer Notice, each of the other Stockholders may elect to purchase or obtain, at the price, if any, and on the terms specified in the Offer Notice (if a price is specified), up to that portion of such Shares which equals the proportion that the number of Shares of issued and outstanding Common Stock then held by such other Stockholder bears to the total number of Shares of issued and outstanding Common Stock of the Company then held by all Stockholders other than the selling Stockholder.  The selling Stockholder shall promptly, in writing, inform each other Stockholder that elects to purchase all the Shares available to it (each, a “Fully-Exercising Investor”) of any other Stockholder’s willingness or failure to do likewise.  During the ten (10) day period commencing after receipt of such information, each Fully-Exercising Investor shall be entitled to obtain that portion of the Shares for which Stockholders were entitled to subscribe but which were not subscribed for by the Stockholders which is equal to the proportion that the number of Shares of Common Stock issued and then held by such Fully-Exercising Investor bears to the total number of shares of Common Stock issued and held by all Fully-Exercising Investors who wish to purchase such unsubscribed shares.

 

D.                                    If (i) all the Shares referred to in the Offer Notice are not elected to be purchased or obtained on the terms set forth in the Offer Notice and (ii), as to Stockholders other than PAG, the Offer Notice had been sent on or after the sixth (6th) anniversary of the Effective Date, the selling Stockholder may, during the one hundred twenty (120) day period following the expiration of the period provided in Section 4.3C hereof, offer all of the Shares to any person or persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice.  If the Seller does not enter into an agreement for the sale of these Shares within such period, or if such agreement is not consummated within thirty (30) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such Shares shall not be offered unless first reoffered to the Stockholders in accordance with this Section 4.3.

 

E.                                     If (i) all the Shares referred to in the Offer Notice are not elected to be purchased or obtained on the terms set forth in the Offer Notice and (ii) the Offer Notice had been sent by a Stockholder other than PAG prior to the sixth (6th) anniversary of the Effective Date, such Shares may not be offered for sale to a third party except as provided in Section 4.6.

 

F.                                      The provisions of this Section 4.3 shall not apply to any sale effected pursuant to Sections 4.4 or 4.5 or 4.6 hereof.

 

4.4                               Take-Along Rights.

 

A.                                    Subject to the rights of PAG in Section 4.4D, if at any time after the fifth  anniversary of the effective date of this Agreement, PAG, PTL and PCP wish to sell all, but not less than all, of the Shares then collectively held by them in one transaction or a series of similar transactions and QEKGS has not delivered the Sale Request to the Stockholders pursuant to Section 4.6(A) (a “Control Transaction”), PAG, PTL and PCP may in their sole collective discretion,

 

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require each other Stockholder (in such capacity, a “Take-Along Stockholder”) to sell all (but not less than all) of the Shares then held by it to such purchaser in accordance with this Section 4.4; provided that such Take-Along Stockholder shall only be required to sell its Shares at the same price per Share and upon substantially the same terms as the Stockholders that initiated the “Take-Along” action.

 

B.                                    If PAG, PTL, and PCP elect to exercise their Take-Along Right in connection with a Control Transaction, they shall deliver a notice to each Take-Along Stockholder and to the Company, setting forth the terms of the Control Transaction (including the proposed closing date for its consummation, which shall not be fewer than sixty (60) days after the effective date of such notice) and all documents required to be executed by each Take-Along Stockholder to consummate that Control Transaction.  Each Take-Along Stockholder shall deliver to PCP, PTL, and PAG at least seven (7) days prior to the proposed closing date, all documents previously furnished to the Take-Along Stockholder for execution in connection with the Control Transaction.  If any Take-Along Stockholder fails to deliver these documents and the transaction is subsequently consummated, the Company shall cause its books and records to show that the Shares represented by the defaulting Stockholder are bound by the provisions of this section and that Shares held by it shall be transferred only to the third party who purchased the Shares in the Control Transaction.

 

C.                                    PAG, PTL, and PCP shall have one hundred eighty (180) days from the date of its notice referred to above to consummate any Control Transaction and, promptly after such consummation, shall notify the Company and each Take-Along Stockholder to that effect and furnish evidence of the sale (including the time of sale) and of the terms thereof as any Take-Along Stockholder may reasonably request.  PAG, PTL, and PCP shall also cause to be remitted to each Take-Along Stockholder the proceeds of the sale attributable to the sale of that Take-Along Stockholder’s Shares not later than the second business day following the sale (subject to any agreed holdbacks or escrows in connection with such sale.  If any Control Transaction is not consummated prior to the expiration of the one hundred eighty (180) day period referred to in this section, PAG, PTL, and PCP may not thereafter consummate the proposed Control Transaction and shall return to each Take-Along Stockholder all documents previously delivered to them in connection with that Control Transaction.

 

D.                                    PTL and PCP shall notify PAG not less than thirty (30) days prior to any anticipated exercise of its rights under this Section 4.4.  Within such thirty (30) day period, PAG shall have the right to make an offer, which must remain open for not less than thirty (30) days, to purchase all, but not less than all, of the Company’s outstanding Shares by giving notice to QEKGS, PTL, and PCP, which notice shall include the price (the “PAG Offer Price”) and other material terms of such offer.  If such offer is accepted by all of QEKGS, PTL, and PCP while the offer is open, QEKGS, PCP and the other Stockholders (including Phoenix) shall sell their respective Shares to PAG, and PAG shall purchase all of such Shares, at the PAG Offer Price and on the other terms and conditions set forth in PAG’s notice.  The terms of any contemplated third party sale, closing procedures and other matters set forth in Sections 4.4B and 4.4C (including as to escrows, holdbacks, and the delivery of purchase price and Shares to be sold) shall be applicable to the PAG purchase.  If PAG does not exercise its right to make an offer to purchase (or affirmatively declines to make such an offer) within the thirty (30) day period specified above, or if any of QEKGS, PTL or PCP do not accept PAG’s offer to purchase Shares, PAG, PTL, and PCP may thereafter for a

 

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period of one hundred and eighty (180) days sell the Shares and exercise its rights under the terms hereof, provided however, that prior to any sale under this Section 4.4 at a price below the PAG Offer Price or on terms materially less favorable to QEKGS, PTL, and PCP than those set forth in the PAG Offer, PAG, PTL, and PCP shall again comply with the terms of this Section 4.4D.

 

E.                                     Notwithstanding anything in this Section 4.4 to the contrary, (i) there shall be no liability on the part of any Stockholder to any other Stockholder if any sale of Shares pursuant to this Section 4.4 is not consummated for whatever reason, and (ii) there shall be no liability on the part of PAG to any other Stockholder, except for its failure to comply with the terms of its offer (if any) under Section 4.4D.  It is understood that PTL, PCP and PAG, in their sole collective discretion, shall determine whether to effect a sale of Shares to any person pursuant this Section 4.4.

 

F.                                      If the provisions of both this Section 4.4 and Section 4.5 apply to a transaction, the provisions of Section 4.5 shall govern.

 

4.5                               Other Stockholder Tag-Along Rights.

 

A.                                    If at any time, any Stockholder (in such capacity, the “Selling Stockholder”) wishes to sell all but not less than all, of the Shares then held by it to any person (other than a sale by QEKGS, Phoenix, PTL, and PCP to PAG pursuant to Section 4.4D above, a Permitted Transfer pursuant to Section 4.2, or a sale pursuant to Section 4.6), then each other Stockholder (in such capacity, a “Tag-Along Stockholder”) may, in its discretion, require the Selling Stockholder to sell all of such Tag-Along Stockholder’s Shares pursuant to such sale at the same price and substantially upon the same terms as the Selling Stockholder proposes to sell its Shares.

 

B.                                    If at any time, a Selling Stockholder wishes to sell less than all of the Shares then held by it to any person, then each Tag-Along Stockholder may, in its discretion, require the Selling Stockholder to sell a portion of such Tag-Along Stockholder’s Shares pursuant to such sale at the same price and substantially upon the same terms as the Selling Stockholder proposes to sell its Shares.  In connection with such sale, each Tag-Along Stockholder shall have the right to sell up to that number of Shares (such Tag-Along Stockholder’s “Included Amount”) equal to the product of X multiplied by Y, where:

 

X = the total number of Shares proposed to be sold by the Selling Stockholder, and

Y = a fraction, the numerator of which is the number of Shares owned by such Tag-Along Stockholder and the denominator of which is the number of Shares owned by all Tag-Along Stockholders who wish to participate in the sale of shares pursuant to this Section 4.5B plus the total number of Shares owned by the Selling Stockholder.

 

C.                                    In connection with a sale under this Section 4.5, the Selling Stockholder shall deliver a written notice to each other Stockholder and the Company (i) setting forth the terms of any sales to which this Section applies, (ii) offering such other Stockholder the right (the “Tag-

 

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Along Right”) to have such Stockholder’s Shares included in such sale in accordance with Section 4.5A or B above, and (iii) specifying the number of Shares equal to such Tag-Along Stockholder’s Included Amount (which in the case of a sale of all of the Shares under Section 4.5A  shall be all of such Tag-Along Stockholder’s Shares) with respect to such sale, together with all documents required to be executed by such Tag-Along Stockholder in order to include such Tag-Along Stockholder’s Shares in such sale.  If any Tag-Along Stockholder exercises its Tag-Along Right in connection with any sale, such Tag-Along Stockholder shall deliver to the Selling Stockholder, prior to the expiration of the thirty (30) day period commencing on the date of the Selling Stockholder’s notice, the certificate or certificates representing the number of Shares such Tag-Along Stockholder desires to include in such sale (which number may be less than such Tag-Along Stockholder’s Included Amount with respect to a sale under Section 4.5B only), duly endorsed, together with all documents previously furnished to such Tag-Along Stockholder for execution in connection with such sale.  Delivery by any Tag-Along Stockholder of such certificate or certificates representing Shares and such other documents shall constitute an irrevocable exercise by the Tag-Along Stockholder of its Tag-Along Right with respect to such sale.  To the extent any Tag-Along Stockholder exercises its Tag-Along Right with respect to a sale under Section 4.5B, the number of Shares proposed to be sold by the Selling Stockholder Seller pursuant to such sale shall be correspondingly reduced.

 

D.                                    The Selling Stockholder shall have up to one hundred eighty (180) days from the date of its notice referred to in Section 4.5C above to consummate any sale and, promptly after such consummation, shall notify the Company and each Tag-Along Stockholder to that effect and shall furnish evidence of such sale (including the time of sale) and of the terms thereof as the Company or such Tag-Along Stockholder may reasonably request.  No later than the fifth day following such sale, the Selling Stockholder shall cause to be remitted (subject to any escrows or agreed holdbacks) to each Tag-Along Stockholder the proceeds of such sale attributable to the sale of such Tag-Along Stockholder’s Shares.  If any such sale is not consummated prior to the expiration of the 180-day period referred to in this Section 4.5D, the Selling Stockholder may not consummate such sale unless the Selling Stockholder again provides the Tag-Along Rights contemplated above to the other Stockholders and shall return to each Tag-Along Stockholder all certificates representing Shares that such Tag-Along Stockholder previously delivered to the Selling Stockholder in connection with such sale.

 

E.                                     Notwithstanding anything in this Section 4.5 to the contrary, there shall be no liability on the part of any Selling Stockholder to any Stockholder if any sale of Shares pursuant to this Section 4.5 is not consummated for whatever reason.  It is understood that each Selling Stockholder, in its sole discretion, shall determine whether to effect a sale of Shares to any person pursuant this Section 4.5.

 

4.6                         QEKGS Exit Right.

 

A.                                    From and after the fifth (5th) anniversary of the Effective Date and prior to initiating purchase and sale discussions with potential third party purchasers hereunder, but subject to the terms and conditions specified in this Section 4.6 and applicable securities laws, QEKGS may notify the other Stockholders of its and Phoenix’s intention to sell all of their Shares (such Shares of QEKGS and Phoenix, the “Subject Shares”) either to all of the remaining Stockholders

 

11

 

or to a third party purchaser other than a Permitted Transferee.  Prior to initiating purchase and sale discussions with third party purchasers hereunder, QEKGS will deliver a written sale request (the “Sale Request”) to such other Stockholders.  In addition, neither QEKGS nor Phoenix nor their representatives may continue or initiate purchase and sale discussions with third party purchasers or their representatives during the pendency of the actions and time periods contemplated by this Section 4.6.  Within sixty (60) days of the Stockholders’ receipt of the Sale Request, PAG, PTL, PCP and QEKGS will attempt to reach agreement on the fair market value of the Subject Shares without taking into account any “control premium” or the illiquid nature of the investment in the Company.

 

B.                                    Should PAG, PTL, PCP and QEKGS fail to reach agreement on the fair market value of the Subject Shares, PAG, PTL and PCP, collectively on the one hand, and QEKGS, on the other hand, shall each engage, at its own expense, an investment banking firm of recognized national standing to act as an appraiser to appraise the Subject Shares without taking into account any “control premium” or the illiquid nature of the investment in the Company.  The two (2) appraisers shall each issue their respective reports determining the fair market value of the Subject Shares within sixty (60) days of their respective engagement.

 

C.                                    The two (2) investment banking firms’ determinations of fair market value of the Subject Shares shall be averaged to determine the final value of the Subject Shares (the “Subject Shares Value”).

 

D.                                    Following completion of the appraisal procedures set forth above, PAG, PCP and PTL shall collectively have a period of thirty (30) days to determine whether or not (i) to proceed with QEKGS with the offer and sale of all Subject Shares at the Subject Shares Value or (ii) to proceed to recapitalize the Company or its subsidiary so that the Company and/or its subsidiary could cause a redemption of the Subject Shares at the Subject Shares Value, or (iii) to engage in other transactions aimed at a disposition of the Subject Shares at the Subject Shares Value to a third party (such determination, the “Penske Determination”).

 

E.                                     Should PAG, PCP and PTL determine to proceed with QEKGS with the offer and sale to a thirty party of all outstanding Shares, Phoenix shall join with all of the Stockholders and agree to the offer and sale of its Shares on the same basis as all of the other Stockholders and all of the Stockholders will exercise their best commercial efforts to complete the sale of all of the Shares of the Company or the shares or assets of the Company’s subsidiary, QEK Global Solution (US), Inc., a Delaware corporation (“QEK”).  To assist with the sale of the Shares of the Company or of the shares or assets of QEK, PAG and QEKGS will jointly proceed promptly to select an investment banker of recognized national standing.

 

F.                                      Should PAG, PCP and PTL determine to proceed with a transaction contemplated by Sections 4.6D(ii) or 4.6D(iii), a transaction will be consummated within six (6) calendar months following such Penske Determination.

 

G.                                    Should no transaction contemplated by Sections 4.6D(i), 4.6D(ii) or 4.6(D)(iii) be completed within six (6) calendar months following the Penske Determination, not later than thirty (30) days after such six (6) month period QEKGS may in its sole discretion require

 

12

 

in writing PAG, PCP and PTL to initiate a marketing and sale process pursuant to which all Stockholders and the Company would seek a purchaser of all outstanding Shares of the Company (the “Company Sale Notice”).  All Stockholders shall use their respective commercially reasonable efforts to aid in the consummation of such purchase and sale transaction.

 

H.                                   With respect to any transaction contemplated by Sections 4.6D(i), 4.6D(ii), 4.6D(iii) or 4.6G, Phoenix agrees to sell its Shares and execute and deliver the purchase and sale agreement, as finally negotiated by the other Stockholders, and pursuant to such agreement Phoenix shall make representations and warranties and provide indemnification on the same terms and conditions as are applicable to QEKGS (and, in any event, on a several, and not joint and several, basis).

 

I.                                        Should PAG, PCP and PTL determine to proceed with a transaction contemplated by Section 4.6D(iii), or if QEKGS determines to proceed with a marketing and sale process contemplated by Section 4.6G, QEKGS may nevertheless delay such transaction at any time for a period not to extend beyond the date thirty six (36) months after the date of such determination if, in QEKGS’s reasonable discretion, material adverse events (either in the economy generally or in the industry in which QEK conducts business specifically) have occurred after the Sale Request that could depress the value of the Shares and/or the shares or assets of QEK.  QEKGS may initiate such delay by written notice to PAG, PCP and PTL and may thereafter rescind such delay whenever, in the reasonable determination of QEKGS, such material adverse event(s) have sufficiently passed such that the value of the Shares and/or the shares or assets of QEK are no longer so adversely impacted.

 

J.                                        Each Stockholder will bear its respective share of the costs of any such actual or proposed purchase and sale of Shares to a third party purchaser who is not a Permitted Transferee to the extent such costs are incurred for the benefit of such Stockholders; provided that QEKGS and Phoenix will, on a proportionate basis, pay all costs and fees incurred with a sale process involving the sale to a third party purchaser of only the Subject Shares including relating to the engagement of an investment banker.

 

K.                                   If (i) QEKGS does not issue a Company Sale Notice in accordance with Section 4.6G, (ii) the Company Sale Notice does not result in a completed transaction for the sale of all of the outstanding Shares of the Company within six (6) months after the Company Sale Notice or if the Stockholders agree in writing to abandon the marketing and sale process initiated under Section 4.6G, or (iii) QEKGS exercises its delay right arising under Section 4.6I, the Stockholders rights under Section 4.4 shall again become effective.

 

L.                                     QEKGS may only exercise its rights under Section 4.6 (including, for the avoidance of doubt, delaying and reinstating a purchase and sale process pursuant to Section 4.6I) only once after the fifth anniversary of the Effective Date.

 

4.7                               Cooperation.  The Company and the Stockholders shall use their respective commercially reasonable best efforts to aid in the consummation of any Control Transition or any transaction contemplated by Section 4.5 or 4.6, and in connection therewith, shall execute and deliver if so required a purchase agreement contemplated by a letter of intent, if applicable, or

 

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otherwise pursuant to which each Stockholder will severally (but not jointly) make representations and warranties relating to its ownership of and title to the Shares and provide indemnification in respect of such representations or warranties on the same terms and conditions as are applicable to the other Stockholders; provided that the sole source for payment of any such indemnity will be funds from the net proceeds otherwise distributed to the Stockholders.  All Stockholders will bear their respective share of the costs of any actual or proposed purchase and sale to the extent such costs are incurred for the benefit of all Stockholders and not otherwise paid by the Company or the acquiring party.  Costs incurred by Stockholders for their own behalf will not be considered costs of such purchase and sale; provided, that in any event, the Company will pay the reasonable attorneys’ fees of one counsel chosen by the Stockholders to represent their interests.

 

4.8                               Obligations Upon Transfer.  No Transfer (which, as used in this Agreement, shall include Transfers to Permitted Transferees) of any Shares permitted under this Agreement shall be effective unless the Company shall have received the favorable opinion of legal counsel of the Company or of other legal counsel acceptable to the Company to the effect that such Transfer is made in compliance with or is exempt from applicable securities laws.  No Transfer of any Shares shall relieve the transferor from any of its obligations to the Company hereunder except to the extent that such obligations are assumed by the transferee in a legally valid and binding agreement and such transferee has complied with all provisions of this Section 4.8.  All Transfers shall be by instrument in form and substance satisfactory to the Company’s Board of Directors and shall include (A) a written, legally binding agreement of the transferee accepting all of the terms and conditions of this Agreement and an executed counterpart of this Agreement, as then in effect; (B) suitable representations by the transferee, including a representation by the transferee that such Transfer was made in accordance with all applicable laws and regulations and covering such other matters as the Company’s Board of Directors may reasonably require; and (C) all such other instruments and agreements as the Company’s Board of Directors may reasonably deem to be necessary or desirable to effectuate such Transfer.

 

4.9                         Invalid Transfers.  Any purported Transfer of Shares not in accordance with the provisions of this Agreement shall be void and ineffective and shall not operate to Transfer any interest or title in such Shares to the purported transferee.  The Company shall not cause or permit any Transfer of any Shares to be registered on its books unless such Transfer is made in accordance with the terms of this Agreement.  The Company shall be protected in relying on the record of Stockholders maintained by it or on its behalf for all purposes, notwithstanding any notice of any purported Transfer to the contrary.

 

ARTICLE 5.  RIGHTS TO PURCHASE

 

5.1                         Right to Purchase.  The Company and each Stockholder shall have the rights set forth below to purchase all, but not less than all, of the Shares held by any Stockholder (which for the purposes of this Article 5 shall include any Shares acquired by the Stockholder or his or her personal representative prior to the closing of a purchase by the Company or the other Stockholders and after the date of the event giving rise to the rights to purchase) in accordance with the provisions of this Article 5.

 

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A.                                    If Shares owned by any Stockholder shall become subject to sale or other Transfer by reason of (i) bankruptcy or insolvency proceedings, whether voluntary or involuntary, (ii) attachment or garnishment; (iii) distraint, levy, execution or other involuntary transfer, then such Stockholder shall give the Company written notice thereof promptly upon the occurrence of such event, stating the terms of such proposed Transfer, the identity of the proposed transferee, the price or consideration, if any, for which the Shares are proposed to be transferred, and the number of Shares and type and number of other interest to be Transferred.  Upon receipt of such notice, or, failing such receipt, when the Company otherwise obtains actual knowledge of such Transfer, the Company shall have the right to purchase from the Stockholder and the transferee of such Stockholder’s Shares, and, upon exercise of this option, the Stockholder, and any transferee of such Stockholder’s Shares, and any such transferee shall be obligated to sell, all of the Shares owned by such persons and acquired from the Stockholder immediately prior to the occurrence of such event (or subsequently acquired as provided above), as shall be specified in the notice of exercise, for the price and upon such terms as set forth in Section 5.1B.

 

If any Shares held by a Stockholder or his or her personal representative are transferred by operation of law (e.g., in the event of the bankruptcy of a Stockholder or the attachment or garnishment of Shares), the transferee shall receive such Shares subject to the provisions of this Agreement, including, but not limited to, the rights granted to the Company and the other Stockholders to acquire such Shares.

 

B.                                    Fair market value shall be determined in good faith by a majority of the members of the Board of Directors (which, if the Stockholder whose Shares are to be purchased is PAG, PTL or PCP, shall include at least one QEKGS Designee) and promptly communicated to all Stockholders; provided that if the Stockholder whose Shares are to be purchasable for fair market value believes that the value determined by the Board is less than the actual value of the Shares, such Stockholder shall be entitled to request a valuation by an appraiser or investment banker reasonably acceptable to both that Stockholder and the Board of Directors, and the fair market value as determined by that appraiser or investment banker shall be final and binding on parties as the fair market value for the Shares.  Any request for such an evaluation must be made within ten (10) days after notice of the Board of Directors’ determination of fair market value has been delivered to the selling Stockholder, and any valuation shall be made within thirty (30) days of the date on which it is requested, promptly communicated to the Company and to all Stockholders.  Within ten (10) business days after the completion of any such valuation, the Company and any Stockholder shall have the right to revoke any exercise of its right to purchase such Shares (if made previously) by delivering written notice of revocation to the selling Stockholder and all other Stockholders and the Company.  The fees and expenses of any valuation pursuant to the preceding section shall be borne equally by the Company and the selling Stockholder requesting it, unless the appraisal indicates that the fair market value of the Shares is greater than 125% of the initial fair market value established by the Board of Directors, in which case the Company shall pay the cost of the appraisal, or if the fair market value determined by the appraisal is less than 75% of the initial fair market value as established by the Board, the Stockholder requesting that appraisal shall pay its entire cost.

 

The Company shall immediately notify each Stockholder when any right to purchase Shares arises pursuant to Section 5.1 and shall keep the Stockholders fully and timely apprised of any decision that it may make to exercise or not exercise its right to purchase Shares (subject, in

 

15

 

each case to required approvals under Article 2 hereof).  If the Company does not exercise its right to purchase all Shares that it is entitled to purchase, the Stockholders shall have the right to purchase any such Shares not purchased by the Company in a manner and proportion that fairly reflects their then ownership interest in the Shares pursuant to procedures established by the Board of Directors.

 

If the Company and/or the Stockholders do not together exercise their right to purchase all Shares held by the selling Stockholder within the specified time periods, that option shall terminate and the Shares proposed to be transferred may be transferred.

 

5.2                               Exercise; Timing.  The purchase option arising pursuant to Section 5.1 must be exercised by the Company (or the Stockholders) by giving written notice to the Stockholder (or his or her personal representative, if applicable) within thirty (30) days after the right to purchase has accrued under Section 5.1.

 

5.3                               Closing; Consideration to be Paid.

 

A.                                    At closing of any sale pursuant to this Article 5, the selling Stockholder shall deliver the Share certificates that are the subject of the sale free and clear of all liens, restrictions and encumbrances (except those arising from this Agreement), duly endorsed, and (if required by the purchaser) with signature guaranteed, and accompanied by all documents necessary to effect such transfer.  In consideration therefor, the purchaser(s) shall pay the purchase price.

 

B.                                    If at the date of closing the selling Stockholder has any outstanding monetary obligation to the Company or to another purchaser, the Company and any such purchaser shall have the right to set-off any such obligations against the purchase price to be paid to the selling Stockholder by it, and that purchase price shall be reduced accordingly.  The calculation of such setoff and the identification and amount of the obligation shall be given to the seller in a notice not less than five (5) days prior to the Closing.

 

ARTICLE 6.  MISCELLANEOUS.

 

6.1                               Registration Rights.  Immediately prior to the closing of the Company’s first firm commitment underwritten public offering of its Common Stock registered under the Securities Act of 1933, as amended, the Company and each Stockholder shall enter into a Registration Rights Agreement providing, among other things, that commencing one hundred eighty (180) days after the completion of that public offering, each Stockholder and any group of Stockholders holding 15% or more of the Company’s then outstanding Common Stock shall have the right to multiple “demand” registrations of their Common Stock on Form S-3 or a successor form thereto which permits incorporation by reference in, at the election of the Stockholders exercising registration rights, an underwritten public offering, or at their election, on a shelf registration statement.  In addition, the Stockholders shall have the right under the Registration Rights Agreement to three (3) piggyback registrations, subject to customary cutbacks and other provisions.  In connection with any registration, the Company shall agree to use its commercially reasonable best efforts to file, cause the registration statement to become

 

16

 

effective, and cause the registration statement to remain effective in each case promptly.  The selling Stockholders shall be responsible for paying, in connection with any registration, federal and state registration fees attributable to their shares, costs and expenses of any counsel retained to represent them as contrasted with the Company, underwriting discounts attributable to their Shares, and, in the case of an underwritten offering, printing and similar costs associated with the preparation and distribution of the registration statement and related prospectus.  The Registration Rights Agreement shall include customary terms relating to the accuracy of information provided by the Company and the selling Stockholders, blackout periods, suspension of the prospectus upon notice from the Company, and indemnification by the Company and the selling Stockholders.

 

6.2                               “Market Stand-Off” Agreement.  In the event of the Company’s first firm commitment underwritten public offering of its common stock registered under the Securities Act of 1933, as amended, each Stockholder hereby agrees that such Stockholder shall not sell or otherwise transfer or dispose of any Company securities held by such Stockholder (other than those included in the registration relating to such offering) for a period specified by the representative of the underwriters of the common stock being sold in such offering, which period shall not exceed one hundred eighty (180) days following the effective date of the registration statement of the Company filed under the Securities Act of 1933, as amended, relating to such offering.  In furtherance of the foregoing, (A) each Stockholder agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter(s) which are consistent with the foregoing or which are necessary to give further effect thereto, and (B) the Company is authorized to impose stop-transfer instructions with respect to the securities subject to the foregoing restriction until the end of the applicable period.

 

6.3                               Equitable Relief.  The parties acknowledge that the Shares are unique, and that any violation of this Agreement cannot be compensated for in damages alone.  Therefore, in addition to all of the other remedies which may be available under applicable law, any party hereto shall have the right to equitable relief, including, without limitation, the right to enforce specifically the terms of this Agreement by obtaining injunctive relief against any actual or threatened violation or non-performance hereof.

 

6.4                               Governing Law.  This Agreement will be governed by and construed in accordance with the internal laws of the State of Delaware (and United States federal law, to the extent applicable) without giving effect to principles of conflicts of law.

 

6.5                               Notices.  All demands, notices, requests, consents and other communications required or permitted under this Agreement shall be in writing and shall be personally delivered or sent by facsimile machine (with a confirmation copy sent by one of the other methods authorized in this section), commercial (including Federal Express) or U.S. Postal Service overnight delivery service, or deposited with the U.S. Postal Service mailed first class, registered or certified mail, postage prepaid, as follows:

 

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If to the Company:

 

VMC Holding Corporation

2555 Telegraph Road

Bloomfield Hills, MI 48302

Attention:  J. Patrick Conroy

Telecopier:  (248) 648-2145

 

If to PCP:

 

PCP Holdings, Inc.

2555 Telegraph Road

Bloomfield Hills, MI 48302

Attention:  Executive Vice President and General Counsel

Telecopier:  (248) 648-2135

 

If to PAG:

 

Penske Automotive Group, Inc.

2555 Telegraph Road

Bloomfield Hills, MI  48302

Attention:  General Counsel

Telecopier:  (248) 648-2515

 

If to PTL:

 

Penske Truck Leasing Co., L.P.

Route 10, Green Hills

Reading, PA  19603-0563

Attention:  Vice President & Treasurer

Telecopier: 610-856-1055

 

with copy to:

 

Sr. Vice President & General Counsel

Telecopier: 610-775-6330

 

If to QEKGS:

QEKGS Investment Holdings, LLC

6120 Parkland Blvd., Ste. 202

Mayfield Hts., OH 44124

Attention: Walter Stuelpe and E.M. deWindt, Jr.

Telecopier: 440-684-9905

 

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with a copy to:

 

Calfee, Halter & Griswold LLP

1405 East 6th Street

Cleveland, OH 44114

Attention:  Joseph K. Juster

Telecopier:  216-241-0816

 

if to Phoenix:

 

Phoenix Life Insurance Company

One American Row, 11th Floor

P.O. Box 5056

Hartford CT 06102-5056

Attention:  Paul M. Chute, CFA

Telecopier:  860-403-5182

 

with a copy to:

 

3S Advisors, LLC

400 Hollyhock Ct

Cleveland, OH 44124

Attention: Paul H Cascio, Managing Member

Telecopier:  [                                ]

 

Notices shall be deemed given upon the earlier to occur of (A) receipt by the party to whom such notice is directed; (B) if sent by facsimile machine, the day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) such notice is sent if sent (as evidenced by the facsimile confirmed receipt) prior to 5:00 p.m. U.S. Eastern Time, or the day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) after which such notice is sent if sent after 5:00 p.m. U.S. Eastern Time; (C) if sent by overnight delivery service, the first business day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) following the day the same is deposited with the commercial carrier or U.S. Postal Service; or (D) if sent by first class mail, registered or certified, postage prepaid, the fifth day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) following the day the same is deposited with the U.S. Postal Service.  Each party, by notice duly given in accordance herewith, may specify a different address for the giving of any notice hereunder.

 

6.6                               Legends.  Each certificate for Shares held by any Stockholder shall be delivered to the Company by each Stockholder and shall be noted conspicuously with the following legend:

 

The transfer of this certificate and the Shares it represents, as well as certain rights with respect to such Shares, are restricted by an Amended and Restated Agreement between this Company and its Stockholders dated November 5,

 

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2013, as it may be amended from time to time, the terms of which Agreement, as it may be amended, are incorporated herein by reference, and a copy of which may be inspected at the principal office of the Company.

 

6.7                               Arbitration.

 

A.                                    Each and every dispute, difference, controversy or claim, whether based on contract, tort, common law, statute or equity (a “Dispute”) arising out of or in connection with or related or incidental to, or question occurring under this Agreement shall be finally settled in accordance with the JAMS Comprehensive Arbitration Rules and Procedures (the “Rules”) by a single arbitrator selected by mutual agreement of the parties to the Dispute within ten (10) days of receipt of a notice of arbitration of a Dispute or, if the parties fail to select an arbitrator by mutual agreement within such ten (10) day period, by JAMS in accordance with its Rules and this Section 6.7.  Any arbitrator selected by JAMS shall be an attorney or retired judge experienced in corporate transactions.  Arbitration of a Dispute shall be commenced by notice provided in accordance with this Agreement and the Rules.  Each party to any arbitration proceeding hereunder shall bear its own expenses in connection with such arbitration, including those of attorneys and experts, and each party thereto shall bear an equal percentage of the costs of the arbitrator and arbitration proceeding, e.g., the arbitration facilities and transcript.  Failure to pay the fees of JAMS and the arbitrator when due shall constitute a separate breach of this Agreement for which the damages shall be awarded by the arbitrator and shall consist of the reasonable attorneys fees and costs incurred to obtain payment of such fees.  The award of the arbitrator shall be rendered in the form of a reasoned award and shall be in writing.  The arbitrator appointed pursuant to this Section 6.7, rather than a court, shall determine any and all challenges and disputes with respect to the arbitrability of a Dispute and the scope of the arbitration obligation under this Agreement.  Furthermore, the arbitrator shall, rather than a court, determine all challenges to the enforceability of this Agreement and the obligation to arbitrate a Dispute.

 

B.                                    The location of all arbitration shall be Detroit, Michigan or any other place mutually agreed to by the parties to the arbitration proceeding.  However, the arbitrator may hold an arbitration hearing at any location in or outside the State of Michigan when necessary to obtain the testimony or documents of third parties.

 

C.                                    The parties hereby exclude any right of appeal to any court on the merits of the Dispute.  The provisions of this Section 6.7 may be enforced in any court having jurisdiction over the award or any of the parties or any of their respective assets, and judgment on the award (including without limitation equitable relief required for enforcement of the award) may be entered in any such court.

 

D.                                    The arbitration of Disputes under this Section 6.7 shall be governed, construed and enforced solely pursuant to the United States Arbitration Act, 9 U.S.C. Section 1 et seq.  The arbitration laws of the states shall not apply.  The law governing all substantive matters pertaining to his Agreement shall be the law of the State of Delaware.

 

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6.8                               Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument.  This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signature of the Company and all of the Stockholders.  An executed counterpart of this Agreement and all amendments hereto shall be kept at the principal office of the Company and shall be made available for inspection by any interested party during regular business hours.

 

6.9                               Assignments and Transfers.

 

A.                                    Subject to the restrictions on Transfer set forth herein and Section 6.12 hereof, this Agreement shall be binding upon and inure to the benefit of the respective parties hereto, and their personal representatives, estates, successors, and assigns, including any transferee of the Shares subject to this Agreement.  As a condition to any sale of Equity Securities, the purchaser thereof shall agree to be bound by the terms hereof and any transfer or issuance not in compliance with this Section 6.9 shall be given the effect set forth in Section 4.8 hereof.

 

B.                                    Subject to the limitations set forth in Sections 1.1, 1.2 and 2.1A, to the extent a Stockholder or a transferee thereof has rights under Section 1.1, 2.1B, 2.2, 4.3. 4.4., 4.5 or 4.6 or Article 5 of this Agreement at the time of transfer, such rights may be transferred (and not retained) to any purchaser permitted hereunder of all, but not less than all, of the outstanding Shares then held by such Stockholder.

 

C.                                    The rights under Sections 2.1A are transferable to a permitted transferee.

 

D.                                    The rights of any Stockholder or its permitted successor under Articles 1, 2, and 5, and under Sections 4.3 and 4.4 shall lapse if such Stockholder ceases to hold of record at least 5% of the issued and outstanding Common Shares.

 

6.10                        Severability.  If any provision of this Agreement is held to be invalid or unenforceable by any judgment of a tribunal of competent jurisdiction, it shall to that extent be omitted, but the remainder of this Agreement shall not be affected by such judgment, and the Agreement shall be carried out as nearly as possible according to its original terms and intent.  In particular, if the provisions relating to Transfers of Shares in Article 5 are determined to constitute an impermissible restriction on transfer, the Company shall have the right to purchase such Shares upon thirty (30) days notice at the purchase price set forth in Article 5.

 

6.11                        Entire Agreement; Amendment.  This Agreement represents the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes all prior written or oral agreements, representations and understandings relating to the subject matter hereof.  This Agreement may be amended or modified at any time by the affirmative vote at a meeting duly called for that purpose of eighty-five percent (85%) of the Shares then outstanding.

 

6.12                        Termination.  This Agreement shall terminate upon the affirmative agreement of each of the Stockholders.  This Agreement, if not previously terminated, shall expire upon (x) the effective date of the first registration statement filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, in connection with the initial firm commitment,

 

21

 

underwritten public offering of the Company’s common stock, (y) the sale to a third party of all of the outstanding Shares held by the Stockholders, or (z) a merger or combination of the Company with or into another company in which the Shares do not constitute a majority of the voting securities in the surviving corporation.

 

6.13                        Representations.  Each of the Stockholders represents to the Company and to each other Stockholder that it is the sole record and beneficial owner of the number of Shares set forth next to its name on Schedule A and no other person has any right, title, or interest in or to the Shares which such schedule indicates that he owns.  All such Shares are held by it free and clear of any liens, encumbrances, equities, options, or rights of another whatsoever.

 

6.14                        Pronouns.  As used in this Agreement, the pronouns “it” and “its” shall mean, when referring to an individual, him, her, his, or hers (as applicable).

 

6.15                        Issuance of Additional Securities.  If the Company issues or agrees to issue any Preferred Stock or any Equity Security other than Common Stock or options to purchase Common Stock under an Option Plan, each Stockholder shall execute and deliver an amendment to this Agreement providing that all of its provisions other than those of Article 1 shall be applicable to such additional securities.  In addition, if the Company adopts an Option Plan, and any person acquires shares of Common Stock or other equity Securities of the Company pursuant to it, such person as a condition of acquiring such shares or securities shall be required to join in this Agreement by executing an addendum hereunder; and, to the extent necessary, this Agreement shall be appropriately amended to reflect the terms and conditions under which such securities are issued.

 

6.17                        Amendment and Restatement.  This Agreement amends and restates in its entirety that Stockholders Agreement of the Company executed as of April 20, 2005.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, this Amended and Restated Stockholders’ Agreement has been duly executed on this 5th day of November, 2013 by each of the parties whose name is set forth below.

 

 

	
 
    	
VMC   HOLDING CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/J.   Patrick Conroy
    
	
 
    	
Name:   J.   Patrick Conroy
    
	
 
    	
Title:   Vice   President
    
	
 
    	
 
    
	
 
    	
PCP   HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/J.   Patrick Conroy
    
	
 
    	
Name:   J.   Patrick Conroy
    
	
 
    	
Title:   Vice   President
    
	
 
    	
 
    
	
 
    	
PENSKE   AUTOMOTIVE GROUP, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/Robert   H. Kurnick, Jr.
    
	
 
    	
Name:   Robert   H. Kurnick, Jr.
    
	
 
    	
Title:  President
    
	
 
    	
 
    
	
 
    	
PENSKE   TRUCK LEASING CO., L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
Penske   Truck Leasing Corporation,
    
	
 
    	
 
    	
its General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/Scott   Cebul
    
	
 
    	
Name:   Scott   Cebul
    
	
 
    	
Title:   Vice   President & Treasurer
    
	
 
    	
 
    
	
 
    	
QEKGS   INVESTMENT HOLDINGS, LLC
    
	
 
    	
By:
    	
Gates   Group Capital Partners LLC,
    
	
 
    	
 
    	
its Manager
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/E.M.   de Windt, Jr.
    
	
 
    	
Name:   E.M.   de Windt, Jr.
    
	
 
    	
Title:   Sr.   Managing Director & CEO
    

 

23

 

	
 
    	
PHOENIX   LIFE INSURANCE COMPANY
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/Nelson   Correa
    
	
 
    	
Name:  Nelson   Correa
    
	
 
    	
Title:  Senior   Managing Director, Private Placements
    

 

24

 

Schedule A

 

	
Holder
    	
 
    	
Number of Shares
    	
 
    
	
PCP Holdings, Inc.
    	
 
    	
647.74
    	
 
    
	
Penske Automotive Group, Inc.
    	
 
    	
1339.42
    	
 
    
	
Penske Truck Leasing Co., L.P.
    	
 
    	
714.42
    	
 
    
	
QEKGS Investment Holdings, LLC
    	
 
    	
1072.11
    	
 
    
	
Phoenix Life Insurance Company
    	
 
    	
536.05

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00227-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00227-of-00352.parquet"}]]