AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 14, 2001
REGISTRATION NO. 333-
REGISTRATION NOS. 333- THROUGH 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------------
Sonic Automotive, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 5511 56-2010790
(State or Other Jurisdiction of (Primary Standard Industrial ) (I.R.S. Employer
Incorporation or Organization) Classification Code Number Identification Number)
5401 East Independence Boulevard
P.O. Box 18747
Charlotte, North Carolina 28212
Telephone: (704) 532-3320
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Mr. Stephen K. Coss
Vice President and General Counsel
5401 East Independence Boulevard
P.O. Box 18747
Charlotte, North Carolina 28212
Telephone: (704) 532-3320
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
--------------------------------------
Copies to:
Brian T. Atkinson, Esq.
Thomas H. O'Donnell, Jr., Esq.
Moore & Van Allen PLLC
100 North Tryon Street, Suite 4700
Charlotte, North Carolina 28202-4003
Telephone: (704) 331-1000
------------------------------
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
-------------------------------
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
Title of each class of securities to be To be Price Offering Registration
registered Registered(1) Per Unit(1) Price(1) Fee
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11% Senior Subordinated Notes due 200,000 1,000 $200,000,000 $47,800
2008, Series D -- -- -- --
Guarantees of 11% Senior Subordinated
Notes due 2008,Series D(2)(3)
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(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(f)(1) of Regulation C of the Securities Act of 1933, as
amended.
(2) Each Registrant other than Sonic Automotive, Inc. is a subsidiary of
Sonic Automotive, Inc. and is guaranteeing payment of the notes. Pursuant to
Rule 457(n) under the Securities Act of 1933, as amended, no registration fee is
required with respect to the guarantees.
(3) No separate consideration will be received for the guarantees of the
notes by the subsidiaries of Sonic Automotive, Inc.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective in such dates as the Securities
and Exchange Commission, acting pursuant to said Section 8(a), may determine.
TABLE OF ADDITIONAL REGISTRANTS
Subsidiary State of IRS
---------- -------- ---
Organization Employer
------------ --------
ID No.
------
Autobahn, Inc ............................................................ California 94-3124481
Capitol Chevrolet and Imports, Inc. ...................................... Alabama 63-1204447
Cobb Pontiac Cadillac, Inc ............................................... Alabama 63-1012553
FA Service Corporation ................................................... California 94-3285891
FAA Auto Factory, Inc. ................................................... California 94-3285893
FAA Beverly Hills, Inc. .................................................. California 95-4673054
FAA Capitol F, Inc. ...................................................... California 94-3350030
FAA Capitol N, Inc. ...................................................... California 64-3279958
FAA Concord H, Inc. ...................................................... California 94-3264558
FAA Concord N, Inc. ...................................................... California 94-3266151
FAA Concord T, Inc. ...................................................... California 94-1730939
FAA Dublin N, Inc. ....................................................... California 94-3267515
FAA Dublin VWD, Inc. ..................................................... California 94-3267514
FAA Holding Corp. ........................................................ California 94-3338764
FAA Las Vegas H, Inc. .................................................... Nevada 94-3330754
FAA Marin D, Inc. ........................................................ California 94-3320521
FAA Marin F, Inc. ........................................................ California 95-4746388
FAA Marin LR, Inc. ....................................................... California 94-3345068
FAA Poway D, Inc. ........................................................ California 94-3264557
FAA Poway G, Inc. ........................................................ California 33-0792049
FAA Poway H, Inc. ........................................................ California 94-3265895
FAA Poway T, Inc. ........................................................ California 94-3266152
FAA San Bruno, Inc. ...................................................... California 94-3264556
FAA Santa Monica V, Inc. ................................................. California 95-4746387
FAA Serramonte, Inc. ..................................................... California 94-3264554
FAA Serramonte H, Inc. ................................................... California 94-3293588
FAA Serramonte L, Inc. ................................................... California 94-3264555
FAA Stevens Creek, Inc. .................................................. California 94-3264553
FAA Torrance CPJ, Inc. ................................................... California 98-4746385
FirstAmerica Automotive, Inc. ............................................ Delaware 88-0206732
Fort Mill Ford, Inc. ..................................................... South Carolina 62-1289609
Franciscan Motors, Inc. .................................................. California 77-0112132
Freedom Ford, Inc. ....................................................... Florida 59-2214873
Frontier Oldsmobile-Cadillac, Inc. ....................................... North Carolina 56-1621461
HMC Finance Alabama, Inc. ................................................ Alabama 56-2198417
Kramer Motors Incorporated ............................................... California 95-2092777
L Dealership Group, Inc. ................................................. Texas 94-1719069
Marcus David Corporation ................................................. North Carolina 56-1708384
Philpott Motors, Ltd. .................................................... Texas 76-0608365
Riverside Nissan, Inc. ................................................... Oklahoma 73-1079837
Royal Motor Company, Inc. ................................................ Alabama 63-1012554
Santa Clara Imported Cars, Inc. .......................................... California 94-1705756
Smart Nissan, Inc. ....................................................... California 94-3256136
Sonic Automotive-Bondesen, Inc. .......................................... Florida 59-3552436
Sonic Automotive of Chattanooga, LLC ..................................... Tennessee 62-1708471
Sonic Automotive-Clearwater, Inc. ........................................ Florida 59-3501017
Sonic Automotive Collision Center of Clearwater, Inc. .................... Florida 59-3501024
Sonic Automotive F&I, LLC ................................................ Nevada 88-0444271
Sonic Automotive of Georgia, Inc. ........................................ Georgia 58-2399219
Sonic Automotive of Nashville, LLC ....................................... Tennessee 62-1708481
Sonic Automotive of Nevada, Inc. ......................................... Nevada 88-0378636
Sonic Automotive Servicing Company, LLC .................................. Nevada 88-0443690
Sonic Automotive of Tennessee, Inc. ....................................... Tennessee 62-1710960
Sonic Automotive of Texas, L.P. ........................................... Texas 78-0586658
Sonic Automotive West, LLC ................................................ Nevada 88-0444344
Sonic Automotive-1307 N. Dixie Hwy., NSB, Inc. ............................ Florida 59-3523302
Sonic Automotive-1400 Automall Drive, Columbus, Inc ....................... Ohio 31-1604259
Sonic Automotive-1455 Automall Drive, Columbus, Inc. ...................... Ohio 31-1604276
Sonic Automotive-1495 Automall Drive, Columbus, Inc. ...................... Ohio 31-1604281
Sonic Automotive-1500 Automall Drive, Columbus, Inc. ...................... Ohio 31-1604285
Sonic Automotive-1720 Mason Ave., DB, Inc. ................................ Florida 59-3523303
Sonic Automotive-1720 Mason Ave., DB, LLC ................................. Florida 57-1072509
Sonic Automotive-1919 N. Dixie Hwy., NSB, Inc. ............................ Florida 59-3523301
Sonic Automotive-21699 U.S. Hwy 19 N., Inc. ............................... Florida 59-3501021
Sonic Automotive-241 Ridgewood Ave., HH, Inc. ............................. Florida 59-3523304
Sonic Automotive 2424 Laurens Rd., Greenville, Inc. ....................... South Carolina 58-2384994
Sonic Automotive-2490 South Lee Highway, LLC .............................. Tennessee 62-1708486
Sonic Automotive 2752 Laurens Rd., Greenville, Inc. ....................... South Carolina 58-2384996
Sonic Automotive-3401 N. Main, TX, L.P. ................................... Texas 76-0586794
Sonic Automotive-3700 West Broad Street, Columbus, Inc. ................... Ohio 31-1604296
Sonic Automotive-3741 S. Nova Rd., PO, Inc. ............................... Florida 59-3532504
Sonic Automotive-4000 West Broad Street, Columbus, Inc. ................... Ohio 31-1604301
Sonic Automotive-4701 I-10 East, TX, L.P. ................................. Texas 76-0586659
Sonic Automotive-5221 I-10 East, TX, L.P. ................................. Texas 76-0586795
Sonic Automotive 5260 Peachtree Industrial Blvd., LLC ..................... Georgia 62-1716095
Sonic Automotive-5585 Peachtree Industrial Blvd., LLC ..................... Georgia 58-2459799
Sonic Automotive-6008 N. Dale Mabry, FL, Inc. ............................. Florida 59-3535965
Sonic Automotive-6025 International Drive, LLC ............................ Tennessee 62-1708490
Sonic Automotive-9103 E. Independence, NC, LLC ............................ North Carolina 56-2103562
Sonic-2185 Chapman Rd., Chattanooga, LLC .................................. Tennessee 56-2126660
Sonic- Bethany H, Inc. .................................................... Oklahoma 73-1620712
Sonic - Buena Park H, Inc. ................................................ California 33-0978079
Sonic-Camp Ford, L.P. ..................................................... Texas 76-0613472
Sonic - Capital Chevrolet, Inc. ........................................... Ohio 31-0743366
Sonic-Carrollton V, L.P. .................................................. Texas 75-2896744
Sonic-Classic Dodge, Inc. ................................................. Alabama 56-2139902
Sonic - Coast Cadillac, Inc. .............................................. California 95-4711579
Sonic-Development, LLC .................................................... North Carolina 56-2140030
Sonic - Fort Mill Chrysler Jeep, Inc. ..................................... South Carolina 56-2044964
Sonic - Fort Mill Dodge, Inc. ............................................. South Carolina 58-2285505
Sonic-FM Automotive, LLC .................................................. Florida 59-3535971
Sonic-FM , Inc. ........................................................... Florida 65-0938819
Sonic-FM Nissan, Inc. ..................................................... Florida 65-0938818
Sonic-FM VW, Inc. ......................................................... Florida 65-0938821
Sonic-Fort Worth T, L.P ................................................... Texas 75-2897202
Sonic-Freeland, Inc. ...................................................... Florida 65-0938812
Sonic-Global Imports, L.P. ................................................ Georgia 58-2436174
Sonic-Glover, Inc. ........................................................ Oklahoma 74-2936323
Sonic - Harbor City H, Inc. ............................................... California 95-4876347
Sonic - Houston V, L.P. ................................................... Texas 76-0684038
Sonic-Integrity Dodge LV, LLC ............................................. Nevada 88-0430677
Sonic - Lake Norman Chrysler Jeep, LLC .................................... North Carolina 56-2044997
Sonic - Lake Norman Dodge, LLC ............................................ North Carolina 56-2044965
Sonic-Las Vegas C East, LLC ............................................... Nevada 88-0470273
Sonic-Las Vegas C West, LLC ............................................... Nevada 88-0470284
Sonic-Lloyd Nissan, Inc. .................................................. Florida 59-3560057
Sonic-Lloyd Pontiac-Cadillac, Inc. ........................................ Florida 59-3560058
Sonic - LS Chevrolet, L.P. ................................................ Texas 76-0594652
Sonic - LS, LLC ........................................................... Delaware Not applicable
Sonic-Lute Riley, L. P. .................................................... Texas 75-2812871
Sonic-Manhattan Fairfax, Inc. .............................................. Virginia 52-2173072
Sonic-Manhattan Waldorf, Inc. .............................................. Maryland 52-2172032
Sonic-Montgomery FLM, Inc. ................................................. Alabama 56-2169250
Sonic-Newsome Chevrolet World, Inc. ........................................ South Carolina 57-1077344
Sonic-Newsome of Florence, Inc. ............................................ South Carolina 57-1077343
Sonic-North Charleston, Inc. ............................................... South Carolina 58-2460639
Sonic-North Charleston Dodge, Inc. ......................................... South Carolina 58-2479700
Sonic - Park Place A, L.P. ................................................. Texas 75-2963437
Sonic Peachtree Industrial Blvd., L.P. ..................................... Georgia 56-2089761
Sonic-Reading, L.P. ........................................................ Texas 76-0605765
Sonic-Richardson F, L.P. ................................................... Texas 75-2901775
Sonic-Riverside, Inc. ...................................................... Oklahoma 73-1574888
Sonic-Riverside Auto Factory, Inc. ......................................... Oklahoma 73-1591124
Sonic-Rockville Imports, Inc. .............................................. Maryland 52-2172034
Sonic-Rockville Motors, Inc. ............................................... Maryland 52-2172033
Sonic-Sam White Nissan, L.P. ............................................... Texas 76-0597722
Sonic-Shottenkirk, Inc. .................................................... Florida 56-3575773
Sonic-Stevens Creek B, Inc. ................................................ California 94-2261540
Sonic-Superior Oldsmobile, LLC ............................................. Tennessee 56-2122487
Sonic of Texas, Inc. ....................................................... Texas 78-0586661
Sonic Resources, Inc. ...................................................... Nevada Not applicable
Sonic-Volvo LV, LLC ........................................................ Nevada 88-0437180
Sonic - West Covina T, Inc. ................................................ California 95-4876089
Sonic - West Reno Chevrolet, Inc. .......................................... Oklahoma 73-1618268
Sonic-Williams Buick, Inc. ................................................. Alabama 63-1213085
Sonic-Williams Cadillac, Inc. .............................................. Alabama 63-1213084
Sonic-Williams Imports, Inc. ............................................... Alabama 63-1213083
Sonic-Williams Motors, LLC ................................................. Alabama 63-1213161
Speedway Chevrolet, Inc. ................................................... Oklahoma 73-1590233
SRE Alabama-2, LLC ......................................................... Alabama 56-2202484
SRE Alabama-3, LLC ......................................................... Alabama 56-2206042
SRealEstate Arizona-1, LLC ................................................. Arizona 86-0996112
SRealEstate Arizona-2, LLC ................................................. Arizona 88-0468215
SRealEstate Arizona-3, LLC ................................................. Arizona 88-0468217
SRealEstate Arizona-4, LLC ................................................. Arizona 88-0468213
SRE Florida-1, LLC ......................................................... Florida 58-2560889
SRE Florida-2, LLC ......................................................... Florida 58-2560900
SRE Florida-3, LLC ......................................................... Florida 58-2560868
SRE Georgia-1, L.P. ........................................................ Georgia 58-2560891
SRE Georgia-2, L.P. ........................................................ Georgia 58-2555514
SRE Georgia-3, L.P. ........................................................ Georgia 58-2554985
SRE Holding, LLC ........................................................... North Carolina 56-2198745
SRE Nevada-1, LLC .......................................................... Nevada 88-0468209
SRE Nevada-2, LLC .......................................................... Nevada 88-0465280
SRE Nevada-3, LLC .......................................................... Nevada 88-0465279
SRE South Carolina-2, LLC .................................................. South Carolina 58-2560892
SRE Tennessee-1, LLC ....................................................... Tennessee 56-2200186
SRE Tennessee-2, LLC ....................................................... Tennessee 56-2202429
SRE Tennessee-3, LLC ....................................................... Tennessee 56-2202479
SRE Texas-1, L.P. .......................................................... Texas 74-2962385
SRE Texas-2, L.P. .......................................................... Texas 74-2963860
SRE Texas-3, L.P. .......................................................... Texas 74-2963859
SRE Virginia-1, LLC ........................................................ Virginia 52-2252370
Stevens Creek Cadillac, Inc. ............................................... California 77-0093380
Town and Country Chrysler-Plymouth-Jeep, LLC ............................... Tennessee 62-1708483
Town and Country Dodge of Chattanooga, LLC ................................. Tennessee 62-1708487
Town and Country Ford, Incorporated ........................................ North Carolina 56-0887416
Town and Country Ford of Cleveland, LLC ..................................... Tennessee 62-1708484
Town and Country Jaguar, LLC ................................................ Tennessee 62-1708491
Transcar Leasing, Inc. ...................................................... California 94-2713550
Village Imported Cars, Inc. ................................................. Maryland 52-0896186
Windward, Inc. .............................................................. Hawaii 94-2659042
The primary standard industrial classification of all of the additional
registrants is 5511. The principal executive offices of all of the additional
registrants is 5401 East Independence Boulevard, Charlotte, North Carolina
28212. Their telephone number is (704) 532-3320.
The information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is declared effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
THIS PROSPECTUS IS SUBJECT TO COMPLETION,
DATED DECEMBER 14, 2001
PROSPECTUS
[SONIC LOGO]
Offer to Exchange All of Our Outstanding
Registered 11% Senior Subordinated Notes Due 2008, Series B
And
Unregistered 11% Senior Subordinated Notes Due 2008, Series C
For
Registered 11% Senior Subordinated Notes Due 2008, Series D
We are offering to exchange all of our outstanding 11% Senior Subordinated
Notes Due 2008, Series B and 11% Senior Subordinated Notes Due 2008, Series C
for $200.0 million in aggregate principal amount of our 11% Senior Subordinated
Notes Due 2008, Series D.
The Series B notes were issued in a registered offering on December 10,
1998. As of the date of this prospectus, there is $125.0 million in aggregate
principal amount of Series B notes outstanding. The Series C notes were issued
in a private offering on November 19, 2001. As of the date of this prospectus,
there is $75.0 million in aggregate principal amount of Series C notes
outstanding.
The terms of the Series B and Series C notes are identical in all material
respects. The terms of the Series D notes will be identical in all material
respects to the Series B and Series C notes.
When issued, the Series D notes will be registered under the Securities
Act of 1933, as amended, and will contain no legends restricting their transfer.
If all of the Series B and Series C notes are exchanged for Series D notes in
this exchange offer, we will have a single series of registered notes
outstanding with an aggregate principal amount of $200.0 million.
This offer expires at 5:00 p.m., New York City time, on ___________, 2002,
unless extended.
The exchange offer for the Series B notes is conditioned upon valid
tenders of at least $50.0 million in aggregate principal amount of Series B
notes. The exchange offer for the Series C notes is not subject to this
condition. Validly tendered Series C notes will be exchanged regardless of the
aggregate principal amount of Series B notes tendered for exchange.
You should carefully review the procedures for tendering Series B or
Series C notes under the caption "The Exchange Offer" beginning on page 27 of
this prospectus. If you do not comply with these procedures, we may not exchange
your Series B or Series C notes for Series D notes.
If you currently hold Series B notes and fail to validly tender them, then
you will continue to hold registered Series B notes, but the total principal
amount of the Series B notes outstanding may be reduced by the exchange offer.
This may reduce the liquidity of the Series B notes after the exchange offer.
If you currently hold Series C notes and fail to validly tender them, then
you will continue to hold unregistered Series C notes and your ability to
transfer them will be subject to transfer restrictions, which could adversely
affect your ability to transfer Series C notes.
Although the Series D notes will be registered, we do not intend to list
them on any securities exchange and, consequently, do not anticipate an active
public market for the Series D notes.
BOTH ACCEPTANCE AND REJECTION OF THIS EXCHANGE OFFER INVOLVE RISKS. SOME
OF THE RISKS ASSOCIATED WITH THE EXCHANGE OFFER AND AN INVESTMENT IN THE SERIES
D NOTES OFFERED THROUGH THIS PROSPECTUS ARE DESCRIBED UNDER THE CAPTION "RISK
FACTORS" BEGINNING ON PAGE 11 OF THIS PROSPECTUS. NEITHER THE SECURITIES AND
EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THE NOTES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL AND
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is , 2002
TABLE OF CONTENTS
Page
Prospectus Summary ................................................ 1
Risk Factors ...................................................... 11
The Exchange Offer ................................................ 27
Selected Consolidated Financial Data .............................. 35
Description of Notes .............................................. 37
Material United States Federal Income Tax Considerations .......... 73
Plan of Distribution .............................................. 73
Legal Matters ..................................................... 73
Experts ........................................................... 74
WHERE YOU CAN FIND MORE INFORMATION ABOUT SONIC
This prospectus incorporates business and financial information about us
that is not included or delivered with the document. This information is
included in annual, quarterly and current reports, proxy statements and other
information we file with the Securities and Exchange Commission (the
"Commission"). You may read and copy these reports, proxy statements and other
information at the Public Reference Room of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. You may obtain information on the operation of the
Commission's Public Reference Room in Washington, D.C. by calling the Commission
at 1-800-SEC-0330. Copies may be obtained from the Commission upon payment of
the prescribed fees. The Commission maintains an Internet web site that contains
reports, proxy and information statements and other information regarding us and
other registrants that file electronically with the Commission. The Commission's
web site is http://www.sec.gov. Information that we file with the Commission may
also be read and copied at the offices of the New York Stock Exchange at 20
Broad Street, New York, New York 10005. We will provide upon request a free copy
of any or all of the documents incorporated by reference in this prospectus
(excluding exhibits to such documents unless such exhibits are specifically
incorporated by reference) to anyone to whom we provide this prospectus. Written
or telephone requests should be directed to Mr. Todd Atenhan, Director of
Investor Relations, P.O. Box 18747, Charlotte, North Carolina 28218, Telephone
(888) 766-4218. You must make your request for documents no later than five
business days before you make your investment decision concerning our securities
to obtain timely delivery of these documents. In addition, you must request this
information by ______________, 2002 or at least five business days in advance of
the expiration of this exchange offer.
This prospectus is a part of a Registration Statement on Form S-4 filed
with the Commission by Sonic. This prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
Statements about the contents of contracts or other documents contained in this
prospectus or in any other filing to which we refer you are not necessarily
complete. You should review the actual copy of such documents filed as an
exhibit to the Registration Statement or such other filing. Copies of the
Registration Statement and these exhibits may be obtained from the Commission as
indicated above upon payment of the fees prescribed by the Commission.
We incorporate by reference into this prospectus the documents listed
below and any future filings made with the Commission (including the exhibits
filed therewith) under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, until we close this offering or it is
otherwise terminated:
(1) Our Current Report on Form 8-K dated January 17, 2001;
(2) Our Annual Report on Form 10-K for the fiscal year ended
December 31, 2000;
(3) Our Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2001;
(4) Our Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 2001;
(5) Our Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2001;
(6) Our Definitive Proxy Statement dated April 4, 2001; and
i
(7) The description of our Class A common stock contained in our
Registration Statement on Form 8-A, as amended, filed with the
Commission pursuant to the Securities Exchange Act of 1934, as
amended.
The information incorporated by reference is considered to be part of this
prospectus and information that we file later with the Commission will
automatically update and supersede this information, as applicable.
Except as otherwise indicated, all references in this prospectus to "we,"
"us," "our," "our company" or "Sonic" means Sonic Automotive, Inc. and its
subsidiaries.
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not making an offer
to sell these securities (1) in any jurisdiction where the offer or sale is not
permitted, (2) where the person making the offer is not qualified to do so or
(3) to any person who cannot legally be offered the securities. You should
assume that the information appearing in this prospectus and the information
incorporated by reference is accurate only as of their respective dates. Our
business, financial condition, results of operations and prospects may have
changed since those dates.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and any related supplements or amendments contain
statements that constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are not historical facts,
but only predictions and generally can be identified by use of statements that
include words such as "believe," "expect," "anticipate," "intend," "plan,"
"foresee" or other words or phrases of similar import. Similarly, statements
that describe our objectives, plans or goals are also forward-looking
statements. We intend such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements contained in the Private
Litigation Securities Reform Act of 1995, and we are including this statement
for purposes of complying with these safe harbor provisions. These statements
appear in a number of places in this prospectus and include statements regarding
our intent, belief or current expectations, or those of our directors or
officers, with respect to, among other things:
o our potential acquisitions;
o trends in our industry;
o our financing plans;
o the effect of the Internet on our business and our ability to implement
our Internet business strategy;
o trends affecting our financial condition or results of operations; and
o our business and growth strategies.
You are cautioned that these forward-looking statements are not guarantees
of future performance and involve risks and uncertainties, and that actual
results may differ materially from those projected in the forward-looking
statements as a result of various factors. Among others, factors that could
materially adversely affect actual results and performance include those risk
factors contained herein and incorporated by reference, such as:
o local and regional economic conditions in the areas we serve;
o the level of consumer spending;
o our relationships with manufacturers;
o high competition;
o site selection and related traffic and demographic patterns;
ii
o inventory management and turnover levels;
o the effect of the Internet on our business;
o realization of cost savings; and
o our success in integrating recent and potential future acquisitions,
including integration of acquired information systems.
iii
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere or incorporated by reference in this prospectus.
Because this is a summary, it does not include all of the information that may
be important to you. You should read this entire prospectus and the documents
that we incorporate by reference before deciding whether to participate in the
exchange.
Sonic Automotive, Inc. is the second largest automotive retailer in the
United States, as measured by total revenue, operating 156 dealership franchises
and 29 collision repair centers in 25 metropolitan areas of the United States.
We own and operate franchises for 29 different brands of cars and light trucks,
providing comprehensive services including sales of both new and used cars and
light trucks, replacement parts and vehicle maintenance, warranty, paint and
repair services. We also arrange extended warranty contracts and financing and
insurance, which we refer to as "F&I," for our automotive customers. Our growth
in operations has been strategically focused on high growth metropolitan
markets, predominantly in the Southeast, Southwest, Midwest and California, that
on average are experiencing population growth that exceeds the national average.
Each of our dealership locations provides similar products and services,
including (1) new car sales, (2) used car sales, (3) parts, service and
collision repair and (4) F&I services. As compared to automotive manufacturers,
we and other automobile retailers exhibit relatively low earnings volatility.
This is primarily due to the differing expense structures between automotive
manufacturers and retailers. For the nine months ended September 30, 2001,
approximately 38% of our expenses, primarily rent and salaries, were fixed
expenses. The majority of our variable expenses are variable, and relate to
sales commissions and advertising which can be adjusted as demand patterns
change. We believe the diversity of our revenue sources at our full service
automotive dealerships and our flexible expense structure mitigate the effects
of economic cycles and seasonal influences.
Our Class A common stock is traded on the New York Stock Exchange under the
symbol "SAH." Our principal executive offices are located at 5401 East
Independence Blvd., Charlotte, North Carolina 28212, telephone (704) 532-3320.
We were incorporated in Delaware in 1997.
1
The Exchange Offer
On November 19, 2001, we privately placed $75.0 million of 11% Senior
Subordinated Notes due 2008, Series C, which we refer to as Series C notes. We
sold the Series C notes to the following initial purchasers:
o Merrill Lynch, Pierce, Fenner & Smith Incorporated; and
o Banc of America Securities LLC.
These initial purchasers then sold the Series C notes to qualified
institutional investors.
At the time of the private placement of the Series C notes, we entered into
a registration rights agreement with the initial purchasers of the Series C
notes. Under the registration rights agreement, we agreed to offer to exchange
registered Series D notes for all of our outstanding Series B and Series C
notes. We agreed to commence this exchange offer on or before April 3, 2002 and
to complete the exchange offer on or before May 3, 2002. If we do not complete
this exchange offer on or before April 3, 2002, except under limited
circumstances, we must pay liquidated damages to the holders of our Series C
notes until the exchange offer is completed.
Securities to be exchanged (see page 27) On July 31, 1998, we issued $125.0
million in aggregate principal amount
of 11% Senior Subordinated Notes due
2008, Series A in a transaction
exempt from the registration
requirements of the Securities Act of
1933. On December 10, 1998, pursuant
to a registered exchange offer, we
exchanged all of the outstanding
Series A notes for 11% Senior
Subordinated Notes due 2008,
Series B. The Series B notes are
currently governed by the terms of an
indenture dated as of July 11, 1998
and are identical in all material
respects to the Series A notes. As
of the date of this prospectus, there
is $125.0 million in aggregate
principal amount of Series B notes
outstanding.
On November 19, 2001, we issued
$75.0 million in aggregate principal
amount of 11% Senior Subordinated
Notes due 2008, Series C in a
transaction exempt from the
registration requirements of the
Securities Act of 1933. The Series C
notes are currently governed by the
terms of an indenture dated as of
November 19, 2001 and are identical
in all material respects to the
Series B notes. As of the date of
this prospectus, there is $75.0
million in aggregate principal amount
of Series C notes outstanding.
The Exchange Offer (see page 27)...... We are offering to exchange all of
our outstanding Series B notes and
Series C notes for $200.0 million in
aggregate principal amount of our
registered 11% Senior Subordinated
Notes due 2008, Series D. The terms
of the Series D notes will be
identical in all material respects to
the Series B and Series C notes. The
Series D notes will be governed by
the terms of an indenture dated as of
November 19, 2001.
Expiration date; extension of tender
period; termination; and
amendment (see pages 28 and 33) This exchange offer will expire at
5:00 p.m. New York City time on
_____________,2002 unless we extend
it. You must tender your outstanding
Series B or Series C notes prior to
____________, 2002 if you want to
participate in the exchange offer. We
may terminate the exchange offer in
the event of circumstances described
on page__under the caption "Exchange
Offer". We have the right to amend
any of the terms of the exchange
offer subject to our obligations
under the registration rights
agreement.
2
Conditions for completion of the exchange
offer (see page 33)... The exchange offer is subject to
various conditions. In particular,
we are not obligated to, and will
not, exchange Series D notes for
Series B notes unless at least $50.0
million in aggregate principal
amount of Series B notes are
tendered for exchange (the "Minimum
Exchange Condition"). All conditions
must be satisfied or waived prior to
the expiration of the exchange
offer. We will not waive, or cause
to be waived, the Minimum Exchange
Condition.
Procedures for tendering Series B and
Series C notes (see page 29)... We issued the Series B and Series C
notes as global securities. When we
issued the Series B and Series C
notes, we deposited them with U.S.
Bank Trust National Association, as
custodian. U.S. Bank Trust issued
an uncertificated depository
interest in the Series B and
Series C notes, which represent a
100% interest in the Series B and
Series C notes, to The Depository
Trust Corporation,which we refer to
as DTC. Beneficial interests in the
Series B and Series C notes, which
direct or indirect participants in
the DTC hold through uncertificated
depository interests, are shown on
records that the DTC maintains in
book-entry form.
If you wish to participate in the
exchange offer, you must transmit
to U.S. Bank Trust National
Association, which is the exchange
agent, on or before the expiration
of the exchange offer, either:
o a completed and signed letter
of transmittal or a facsimile
thereof, in accordance with the
instructions contained in this
prospectus and the letter of
transmittal,and any other
documents; or
o a computer-generated message
transmitted by means of DTC's
Automated Tender Offer Program
system and forming a part of a
confirmation of book-entry
transfer in which you
acknowledge and agree to be
bound by the terms of the
letter of transmittal. The
exchange agent must also
receive on or prior to the
expiration of the exchange
offer either:
o a timely confirmation of
book-entry transfer of your
outstanding notes into the
exchange agent's account at
DTC, in accordance with the
procedure for book-entry
transfers; or
o the documents necessary for
compliance with the
guaranteed delivery
procedures.
Do not send letters of transmittal
and certificates representing
Series B and Series C notes to us
or to DTC. Send these documents
only to the exchange agent.
3
Procedures for tendering
certificated Series B and Series C notes
(see page 30)........ If you are a holder of book-entry
interests in the Series B and
Series C notes, you are entitled to
receive, in limited circumstances, in
exchange for your book-entry
interests, certificated notes which
are in equal principal amounts to your
book-entry interests. No certificated
notes are issued and outstanding as
of the date of this prospectus. If
you acquire certificated Series B and
Series C notes prior to the expiration
of the exchange offer, you must tender
your certificated outstanding notes in
accordance with the procedures
described in this prospectus under the
heading "The Exchange Offer -
Procedures for Tendering -
Certificated Series B and Series C
Notes."
Procedures for tendering
Series B and Series C notes held by a
broker (see page 30)........ If you hold your Series B and
Series C notes through a broker, do
not complete the letter transmittal.
Please contact your broker directly
for instructions on how to
participate in the exchange offer.
Guaranteed delivery procedures
(see page 31)......... If you wish to tender your Series B
and Series C notes and your Series B
and Series C notes are not immediately
available or you cannot timely deliver
your Series B and Series C notes, the
letter of transmittal or any other
documents required by the letter of
transmittal to the exchange agent, or
you cannot complete the procedure for
book-entry transfer, then on or prior
to the expiration of the exchange
offer you must tender your Series B
and Series C notes according to the
guaranteed delivery procedures set
forth in "The Exchange Offer -
Guaranteed Delivery Procedures."
Withdrawal (see page 32)....... Your tender of Series B or Series C
notes pursuant to this exchange offer
may be withdrawn at any time before
the exchange offer expires.
Withdrawals may not be rescinded. If
you change your mind again, you may
tender your Series B or Series C notes
again by following the exchange offer
procedures before the exchange offer
expires.
Termination of certain rights of the
Series C notes (see page 28).......... Pursuant to the registration rights
agreement and the terms of the
Series C notes, holders of Series C
notes have certain rights pending the
closing of the exchange offer. After
the closing of the exchange offer,
holders of Series C notes will not be
entitled to these rights except in
limited circumstances.
Accrued interest (see page 33)..... Interest on the Series D notes will
accrue from the most recent interest
payment date on which interest was
paid on the Series B and Series C
notes.
4
Resales of Series D notes (see page 31).... Based on interpretations by the
Commission staff, we believe holders
of the Series D notes who are not
broker-dealers, can offer for
resale, resell and otherwise
transfer the Series D notes without
complying with the registration and
prospectus delivery requirements of
the Securities Act of 1933, as
amended if:
o you acquire the Series D notes in
the ordinary course of your
business;
o you are not participating, do not
intend to participate and have
no arrangement or understanding
with any person to participate,
in the distribution of the
Series D notes; and
o you are not an "affiliate" of
Sonic, as defined in Rule 405
under of the Securities Act of
1933.
By executing the letter of
transmittal related to this
offering, or by agreeing to the
terms of the letter of transmittal,
you are representing to us that you
satisfy each of these conditions.
If you do not satisfy these
conditions and you transfer the
Series D notes without delivering
a proper prospectus or without
qualifying for an exemption from the
registration requirements of the
Securities Act of 1933, you may
incur liability under the
Securities Act of 1933.
Our belief that you can offer for
resale, resell and otherwise
transfer the Series D notes
without complying with the
registration and prospectus delivery
requirements of the Securities Act
of 1933 if you meet the conditions
listed above is based on Commission
staff interpretations given to
other, unrelated issuers in other
exchange offers. We will not seek an
Commission staff interpretation in
connection with our exchange offer.
We cannot assure you that the
Commission staff would make a
similar interpretation with respect
to our exchange offer and will not
be responsible for or indemnify you
against any liability you may incur
under the Securities Act.
Delivery of Series D notes
(see pages 29 and 33)....... We will deliver Series D notes by
book-entry transfer as soon as
reasonably practicable after
acceptance of the Series B and
Series C notes. If we do not accept
any of your outstanding Series B or
Series C notes for exchange, we will
return them to you as promptly as
practicable after the expiration or
termination of the exchange offer
without any expense to you.
No appraisal rights (see page 28)... No appraisal rights are available to
holders of Series B or Series C
notes in connection with the
exchange offer. If you do not tender
your Series B or Series C notes or
we reject your tender, you will not
be entitled to any further
registration rights under the
registration rights agreement,
except under limited circumstances.
Your unexchanged notes will,
however, remain outstanding and
entitled to the benefits of the
indenture.
5
Prospectus delivery (see page 31).... All broker-dealers must comply with the
registration and prospectus delivery
requirements of the Securities Act of
1933. Each broker-dealer that receives
registered notes for its own account
pursuant to the exchange offer must
acknowledge that it will deliver a
prospectus in connection with any resale
of the registered notes. The letter of
transmittal accompanying this prospectus
states that by so acknowledging and by
delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. We have agreed that for a
period of 180 days after consummating the
exchange offer we will make this
prospectus available to any broker-dealer
for use in connection with any resale.
Material United States federal income
tax considerations(see page 73)...... Your exchange of Series B or Series C
notes for Series D notes should not be a
taxable exchange for United States federal
income tax purposes. You should not
recognize any taxable gain or loss or any
interest income as result of the exchange.
Exchange agent (see page 34)..... U.S. Bank Trust National Association
Risk factors (see page 11)...... You should consider carefully the matters
described in the section entitled "Risk
Factors," as well as the other information
included in this prospectus and the
documents to which we have referred you.
Legal limitation......... We are not making any offer to sell, nor
are we soliciting any offer to buy,
securities in any jurisdiction in which
the offer or sale is not permitted.
6
Summary of the Series D Notes
The following is a brief summary of certain terms of the Series D notes.
For a more complete description of the terms of the notes, see "Description of
Notes" in this prospectus.
Issuer............................ Sonic Automotive, Inc.
Notes offered .................... $200.0 million aggregate principal amount of
11% senior subordinated notes due 2008,
Series D. The terms of these notes will be
identical in all material respects to Series
B and Series C notes.
Interest rate.................... The Series D notes will bear interest at a
rate of 11% per annum.
Maturity ........................ August 1, 2008.
Interest payment dates .......... February 1 and August 1, beginning August 1,
2002.
Guarantees....................... Each of our operating subsidiaries will
guarantee the Series D notes. Future
subsidiaries may also be required to
guarantee the Series D notes.
Ranking ......................... The Series D notes will be unsecured senior
subordinated obligations and will be
subordinated to our floor plan facilities,
construction/mortgage facility, revolving
facility and other senior indebtedness. The
Series D notes will rank equally with our
senior subordinated indebtedness and will
rank senior to our subordinated
indebtedness. Because the Series D notes
are subordinated, in the event of
bankruptcy, liquidation or dissolution and
acceleration of or payment default on senior
indebtedness, holders of the Series D notes
will not receive any payment until holders
of senior indebtedness have been paid in
full.
As of September 30, 2001, after giving
pro forma effect to the sale of the
Series C notes, our use of the net proceeds
of that sale, and assuming that all
Series B notes and Series C notes are
exchanged for Series D notes, we would have
had $253.6 million of debt which would have
been senior or secured (excluding floor
plan debt), no debt ranking pari passu to
the Series D notes and $5.5 million of
unsecured subordinated debt.
Optional redemption .......... We may redeem some or all of the Series D
notes at any time on or after August 1,
2003 at the redemption prices described in
the prospectus.
Change of control............. When a change of control occurs, each
holder of Series D notes may require us to
repurchase some or all of its notes at a
purhase price equal to 101% of the principal
amount of the notes, plus accrued interest.
Covenants..................... The indenture governing the Series D notes
will contain covenants that, among other
things, will limit our ability and the
ability of our subsidiaries to:
o incur additional indebtedness,
o pay dividends on, redeem or repurchase our
capital stock,
7
o make investments
o create certain liens,
o sell assets,
o in the case of our restricted subsidiaries,
make dividend or other payments to us,
o in the case of our subsidiaries, guarantee
indebtedness or secure debt,
o engage in transactions with affiliates,
o create unrestricted subsidiaries and
o consolidate, merge or transfer all or
substantially all of our assets and the assets
of our subsidiaries on a consolidated basis.
These covenants are subject to important
exceptions and qualifications, which are
described under the heading "Description of
Notes" in this prospectus.
Exchange offer; registration
rights..................... Under a registration rights agreement executed as
part of the sale of the Series C notes, we and
the guarantors agreed to:
o use our reasonable best efforts to file a
registration statement within 60 days after the
issue date of the Series C notes enabling
holders of Series C notes and of the Series B
notes to exchange their Series C notes or the
Series B notes for publicly registered Series D
notes with identical terms,
o use our reasonable best efforts to cause the
registration statement to become effective
within 135 days after the issue date of the
Series C notes,
o use our reasonable best efforts to complete the
exchange offer within 165 days after the issue
date of the Series C notes and
o file a shelf registration statement for the
resale of the Series C notes if we cannot
effect an exchange offer within the time
periods listed above and in other
circumstances.
We will not complete the exchange offer until
after our February 1, 2002 interest payment on
the Series B and Series C notes. The interest
rate on the Series C notes will increase if we
do not comply with our obligations under the
registration rights agreement. See "Exchange
Offer."
Use of proceeds............. We will not receive any proceeds from the
exchange offer. We are conducting the exchange
offer to satisfy our obligations under the
registration rights agreement.
8
Summary Consolidated Financial and Operating Data
We have accounted for all of our dealership acquisitions using the purchase
method of accounting and, as a result, we do not include in our financial
statements the results of operations of acquired dealerships prior to the date
they were acquired by us. The Summary Consolidated Financial and Operating Data
of Sonic discussed below reflect the results of operations and financial
position of each of our dealerships acquired prior to September 30, 2001. As a
result of the effects of our acquisitions and other potential factors in the
future, the Summary Consolidated Financial Data set forth below is not
necessarily indicative of the results of operations and financial position of
Sonic in the future or the results of operations and financial position that
would have resulted had such acquisitions occurred at the beginning of the
periods presented below. In accordance with accounting principles generally
accepted in the United States of America, the summary consolidated financial and
operating data has been retroactively restated to reflect Sonic's two-for-one
common stock split that occurred on January 29, 1999. This summary consolidated
financial and operating data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Sonic's consolidated financial statements and the related notes thereto,
incorporated by reference in this prospectus.
9
Nine Months Ended
Year Ended December 31, September 30,
------------------------------------------------------------------------------------------
1998 1999 2000 2000 2001
---- ---- ---- ---- ----
(dollars and shares in thousands, except per share amounts)
Income Statement Data:
Revenues:
Vehicle sales .................. $ 1,407,030 $ 2,903,868 $ 5,201,750 $ 3,968,319 $ 4,026,470
Parts, service and
collision repair ............... 162,660 364,184 687,975 513,920 581,153
Finance, insurance and other ... 34,011 82,771 162,751 125,362 139,802
------------------ ---------------- --------------- ------------ --------------
Total revenues ............... 1,603,701 3,350,823 6,052,476 4,607,601 4,747,425
Cost of sales ...................... 1,396,259 2,896,400 5,187,289 3,951,528 4,048,753
------------------ ---------------- --------------- ------------ --------------
Gross profit ....................... 207,442 454,423 865,187 656,073 698,672
Selling, general and administrative
expenses............................ 150,130 326,914 633,356 473,745 527,009
Depreciation and amortization....... 4,607 11,699 22,714 17,344 19,384
------------------ ---------------- --------------- ------------ --------------
Operating income.................... 52,705 115,810 209,117 164,984 152,279
Interest expense, floor plan ....... 14,096 22,536 47,108 34,012 30,188
Interest expense, other ............ 9,395 21,586 42,244 31,200 26,989
Other income ....................... 426 1,286 107 109 120
------------------ ---------------- --------------- ------------ --------------
Income before income taxes.......... 29,640 72,974 119,872 99,881 95,222
Provision for income taxes.......... 11,083 28,325 45,700 38,000 37,135
------------------ ---------------- --------------- ------------ --------------
Net income.......................... $ 18,557 $ 44,649 $ 74,172 $ 61,881 $ 58,087
================= ============== =============== ============ ==============
Diluted net income per share ....... $ 0.74 $ 1.27 $ 1.69 $ 1.40 $ 1.40
================= ============== =============== ============ ==============
Weighted average diluted common shares
outstanding ........................ 24,970 35,248 43,826 44,257 41,511
================= ============== =============== ============ ==============
Ratio of earnings to fixed
charges (a)..................... 3.3x 3.4x 3.0x 3.2x 3.2x
Other Financial Data:
EBITDA (b)...................... $ 43,642 $ 106,259 $ 184,830 $ 148,425 $ 141,595
Capital expenditures............ $ 4,335 $ 21,548 $ 73,171 $ 57,993 $ 30,909
Ratio of EBITDA to interest expense,
other (b)....................... 4.6x 4.9x 4.4x 4.8x 5.2x
Margin Data:
EBITDA margin (b)............... 2.7% 3.2% 3.1% 3.2% 3.0%
Gross profit margin ............ 12.9% 13.6% 14.3% 14.2% 14.7%
Balance Sheet Data
(at end of period):
Cash and cash equivalents ...... $ 51,834 $ 83,111 $ 109,325 $ 89,813 $ 103,431
Inventories .................... 264,971 630,857 773,785 661,175 654,762
Total assets ................... 576,103 1,501,102 1,789,248 1,654,071 1,689,314
Notes payable-- floor plan ..... 228,158 517,575 684,718 540,950 557,301
Long-term debt (c).............. 145,790 425,894 493,309 498,951 457,032
Stockholders' equity ........... 142,429 402,573 450,922 443,304 489,919
______________
(a) Fixed charges is defined as interest (other than interest expense
related to notes payable-floor plan) and such portion of rent
expense determined to be representative of the interest factor. The
ratio of earnings to fixed charges is calculated by adding fixed
charges to income before income taxes and minority interest and
dividing the sum by fixed charges.
(b) EBITDA is defined as earnings before interest (other than interest
expense related to notes payable-floor plan), taxes, depreciation,
and amortization. While EBITDA should not be construed as a
substitute for operating income or as a better measure of liquidity
than cash flows from operating activities, which are determined in
accordance with accounting principles generally accepted in the
United States of America, we have included it herein to provide
additional information with respect to our ability to meet future
debt service, capital expenditures and working capital requirements.
These measures may not be comparable to similarly titled measures
reported by other companies.
(c) Long-term debt, including current portion, includes the payable to
our Chairman and the payable to our affiliates, which are
subordinated to the Notes. See Sonic's Consolidated Financial
Statements and the related notes incorporated by reference in this
prospectus.
10
RISK FACTORS
Prospective investors should carefully consider and evaluate all of the
information set forth in this prospectus, including the risk factors set forth
below.
Failure to exchange your Series B or Series C notes may have adverse
consequences to you.
If you do not exchange your Series B notes for Series D notes, then you
will continue to hold registered notes, but the total principal amount of Series
B notes outstanding may be reduced by the exchange offer. This may reduce the
liquidity of the Series B notes after the exchange offer. We are not obligated
to, and will not, exchange Series B notes for Series B notes unless at least
$50.0 million in aggregate principal amount of Series B notes are tendered for
exchange.
If you do not exchange your Series C notes for Series D notes in the
exchange offer, your Series C notes will continue to be subject to the
restrictions on transfer contained in the legend on the Series C notes. In
general, the Series C notes may not be offered or sold unless they are
registered under the Securities Act. However, you may offer or sell your Series
C notes under an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. After the exchange offer is
completed, you will not be entitled to any exchange or registration rights with
respect to your Series C notes except under limited circumstances. The exchange
offer for the Series C notes is not conditioned upon the tender of a minimum
aggregate principal amount of Series B or Series C notes. Validly tendered
Series C notes will be exchanged regardless of the aggregate principal amount of
Series B notes tendered for exchange.
Issuance of the Series D notes in exchange for the Series B and Series C
notes pursuant to the exchange offer will be made following the prior
satisfaction, or waiver, of the conditions set forth in "The Exchange Offer -
Conditions to the Exchange Offer" and only after timely receipt by the exchange
agent of Series B or Series C notes, a properly completed and duly executed
letter of transmittal and all other required documents. Therefore, holders of
Series D notes desiring to tender their Series B or Series C notes in exchange
for Series D notes should allow sufficient time to ensure timely delivery of all
required documentation. Neither we, the exchange agent nor, any other person is
under any duty to give notification of defects or irregularities with respect to
the tenders of Series D notes for exchange. Series B or Series C notes that may
be tendered in the exchange offer but which are not validly tendered will remain
outstanding following the consummation of the exchange offer.
The Series D notes and the guarantees are subordinated to our senior
indebtedness.
The payment of the principal of, premium, if any, and interest on the
Series D notes will be subordinated to the prior payment in full of all of our
existing and future senior indebtedness. In the event of a liquidation,
dissolution, reorganization or any similar proceeding, our assets will be
available to pay obligations on the Series D notes only after senior
indebtedness has been paid in full. Therefore, there may not be sufficient
assets to pay amounts due on all or any of the Series D notes.
In addition, we may not:
o pay principal of, premium, if any, interest on or any other amounts
owing in respect of the Series D notes;
o make any deposit pursuant to defeasance provisions; or
o purchase, redeem or otherwise retire the Series D notes, if any senior
indebtedness is not paid when due or any other default on senior
indebtedness occurs and the maturity of such indebtedness is accelerated
in accordance with its terms unless, in either case, the default has
been cured or waived, any the acceleration has been rescinded or the
senior indebtedness has been repaid in full.
Moreover, under certain circumstances, if any non-payment default exists
with respect to senior indebtedness, we may not make any payments on the Series
D notes for a specified time, unless such default is cured or waived, any
acceleration of such indebtedness has been rescinded or such indebtedness has
been repaid in full. See "Description of the Notes--Ranking."
The Series D notes and the guarantees will be unsecured senior
subordinated obligations and, as such, will be subordinated in right of payment
with all of the other existing and future senior indebtedness incurred by us and
certain of the guarantors and pari passu in right of payment to all of the
existing and future senior subordinated indebtedness incurred by us. Certain of
the guarantees may not be so subordinated. As of September 30, 2001, after
giving effect to the sale of the Series C notes and application of the estimated
net proceeds of that offering:
o we and the guarantors would have had $253.6 million of debt which is
senior or secured and $125.0 million of debt ranking pari passu to the
Series D notes or the guarantees, as the case may be;
o we would also have had approximately $5.5 million of indebtedness
subordinated to the Series D notes; and
o the guarantors would also have had $557.3 million of secured floor plan
indebtedness.
11
Our indebtedness is described in the footnotes to the unaudited financial
statements contained in our most recent quarterly report on Form 10-Q which is
incorporated by reference and under the heading "Recent Developments" appearing
elsewhere in this prospectus. The Series D notes will not be secured by any of
our assets or assets of the guarantors. Our floor plan indebtedness is secured
by vehicle inventory and proceeds from the sale of that inventory. The
indebtedness under our revolving facility is secured by:
o our pledge of all the capital stock, membership interests and
partnership interests of all of our dealership subsidiaries (to the
extent that such a pledge is permitted by the applicable manufacturer);
o guarantees by all of our subsidiaries that are, in turn, secured by a
lien on all of the assets of these subsidiaries; and
o a lien on all of our other assets, except for real estate owned by us or
our subsidiaries.
In the event of a default on the Series D notes or our bankruptcy,
liquidation or reorganization, these assets will be available to satisfy the
obligations with respect to the indebtedness secured thereby before any payment
therefrom could be made on the Series D notes. Therefore, there may not be
sufficient assets to pay amounts due on all or any of the Series D notes.
Since the total outstanding principal of the Series D notes will include the
total outstanding principal amount of the Series B and Series C notes, you will
experience an immediate dilution of your percentage of ownership of the notes
outstanding.
If all of the outstanding Series B and Series C notes are exchanged for
Series D notes, $200.0 million aggregate principal amount of Series D notes will
be outstanding following the consummation of the exchange offer, and the Series
D notes will be deemed to be a single series of notes outstanding under the
indenture. As a result, any actions requiring the consent of each holder or the
holders of a majority in outstanding principal amount of Series D notes under
the indenture will therefore require the consent of each holder of Series D
notes or the holders of a majority in aggregate principal amount of outstanding
Series D notes, and, the current individual voting interest of each holder of
Series B or Series C notes will accordingly be diluted.
We may not be able to purchase your Series D notes upon a change of control.
Upon the occurrence of specified change of control events, we are required
to offer to purchase each Series D holder's notes at a price of 101% of their
principal amount plus accrued interest. We may not have sufficient financial
resources to purchase all of the Series D notes that holders may tender to us
upon a change of control. In certain circumstances, our lenders also have the
right to prohibit any purchases by us of the Series D notes, in which case we
would be in default on the Series D notes.
Participants in the exchange offer must deliver a prospectus in connection with
resales of the Series D notes.
Based on certain no-action letters issued by the staff of the Commission,
we believe that you may offer for resale, resell or otherwise transfer the
exchange notes without compliance with the registration and prospectus delivery
requirements of the Securities Act of 1933. However, in some instances described
in this prospectus under "Plan of Distribution," you will remain obligated to
comply with the registration and prospectus delivery requirements of the
Securities Act of 1933 to transfer your Series D notes. In these cases, if you
transfer any Series D note without delivering a prospectus meeting the
requirements of the Securities Act of 1933 or without an exemption from
registration of your Series D notes under the Securities Act of 1933, you may
incur liability under this act. We do not and will not assume, or indemnify you
against, this liability.
We depend upon the operations of our subsidiaries.
The Series D notes are our obligations. As of September 30, 2001,
substantially all of our consolidated assets were held by the guarantors and
substantially all of our cash flow and net income were generated by the
guarantors. Our ability to make interest and principal payments when due to
holders of the Series D notes depends therefore upon the receipt of sufficient
funds from our subsidiaries.
Courts interpreting state or federal fraudulent transfer laws may invalidate the
guarantees.
Our obligations under the notes will be guaranteed by the guarantors. To
the extent that a court were to find, pursuant to federal or state fraudulent
transfer laws or otherwise, that:
o the guarantees were incurred by the guarantors with intent to hinder,
delay or defraud any present or future creditor or the guarantors
contemplated insolvency with a design to prefer one or more creditors to
the exclusion in whole or in part of others; or
o a guarantor did not receive fair consideration or reasonably equivalent
value for issuing its guarantee and the guarantor
o was insolvent,
o was rendered insolvent by reason of the issuance of the guarantee,
12
o was engaged or about to engage in a business or transaction for which
the remaining assets of the guarantor constituted unreasonably small
capital to carry on its business,
o intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured or
o was a defendant in an action for money damages or had a judgment for
money damages docketed against it (in either case, if after final
judgment, the judgment remained unsatisfied),
the court could avoid or subordinate the guarantee in favor of the
guarantor's other creditors. Among other things, a legal challenge of a
guarantee on fraudulent conveyance grounds may focus on the benefits, if any,
realized by the guarantor as a result of our issuance of the notes. The measure
of insolvency of the guarantor for these purposes will vary depending upon the
law of the relevant jurisdiction. Generally, however, a company would be
considered insolvent:
o if the sum of the company's debts, including contingent liabilities, is
greater than all of the company's property at a fair valuation,
o if the present fair saleable value of the company's assets is less than
the amount that will be required to pay its probable liability on its
existing debts as they become absolute and mature or
o if the company could not pay its debts as they become due.
We cannot assure you what standards a court would apply to determine
whether a guarantor was solvent at the relevant time. To the extent that a
guarantee were to be avoided as a fraudulent conveyance or held unenforceable
for any other reason, holders of the Series D notes would cease to have any
claim in respect of the guarantor and would be creditors solely of ours and of
the guarantors whose guarantees had not been avoided or held unenforceable. In
this event, the claims of the holders of the Series D notes against the issuer
of an invalid guarantee would be subject to the prior payment in full of all
liabilities of the guarantor thereunder. There can be no assurance that, after
providing for all prior claims, there would be sufficient assets to satisfy the
claims of the holders of the Series D notes relating to the voided guarantees.
The guarantees may be released under certain circumstances upon resale,
exchange or transfer by us of the stock of the related guarantor or all or
substantially all of the assets of the guarantor to a non-affiliate. See
"Description of Notes--Certain Covenants--Limitation on Issuances of Guarantees
of and Pledges for Indebtedness."
To the extent that a court were to find that the issuance of the Series D
notes violated federal or state fraudulent transfer or conveyance laws, in the
manner described above with respect to the guarantors, the court could avoid or
modify our obligations to holders of the Series D notes in favor of our other
creditors. To the extent that the issuance of the Series D notes were to be
avoided as a fraudulent conveyance or held unenforceable for any other reason,
holders of the Series D notes would cease to have any claim against us and would
be creditors solely of the guarantors whose guarantees had not been avoided or
held unenforceable. In this event, the claims of the holders of the Series D
notes against us would be subject to the prior payment in full of all of our
liabilities. We cannot assure you that, after providing for all prior claims,
there would be sufficient assets to satisfy the claims of the holders of the
Series D notes.
We do not expect a public market for the Series D notes to develop after
completion of the exchange offer.
There currently is no trading market and there can be no assurance as to
the liquidity of any market for the Series D notes that may develop, the ability
of holders of the Series D notes to sell their Series D notes, or the prices at
which holders of the Series D notes would be able to sell their Series D notes.
If markets were to exist, the Series D notes could trade at prices higher or
lower than the initial purchase prices you paid for either your series B or your
Series C notes. Although Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Banc of America Securities LLC have informed us that they currently intend to
make a market in the Series D notes, if issued, they are not obligated to do so,
and they may discontinue any market making activities they engage in at any time
without notice. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Series D notes if issued. The Series D notes
will be eligible for trading in the PORTAL market. We do not intend to apply for
listing of the Series D notes, if issued, on any securities exchange or for
quotation on the National Association of Securities Dealers Automated Quotation
System. We have agreed to file this registration statement with the Commission
to an offer to exchange our Series B notes and the Series C notes for a single
class of publicly traded Series D notes. We can provide no assurance that any
holder of any Series B or Series C Notes will participate in the exchange offer.
The failure of holders of Series B and C notes to participate in the exchange
offer will have an adverse impact on the liquidity of the Series D notes
Our significant indebtedness could materially adversely affect our financial
health and prevent us from fulfilling our financial obligations.
As of September 30, 2001, our total outstanding indebtedness was
approximately $1,008.8 million, including the following:
o $312.4 million under a revolving credit agreement (the "Revolving
Facility") with Ford Motor Credit Company ("Ford Motor Credit"),
Chrysler Financial Company, LLC ("Chrysler Financial") and Toyota Motor
Credit Corporation ("Toyota
13
Credit") with a borrowing limit of $600 million, subject to a borrowing
base calculated on the basis of our receivables, inventory and
equipment and a pledge of certain additional collateral by an affiliate
of Sonic;
o $368.4 million under a standardized secured inventory floor plan
facility (the "Ford Floor Plan Facility") with Ford Motor Credit;
o $115.6 million under a standardized secured floor plan facility (the
"Chrysler Floor Plan Facility") with Chrysler Financial;
o $11.5 million under a standardized secured floor plan facility (the
"Toyota Floor Plan Facility") with Toyota Credit;
o $61.8 million under a standardized secured floor plan facility (the
"GMAC Floor Plan Facility" and together with the Ford Floor Plan
Facility, the Toyota Floor Plan Facility and the Chrysler Floor Plan
Facility, the "Floor Plan Facilities") with General Motors Acceptance
Corporation ("GMAC");
o $121.5 million in 11% Senior Subordinated Notes due 2008 representing
$125.0 million in aggregate principal amount less unamortized discount
of approximately $3.5 million; and
o $17.6 million of other secured debt, including $10.7 million under a
revolving real estate acquisition and new dealership construction line
of credit (the "Construction Loan") and a related mortgage refinancing
facility (the "Permanent Loan" and together with the Construction Loan,
the "Mortgage Facility") with Ford Motor Credit.
As of September 30, 2001, we had approximately $229.2 million available
for additional borrowings under the Revolving Facility, based on a borrowing
base calculated on the basis of our receivables, inventory and equipment and
certain additional collateral pledged by an affiliate of Sonic. We also had
approximately $89.3 million available for additional borrowings under the
Mortgage Facility for real estate acquisitions and new dealership construction.
We also have significant additional capacity under the Floor Plan Facilities. In
addition, the indentures relating to our senior subordinated notes and other
debt instruments allow us to incur additional indebtedness, including secured
indebtedness.
The degree to which we are leveraged could have important consequences to
the holders of our securities, including the following:
o our ability to obtain additional financing for acquisitions, capital
expenditures, working capital or general corporate purposes may be
impaired in the future;
o a substantial portion of our current cash flow from operations must be
dedicated to the payment of principal and interest on our senior
subordinated notes, borrowings under the Revolving Facility and the
Floor Plan Facilities and other indebtedness, thereby reducing the
funds available to us for our operations and other purposes;
o some of our borrowings are and will continue to be at variable rates of
interest, which exposes us to the risk of increased interest rates;
o the indebtedness outstanding under our credit facilities is secured by
a pledge of substantially all the assets of our dealerships; and
o we may be substantially more leveraged than some of our competitors,
which may place us at a relative competitive disadvantage and make us
more vulnerable to changing market conditions and regulations.
In addition, our debt agreements contain numerous covenants that limit our
discretion with respect to business matters, including mergers or acquisitions,
paying dividends, incurring additional debt, making capital expenditures or
disposing of assets.
Our future operating results depend on our ability to integrate our operations
with recent acquisitions.
Our future operating results depend on our ability to integrate the
operations of our recently acquired dealerships, as well as dealerships we
acquire in the future, with our existing operations. In particular, we need to
integrate our systems, procedures and structures, which can be difficult. Our
growth strategy has focused on the pursuit of strategic acquisitions that either
expand or complement our business. We acquired 19 dealerships in 1998, 72 during
1999, 11 in 2000 and 12 to date in 2001.
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We cannot assure you that we will effectively and profitably integrate the
operations of these dealerships without substantial costs, delays or operational
or financial problems, including as a result of:
o the difficulties of managing operations located in geographic areas
where we have not previously operated;
o the management time and attention required to integrate and manage
newly acquired dealerships;
o the difficulties of assimilating and retaining employees; and
o the challenges of keeping customers.
These factors could have a material adverse effect on our financial
condition and results of operations.
Risks associated with acquisitions may hinder our ability to increase revenues
and earnings.
The automobile retailing industry is considered a mature industry in which
minimal growth is expected in industry unit sales. Accordingly, our future
growth depends in large part on our ability to acquire additional dealerships,
as well as on our ability to manage expansion, control costs in our operations
and consolidate both past and future dealership acquisitions into existing
operations. In pursuing a strategy of acquiring other dealerships, we face risks
commonly encountered with growth through acquisitions. These risks include, but
are not limited to:
o incurring significantly higher capital expenditures and operating
expenses;
o failing to assimilate the operations and personnel of the acquired
dealerships;
o entering new markets with which we are unfamiliar;
o potential undiscovered liabilities at acquired dealerships;
o disrupting our ongoing business;
o diverting our limited management resources;
o failing to maintain uniform standards, controls and policies;
o impairing relationships with employees, manufacturers and customers
as a result of changes in management;
o causing increased expenses for accounting and computer systems, as
well as integration difficulties; and
o failure to obtain a manufacturer's consent to the acquisition of one
or more of its dealership franchises.
We may not adequately anticipate all of the demands that our growth will
impose on our systems, procedures and structures, including our financial and
reporting control systems, data processing systems and management structure. If
we cannot adequately anticipate and respond to these demands, our business could
be materially harmed.
Failure to retain qualified management personnel at any acquired
dealership may increase the risk associated with integrating the acquired
dealership.
Installing new computer systems has disrupted existing operations in the
past as management and salespersons adjust to new technologies. We cannot assure
you that we will overcome these risks or any other problems encountered with
either our past or future acquisitions.
Automobile manufacturers exercise significant control over our operations and we
are dependent on them to operate our business.
Each of our dealerships operates pursuant to a franchise agreement with
the applicable automobile manufacturer or manufacturer authorized distributor.
We are significantly dependent on our relationships with these manufacturers.
Without a franchise agreement, we cannot obtain new vehicles from a
manufacturer.
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Vehicles manufactured by the following manufacturers accounted for the
indicated approximate percentage of our new vehicle revenue for the nine months
ended September 30, 2001:
Percentage of Historical
New Vehicle Revenues for
the Nine Months Ended
Manufacturer September 30, 2001
------------ ------------------------
Ford 18.8%
Honda 13.1%
BMW 11.1%
Toyota 11.1%
General Motors 10.8%
Chrysler 8.6%
Nissan 5.3%
Lexus 5.3%
No other manufacturer accounted for more than five percent of our new
vehicle sales during the first nine months of 2001. A significant decline in the
sale of Ford, Honda, Chrysler, General Motors, BMW, Toyota, Nissan or Lexus new
vehicles could have a material adverse effect on our revenue and profitability.
Manufacturers exercise a great degree of control over the operations of
our dealerships. Each of our franchise agreements provides for termination or
non-renewal for a variety of causes, including any unapproved change of
ownership or management and other material breaches of the franchise agreements.
Manufacturers may also have a right of first refusal if we seek to sell
dealerships. We believe that we will be able to renew at expiration all of our
existing franchise agreements, other than our Oldsmobile and Plymouth franchise
agreements. DaimlerChrysler phased out the Plymouth division on October 1, 2001
and General Motors is in the process of phasing out the Oldsmobile division.
Neither of these actions will materially affect us.
o We cannot assure you that any of our existing franchise agreements will
be renewed or that the terms and conditions of such renewals will be
favorable to us.
o If a manufacturer is allowed under state franchise laws to terminate or
decline to renew one or more of our significant franchise agreements,
this action could have a material adverse effect on our results of
operations.
o Actions taken by manufacturers to exploit their superior bargaining
position in negotiating the terms of renewals of franchise agreements
or otherwise could also have a material adverse effect on our results
of operations.
o Manufacturers allocate their vehicles among dealerships generally based
on the sales history of each dealership. Consequently, we also depend
on the manufacturers to provide us with a desirable mix of popular new
vehicles. These popular vehicles produce the highest profit margins and
tend to be the most difficult to obtain from the manufacturers.
o Our dealerships depend on the manufacturers for certain sales
incentives, warranties and other programs that are intended to promote
and support dealership new vehicle sales. Manufacturers have
historically made many changes to their incentive programs during each
year. A reduction or discontinuation of a manufacturer's incentive
programs may materially adversely affect our profitability. Some of
these programs include:
o customer rebates on new vehicles;
o dealer incentives on new vehicles;
o special financing or leasing terms;
o warranties on new and used vehicles; and
o sponsorship of used vehicle sales by authorized new vehicle dealers.
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Adverse conditions affecting one or more manufacturers may negatively impact our
profitability.
The success of each of our dealerships depends to a great extent on the
manufacturers':
o financial condition;
o marketing;
o vehicle design;
o production capabilities;
o management; and
o labor relations.
Nissan, Dodge (a Chrysler brand) and Volvo have had significant difficulty
in the U.S. market in the recent past. If any of our manufacturers, particularly
Ford, Honda, Chrysler, General Motors, BMW, Toyota, Nissan, or Lexus were unable
to design, manufacture, deliver and market their vehicles successfully, the
manufacturer's reputation and our ability to sell the manufacturer's vehicles
could be adversely affected.
Events such as strikes and other labor actions by unions, or negative
publicity concerning a particular manufacturer or vehicle model, may materially
and adversely affect our results of operations. Similarly, the delivery of
vehicles from manufacturers later than scheduled, which may occur particularly
during periods when new products are being introduced, can reduce our sales.
Although we have attempted to lessen our dependence on any one manufacturer by
establishing dealer relationships with a number of different domestic and
foreign automobile manufacturers, adverse conditions affecting manufacturers,
Ford, Honda, Chrysler, General Motors, BMW, Toyota, Nissan or Lexus in
particular, could have a material adverse effect on our results of operations.
In the event of a strike, we may need to purchase inventory from other
automobile dealers at prices higher than we would be required to pay to the
affected manufacturer in order to carry an adequate level and mix of inventory.
Consequently, strikes or other adverse labor actions could materially adversely
affect our profitability.
Manufacturer stock ownership/issuance restrictions limit our ability to issue
additional equity to meet our financing needs.
Standard automobile franchise agreements prohibit transfers of any
ownership interests of a dealership and its parent and, therefore, often do not
by their terms accommodate public trading of the capital stock of a dealership
or its parent. Our manufacturers have agreed to permit trading in Sonic's Class
A common stock. A number of manufacturers impose restrictions on the
transferability of the Class A common stock.
o Honda may force the sale of our Honda or Acura franchises if (1) an
automobile manufacturer or distributor acquires securities having
five percent or more of the voting power of Sonic's securities, (2)
an individual or entity that has either a felony criminal record or
a criminal record relating solely to dealings with an automobile
manufacturer, distributor or dealership acquires securities having
five percent or more of the voting power of Sonic's securities or
(3) any individual or entity acquires securities having 20% or more
of the voting power of Sonic's securities and Honda reasonably deems
such acquisition to be detrimental to Honda's interests in any
material respect.
o Ford may cause us to sell or resign from one or more of our Ford,
Lincoln or Mercury franchises if any person or entity (other than O.
Bruton Smith and any entity controlled by him) acquires or has a
binding agreement to acquire securities having 50% or more of the
voting power of Sonic's securities.
o General Motors and Infiniti may force the sale of their respective
franchises if 20% of more of Sonic's voting securities are similarly
acquired.
o Toyota may force the sale of one or more of Sonic's Toyota or Lexus
dealerships if (1) an automobile manufacturer or distributor
acquires securities, or the right to vote securities by proxy or
voting agreement, having more than five percent of the voting power
of Sonic's securities, (2) any individual or entity acquires
securities, or the right to vote securities by proxy or voting
agreement, having more than 20% of the voting power of Sonic's
securities, (3) there is a material change in the composition of
Sonic's Board of Directors that Toyota reasonably concludes will be
materially incompatible with Toyota's interests or will have an
adverse effect on Toyota's reputation or brands in the marketplace
or the performance of Sonic or its Toyota and Lexus dealerships, (4)
there occurs an extraordinary transaction whereby Sonic's
stockholders immediately prior to such transaction own in the
aggregate securities having less than a majority of
17
the voting power of Sonic or the successor entity, or (5) any
individual or entity acquires control of Sonic, Sonic Financial
Corporation or any Toyota or Lexus dealership owned by Sonic.
o Chrysler requires prior approval of any future sales that would
result in a change in voting or managerial control of Sonic.
o Mercedes requires 60 days advance notice to approve any acquisition
of 20% or more of Sonic's voting securities.
o Volkswagen has approved the sale of no more than 25% of the voting
control of Sonic, and any future changes in ownership or transfers
among Sonic's current stockholders that could affect the voting or
managerial control of Sonic's Volkswagen franchise subsidiaries
requires the prior approval of Volkswagen.
Other manufacturers may impose similar or more limiting restrictions.
Our lending arrangements also require that holders of Sonic's Class B
common stock maintain voting control over Sonic. We are unable to prevent our
stockholders from transferring shares of our common stock, including transfers
by holders of the Class B common stock. If such transfer results in a change in
control of Sonic, it could result in the termination or non-renewal of one or
more of our franchise agreements and a default under our credit arrangements.
Moreover, these issuance limitations may impede our ability to raise capital
through additional equity offerings or to issue our stock as consideration for
future acquisitions.
Manufacturers' restrictions on acquisitions could limit our future growth.
We are required to obtain the consent of the applicable manufacturer
before the acquisition of any additional dealership franchises. We cannot assure
you that manufacturers will grant such approvals, although the denial of such
approval may be subject to certain state franchise laws.
Obtaining manufacturer consent for acquisitions could also take a
significant amount of time. Obtaining manufacturer approval for our completed
acquisitions has taken approximately three to five months. We believe that
manufacturer approvals of subsequent acquisitions from manufacturers with which
we have previously completed applications and agreements may take less time,
although we cannot provide you with assurances to that effect. In addition,
under an applicable franchise agreement or under state law, a manufacturer may
have a right of first refusal to acquire a dealership in the event we seek to
acquire that dealership franchise.
If we experience delays in obtaining, or fail to obtain, manufacturer
approvals for dealership acquisitions, our growth strategy could be materially
adversely affected. In determining whether to approve an acquisition, the
manufacturers may consider many factors, including:
o our management's moral character;
o the business experience of the post-acquisition dealership
management;
o our financial condition;
o our ownership structure; and
o manufacturer-determined consumer satisfaction index scores.
In addition, a manufacturer may seek to limit the number of its
dealerships that we may own, our national market share of that manufacturer's
products or the number of dealerships we may own in a particular geographic
area. These restrictions may not be enforceable under state franchise laws.
o Our framework agreement with Ford places the following restrictions
on our ability to acquire Ford or Lincoln Mercury dealerships:
o We may not acquire additional Ford or Lincoln Mercury
dealerships unless we continue to satisfy Ford's requirement
that 80% of our Ford dealerships meet Ford's performance
criteria. Beyond that, we may not make an acquisition that would
result in our owning Ford or Lincoln Mercury dealerships with
sales exceeding five percent of the total Ford or total Lincoln
Mercury retail sales of new vehicles in the United States for
the preceding calendar year.
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o We may not acquire additional Ford or Lincoln Mercury dealerships in
a particular state if such an acquisition would result in our owning
Ford or Lincoln Mercury dealerships with sales exceeding 5% of the
total Ford or total Lincoln Mercury retail sales of new vehicles in
that state for the preceding calendar year.
o We may not acquire additional Ford dealerships in a Ford-defined
market area if such an acquisition would result in our owning more
than one Ford dealership in a market having a total of three or less
Ford dealerships or owning more than 25% of the Ford dealerships in
a market having a total of four or more Ford dealerships. An
identical market area restriction applies for Lincoln Mercury
dealerships.
o Our framework agreement with Toyota limits the number of Toyota and Lexus
dealerships that we may own on a national level, in each Toyota-defined
geographic region or distributor area, and in each Toyota or Lexus-defined
metropolitan market. Nationally, the limitations on Toyota dealerships
owned by us are for specified time periods and are based on specified
percentages of total Toyota unit sales in the United States. In
Toyota-defined geographic regions or distributor areas, the limitations on
Toyota dealerships owned by us are specified by the applicable Toyota
regional limitations policy or distributor's policy in effect at such
time. In Toyota-defined metropolitan markets, the limitations on Toyota
dealerships owned by us are based on Toyota's metro markets limitation
policy then in effect, which currently provides a limitation based on the
total number of Toyota dealerships in the particular market. For Lexus, we
may own no more than one Lexus dealership in any one Lexus-defined
metropolitan market and no more than three Lexus dealerships nationally.
o Our framework agreement with Honda limits the number of Honda and Acura
dealerships that we may own on a national level, in each Honda and
Acura-defined geographic zone, and in each Honda-defined metropolitan
market. Nationally, the limitations on Honda dealerships owned by us are
based on specified percentages of total Honda unit sales in the United
States. In Honda-defined geographic zones, the limitations on Honda
dealerships owned by us are based on specified percentages of total Honda
unit sales in each of 10 Honda-defined geographic zones. In Honda-defined
metropolitan markets, the limitations on Honda dealerships owned by us are
specified numbers of dealerships in each market, which numerical limits
vary based mainly on the total number of Honda dealerships in a particular
market. For Acura, we may own no more than (A) two Acura dealerships in a
Honda-defined metropolitan market, (B) three Acura dealerships in any one
of six Honda-defined geographic zones and (C) five Acura dealerships
nationally. Honda also prohibits ownership of contiguous dealerships.
o Mercedes restricts any company from owning Mercedes dealerships with sales
of more than 3% of total sales of Mercedes vehicles in the U.S. during the
previous calendar year.
o General Motors currently limits the maximum number of General Motors
dealerships that we may acquire to 50% of the General Motors dealerships,
by brand line, in a General Motors-defined geographic market area having
multiple General Motors dealers.
o Subaru limits us to no more than two Subaru dealerships within certain
designated market areas, four Subaru dealerships within its Mid-America
region and 12 dealerships within Subaru's entire area of distribution.
o BMW currently prohibits publicly held companies from owning BMW
dealerships representing more than 10% of all BMW sales in the U.S. or
more than 50% of BMW dealerships in a given metropolitan market.
o Toyota, Honda and Mercedes also prohibit the coupling of a franchise with
any other brand without their consent.
As a condition to granting their consent to our acquisitions, a number of
manufacturers required additional restrictions. These agreements principally
restrict:
o material changes in our company or extraordinary corporate transactions
such as a merger, sale of a material amount of assets or change in our
board of directors or management that could have a material adverse effect
on the manufacturer's image or reputation or could be materially
incompatible with the manufacturer's interests;
o the removal of a dealership general manager without the consent of the
manufacturer; and
o the use of dealership facilities to sell or service new vehicles of other
manufacturers.
In addition, manufacturer consent to our acquisitions may impose
conditions, such as requiring facilities improvements by us at the acquired
dealership.
19
If we are unable to comply with these restrictions, we generally:
o must sell the assets of the dealerships to the manufacturer or to a
third party acceptable to the manufacturer; or
o terminate the dealership agreements with the manufacturer.
Other manufacturers may impose other and more stringent restrictions in
connection with future acquisitions.
As of December 10, 2001, we owned the following number of franchises for
the following manufacturers:
Number of Number of
Manufacturer Franchises Manufacturer Franchises
- ------------ ---------- ------------ ----------
Chevrolet 13 Lexus 4
Honda 13 Lincoln 4
Ford 12 Mercedes 4
BMW 10 Hyundai 3
Cadillac 10 Isuzu 3
Nissan 10 Mitsubishi 3
Toyota 9 Kia 2
Volvo 9 Audi 2
Dodge 8 Infiniti 2
Chrysler 7 Pontiac 2
Jeep 6 Porsche 2
Mercury 5 GMC 1
Oldsmobile 4 Acura 1
Volkswagen 4 Land Rover 1
Subaru 1
Our failure to meet a manufacturer's consumer satisfaction requirements may
adversely affect our ability to acquire new dealerships and our profitability.
Many manufacturers attempt to measure customers' satisfaction with their
sales and warranty service experiences through systems which vary from
manufacturer to manufacturer, but which are generally known as customer
satisfaction index, or CSI, scores. These manufacturers may use a dealership's
CSI scores as a factor in evaluating applications for additional dealership
acquisitions. The components of CSI have been modified by various manufacturers
from time to time in the past, and we cannot assure you that these components
will not be further modified or replaced by different systems in the future. To
date, we have not been materially adversely affected by these standards and have
not been denied approval of any acquisition based on low CSI scores, except for
Jaguar's refusal to approve our acquisition of a Chattanooga Jaguar franchise in
1997. However, we cannot assure you that we will be able to comply with these
standards in the future. A manufacturer may refuse to consent to an acquisition
of one of its franchises if it determines our dealerships do not comply with the
manufacturer's CSI standards. This could materially adversely affect our
acquisition strategy. In addition, we receive payments from the manufacturers
based, in part, on CSI scores, which could be materially adversely affected if
our CSI scores decline.
There are limitations on our financial resources available for acquisitions.
We intend to finance our acquisitions with cash generated from operations,
through issuances of our stock or debt securities and through borrowings under
credit arrangements.
o We cannot assure you that we will be able to obtain additional
financing by issuing stock or debt securities.
o Using cash to complete acquisitions could substantially limit our
operating or financial flexibility.
o If we are unable to obtain financing on acceptable terms, we may be
required to reduce the scope of our presently anticipated expansion,
which could materially adversely affect our growth strategy.
We estimate that as of September 30, 2001, we had approximately $229.2
million available for additional borrowings under the Revolving Facility, based
on a borrowing base calculated on the basis of our receivables, inventory and
equipment and a pledge of certain additional collateral by an affiliate of Sonic
(which borrowing base was $541.6 million of the $600.0 million facility at
September 30, 2001).
20
In addition, we are dependent to a significant extent on our ability to
finance our inventory with "floor plan financing." Floor plan financing is how a
dealership finances its purchase of new vehicles from a manufacturer. The
dealership borrows money to buy a particular vehicle from the manufacturer and
pays off the loan when it sells that particular vehicle, paying interest during
this period. We must obtain new floor plan financing or obtain consents to
assume existing floor plan financing in connection with our acquisition of
dealerships.
Substantially all the assets of our dealerships are pledged to secure this
floor plan indebtedness. In addition, substantially all the real property and
assets of our subsidiaries that are constructing new dealerships are pledged
under our Mortgage Facility with Ford Motor Credit. These pledges may impede our
ability to borrow from other sources.
Finally, because Ford Motor Credit is associated with Ford, any
deterioration of our relationship with one could adversely affect our
relationship with the other. The same is true of our relationships with Chrysler
and Chrysler Financial, GM and GMAC, and Toyota and Toyota Credit.
Although O. Bruton Smith, our Chairman and Chief Executive Officer, has
previously facilitated our acquisition financing, we cannot assure you that he
will be willing or able to assist in our financing needs in the future.
Mr. Smith initially guaranteed obligations under the Revolving Facility.
Such obligations were further secured with a pledge of shares of common stock of
Speedway Motorsports, Inc. ("SMI") owned by Sonic Financial Corporation ("SFC"),
a corporation controlled by Mr. Smith having an estimated value at the time of
the pledge of approximately $50.0 million (the "Revolving Pledge"). When the
Revolving Facility's borrowing limit was increased to $75.0 million in 1997, Mr.
Smith's personal guarantee of Sonic's obligations under the Revolving Facility
was released, although the Revolving Pledge remained in place. Mr. Smith was
also required by Ford Motor Credit to lend $5.5 million (the "Subordinated Smith
Loan") to Sonic to increase our capitalization because the net proceeds from our
November 1997 initial public offering were significantly less than expected. In
August 1998, Ford Motor Credit released the Revolving Pledge. In November 1999,
Ford Motor Credit further increased the borrowing limit under the Revolving
Facility to $350.0 million subject to a borrowing base calculated on the basis
of our receivables, inventory and equipment and a continuing pledge by SFC of
five million shares of SMI common stock. Presently, the borrowing limit of the
Revolving Facility is $600.0 million, subject to a similar borrowing base,
including SFC's continuing pledge of SMI stock.
Before our acquisition of FirstAmerica Automotive, Inc. ("FirstAmerica")
Mr. Smith guaranteed the obligations of FirstAmerica under FirstAmerica's new
acquisition line of credit with Ford Motor Credit. FirstAmerica obtained this
new financing to enable it to complete its then pending acquisitions. The
borrowing limit on this credit facility was approximately $138 million. Mr.
Smith had guaranteed approximately $107 million of this amount, which guarantee
was secured by a pledge of five million shares of SMI common stock owned by SFC.
We assumed FirstAmerica's obligations to Ford Motor Credit under our Revolving
Facility when we acquired FirstAmerica. Mr. Smith's secured guarantee in favor
of Ford Motor Credit guaranteed a portion of our obligations under the Revolving
Facility until August 2000. After August 2000, Mr. Smith did not provide a
guarantee in favor of the Revolving Facility lenders, but SFC continues to
pledge SMI stock as collateral. We cannot assure you that Mr. Smith will be
willing or able to provide similar guarantees or credit support in the future to
facilitate Sonic's future acquisitions.
Automobile retailing is a mature industry with limited growth potential in new
vehicle sales, and our acquisition strategy will affect our revenues and
earnings.
The United States automobile dealership industry is considered a mature
industry in which minimal growth is expected in unit sales of new vehicles. As a
consequence, growth in our revenues and earnings is likely to be significantly
affected by our success in acquiring and integrating dealerships and the pace
and size of such acquisitions.
High competition in automobile retailing reduces our profit margins on vehicle
sales. Further, the use of the Internet in the car purchasing process could
materially adversely affect us.
Automobile retailing is a highly competitive business with approximately
21,600 franchised automobile dealerships in the United States at the end of
2000. Our competition includes:
o Franchised automobile dealerships selling the same or similar makes of
new and used vehicles that we offer in our markets and sometimes at
lower prices than we offer. Some of these dealer competitors may be
larger and have greater financial and marketing resources than we do;
o Other franchised dealers;
21
o Private market buyers and sellers of used vehicles;
o Used vehicle dealers;
o Internet-based vehicle brokers that sell vehicles obtained from
franchised dealers directly to consumers;
o Service center chain stores; and
o Independent service and repair shops.
Our financing and insurance, or "F&I", business and other related
businesses, which provide higher contributions to our earnings than sales of new
and used vehicles, are subject to strong competition from various financial
institutions and other third parties. This competition is increasing as these
products are now being marketed and sold over the Internet.
Gross profit margins on sales of new vehicles have been generally
declining since 1986. We do not have any cost advantage in purchasing new
vehicles from manufacturers, due to economies of scale or otherwise. We
typically rely on advertising, merchandising, sales expertise, service
reputation and dealership location to sell new vehicles. The following factors
could have a significant impact on our business:
o The Internet has become a significant part of the sales process in
our industry. Customers are using the Internet to compare pricing
for cars and related F&I services, which may further reduce margins
for new and used cars and profits for related F&I services. In
addition, CarsDirect.com and others are selling vehicles over the
Internet without the benefit of having a dealership franchise,
although they must currently source their vehicles from a franchised
dealer. CarsDirect.com is in an alliance with United Auto Group to
facilitate their sourcing of vehicles. Also, AutoNation, Inc. is
selling vehicles for its new car dealerships through its
AutoNationDirect.com web site. If Internet new vehicle sales are
allowed to be conducted without the involvement of franchised
dealers, our business could be materially adversely affected. In
addition, other franchise groups have aligned themselves with
Internet car sellers or are spending significant sums on developing
their own Internet capabilities, which could materially adversely
affect our business.
o Our revenues and profitability could be materially adversely
affected should manufacturers decide to enter the retail market
directly .
o The increased popularity of short-term vehicle leasing also has
resulted, as these leases expire, in a large increase in the number
of late model vehicles available in the market, which puts added
pressure on new and used vehicle margins.
o Some of our competitors may be capable of operating on smaller
gross margins than we are, and the on-line auto brokers have been
operating at a loss.
o As we seek to acquire dealerships in new markets, we may face
increasingly significant competition as we strive to gain market
share through acquisitions or otherwise. This competition includes
other large dealer groups and dealer groups that have publicly
traded equity.
Our franchise agreements do not grant us the exclusive right to sell a
manufacturer's product within a given geographic area. Our revenues or
profitability could be materially adversely affected if any of our manufacturers
award franchises to others in the same markets where we operate, although
certain state franchise laws may limit such activities by the manufacturers. A
similar adverse effect could occur if existing competing franchised dealers
increase their market share in our markets. Our gross margins may decline over
time as we expand into markets where we do not have a leading position. These
and other competitive pressures could materially adversely affect our results of
operations.
The cyclical and local nature of automobile sales may adversely affect our
profitability.
The automobile industry is cyclical and historically has experienced
periodic downturns characterized by oversupply and weak demand. Many factors
affect the industry, including general economic conditions and consumer
confidence, fuel prices, the level of discretionary personal income,
unemployment rates, interest rates and credit availability. We are in the midst
of an industry and general economic slowdown that could materially adversely
effect our business.
New and used vehicle sales substantially slowed immediately following the
terrorist attacks of September 11, 2001. In response, certain manufacturers,
especially of domestic brands, have introduced incentive programs, which have
contributed to a significant increase in the pace of new vehicle sales in
October and November. In addition, we have seen an increase in year over year
used vehicle sales in October and November as well as an increase in sales of
new vehicles whose manufacturers have not
22
offered similar incentive programs. We are not able to determine how long the
manufacturers will continue to offer these aggressive incentive programs or how
long the overall increase in demand will continue, but expect that, absent these
incentive programs, vehicle sales may begin to slow again in December and
continue slowing into 2002. In addition, we are not able to determine the
long-term consequences the terrorist attacks and subsequent outbreaks of
hostilities will have on general economic conditions, our industry, or Sonic.
Local economic, competitive and other conditions also affect the
performance of dealerships. Our dealerships currently are located in the
Atlanta, Baltimore, Birmingham, Charleston, Charlotte, Chattanooga, Columbia,
Columbus, Dallas, Daytona Beach, Fort Myers, Greenville/Spartanburg, Houston,
Las Vegas, Los Angeles, Mobile/Pensacola, Montgomery, Nashville, Oklahoma City,
San Diego, San Francisco, San Jose/Silicon Valley, Tampa/Clearwater, Tulsa and
Washington, D.C. markets. We intend to pursue acquisitions outside of these
markets, but our operational focus is on our current markets. As a result, our
results of operations depend substantially on general economic conditions and
consumer spending habits in the Southeast and Northern California and, to a
lesser extent, the Houston and Columbus markets. Sales in our Northern
California market represented 20.6% of our sales for the nine months ended
September 30, 2001. Our results of operations also depend on other factors, such
as tax rates and state and local regulations specific to the states in which we
currently operate. Sonic may not be able to expand geographically and any such
expansion may not adequately insulate it from the adverse effects of local or
regional economic conditions.
We can offer you no assurances that we will be able to continue executing our
acquisition strategy without the costs of future acquisitions escalating.
Although there are many potential acquisition candidates that fit our
acquisition criteria, we cannot assure you that we will be able to consummate
any such transactions in the future or identify those candidates that would
result in the most successful combinations, or that future acquisitions will be
able to be consummated at acceptable prices and terms. In addition, increased
competition for acquisition candidates could result in fewer acquisition
opportunities for us and higher acquisition prices. The magnitude, timing,
pricing and nature of future acquisitions will depend upon various factors,
including:
. the availability of suitable acquisition candidates;
. competition with other dealer groups for suitable acquisitions;
. the negotiation of acceptable terms;
. our financial capabilities;
. our stock price;
. the availability of skilled employees to manage the acquired companies;
and
. general economic and business conditions.
We may be required to file applications and obtain clearances under
applicable federal antitrust laws before completing an acquisition. These
regulatory requirements may restrict or delay our acquisitions, and may increase
the cost of completing acquisitions.
The operating condition of acquired businesses cannot be determined accurately
until we assume control.
Although we conduct what we believe to be a prudent level of investigation
regarding the operating condition of the businesses we purchase, in light of the
circumstances of each transaction, an unavoidable level of risk remains
regarding the actual operating condition of these businesses. Until we actually
assume operating control of such business assets, we may not be able to
ascertain the actual value of the acquired entity.
Potential conflicts of interest between Sonic and its officers could adversely
affect our future performance.
O. Bruton Smith serves as the chairman and chief executive officer of SMI.
Accordingly, Sonic competes with SMI for the management time of Mr. Smith. Under
his employment agreement with Sonic, Mr. Smith is required to devote
approximately 50% of his business time to our business. The remainder of his
business time may be devoted to other entities, including SMI.
Sonic has in the past and will likely in the future enter into
transactions with Mr. Smith, entities controlled by Mr. Smith or other
affiliates of Sonic. We believe that all of our existing arrangements with
affiliates are as favorable to us as if the arrangements were negotiated between
unaffiliated parties, although the majority of such transactions have neither
been
23
independently verified in that regard nor are likely to be so verified in
the future. Potential conflicts of interest could arise in the future between
Sonic and its officers or directors in the enforcement, amendment or termination
of arrangements existing between them.
Under Delaware law generally, a corporate insider is precluded from acting
on a business opportunity in his individual capacity if that opportunity is
(1) one which the corporation is financially able to undertake,
(2) is in the line of the corporation's business,
(3) is of practical advantage to the corporation, and
(4) is one in which the corporation has an interest or reasonable
expectancy.
Accordingly, our corporate insiders are generally prohibited from engaging
in new dealership-related business opportunities outside of Sonic unless a
majority of Sonic's disinterested directors decide that such opportunities are
not in our best interest.
Sonic's charter contains provisions providing that transactions between
Sonic and its affiliates must be no less favorable to Sonic than would be
available in similar transactions with an unrelated third party. Moreover, any
such transactions involving aggregate payments in excess of $500,000 must be
approved by a majority of Sonic's directors and a majority of Sonic's
independent directors. If not so approved, Sonic must obtain an opinion as to
the financial fairness of the transaction to be issued by an investment banking
or appraisal firm of national standing. In addition, the terms of the Revolving
Facility and Sonic's existing senior subordinated notes restrict transactions
with affiliates in a manner similar to Sonic's charter restrictions.
The loss of key personnel and limited management and personnel resources could
adversely affect our operations and growth.
Our success depends to a significant degree upon the continued
contributions of Sonic's management team, particularly its senior management,
and service and sales personnel. Additionally, manufacturer franchise agreements
may require the prior approval of the applicable manufacturer before any change
is made in franchise general managers. We do not have employment agreements with
most of our dealership managers and other key dealership personnel.
Consequently, the loss of the services of one or more of these key employees
could have a material adverse effect on our results of operations.
In addition, as we expand we may need to hire additional managers. The
market for qualified employees in the industry and in the regions in which we
operate, particularly for general managers and sales and service personnel, is
highly competitive and may subject us to increased labor costs during periods of
low unemployment. The loss of the services of key employees or the inability to
attract additional qualified managers could have a material adverse effect on
our results of operations. In addition, the lack of qualified management or
employees employed by potential acquisition candidates may limit our ability to
consummate future acquisitions.
Seasonality of the automotive retail business adversely affects first quarter
revenues.
Our business is seasonal, with a disproportionate amount of revenues
received generally in the second, third and fourth fiscal quarters.
Import product restrictions and foreign trade risks may impair our ability to
sell foreign vehicles profitably.
Some of the vehicles and major components of vehicles we sell are
manufactured in foreign countries. Accordingly, we are subject to the import and
export restrictions of various jurisdictions and are dependent to some extent
upon general economic conditions in, and political relations with, a number of
foreign countries, particularly Germany, Japan and Sweden. Fluctuations in
currency exchange rates may also adversely affect our sales of vehicles produced
by foreign manufacturers. Imports into the United States may also be adversely
affected by increased transportation costs and tariffs, quotas or duties.
Governmental regulation and environmental regulation compliance costs may
adversely affect our profitability.
We are subject to a wide range of federal, state and local laws and
regulations, such as local licensing requirements and consumer protection laws.
The violation of these laws and regulations can result in civil and criminal
penalties against us or in a cease and desist order against our operations if we
are not in compliance. Our future acquisitions may also be subject to
regulation, including antitrust reviews. We believe that we comply in all
material respects with all laws and regulations applicable to our business, but
future regulations may be more stringent and require us to incur significant
additional costs.
24
Our facilities and operations are also subject to federal, state and local
laws and regulations relating to environmental protection and human health and
safety, including those governing wastewater discharges, air emissions, the
operation and removal of underground and aboveground storage tanks, the use,
storage, treatment, transportation, release, recycling and disposal of solid and
hazardous materials and wastes and the cleanup of contaminated property or
water. We may be required by these laws to pay the full amount of the costs of
investigation and/or remediation of contaminated properties, even if we are not
at fault for disposal of the materials or if such disposal was legal at the
time. People who may be found liable under these laws and regulations include
the present or former owner or operator of a contaminated property and companies
that generated, transported, disposed of or arranged for the transportation or
disposal of hazardous substances found at the property.
Our past and present business operations are subject to environmental laws
and regulations governing the use, storage, handling, recycling and disposal of
hazardous or toxic substances such as new and waste motor oil, oil filters,
transmission fluid, antifreeze, freon, new and waste paint and lacquer thinner,
batteries, solvents, lubricants, degreasing agents, gasoline and diesel fuels.
We are also subject to laws and regulations relating to underground storage
tanks that exist or used to exist at many of our properties. Like many of our
competitors, we have incurred, and will continue to incur, capital and operating
expenditures and other costs in complying with such laws and regulations. In
addition, soil and groundwater contamination exists at certain of our
properties. We cannot assure you that our other properties have not been or will
not become similarly contaminated. In addition, we could become subject to
potentially material new or unforeseen environmental costs or liabilities
because of our acquisitions.
Environmental laws and regulations, including those governing air
emissions and underground storage tanks, could require compliance with new or
more stringent standards that are imposed in the future. We cannot predict what
other environmental legislation or regulations will be enacted in the future,
how existing or future laws or regulations will be administered or interpreted
or what environmental conditions may be found to exist in the future.
Consequently, we may be required to make substantial expenditures in the future.
Concentration of voting power and antitakeover provisions of our charter,
Delaware law and our dealer agreements may reduce the likelihood of any
potential change of control of Sonic.
Sonic's common stock is divided into two classes with different voting
rights. This dual class stock ownership allows the present holders of the Class
B common stock to control Sonic. Holders of Class A common stock have one vote
per share on all matters. Holders of Class B common stock have 10 votes per
share on all matters, except that they have only one vote per share on any
transaction proposed by the Board of Directors or a Class B common stockholder
or otherwise benefiting the Class B common stockholders constituting a:
(1) "going private" transaction;
(2) disposition of substantially all of our assets;
(3) transfer resulting in a change in the nature of our business; or
(4) merger or consolidation in which current holders of common stock
would own less than 50% of the common stock following such
transaction.
The holders of Class B common stock currently hold less than a majority of
Sonic's outstanding common stock, but a majority of Sonic's voting power. This
may prevent or discourage a change of control of Sonic even if such action were
favored by holders of Class A common stock.
Sonic's charter and bylaws make it more difficult for its stockholders to
take corporate actions at stockholders' meetings. In addition, options under our
1997 Stock Option Plan become immediately exercisable on a change in control.
Also, Delaware law makes it difficult for stockholders who have recently
acquired a large interest in a company to consummate a business transaction with
the company against its directors' wishes. Finally, restrictions imposed by our
dealer agreements may impede or prevent any potential takeover bid. Generally,
our franchise agreements allow the manufacturers the right to terminate the
agreements upon a change of control of our company and impose restrictions upon
the transferability of any significant percentage of our stock to any one person
or entity who may be unqualified, as defined by the manufacturer, to own one of
its dealerships. The inability of a person or entity to qualify with one or more
of our manufacturers may prevent or seriously impede a potential takeover bid.
These agreements, corporate documents and laws, as well as provisions of our
lending arrangements creating an event of default on a change in control, may
have the effect of delaying or preventing a change in control or preventing
stockholders from realizing a premium on the sale of their shares upon an
acquisition of Sonic.
New accounting pronouncements on business combinations and goodwill could affect
future earnings.
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141: Business
Combinations. SFAS 141 prohibits the pooling-of-interests method of accounting
and requires the use of the purchase method of accounting for all business
combinations initiated after June 30, 2001. In addition, SFAS 141
25
provides additional guidance regarding the measurement and recognition of
goodwill and other acquired intangible assets. The provisions of this standard
became effective beginning July 1, 2001. For acquisitions after this, we are
required to classify certain intangible assets, such as franchise rights granted
from automobile manufacturers, as intangible assets apart from goodwill.
In July 2001, the FASB also issued SFAS No. 142: Goodwill and Other
Intangible Assets. Among other things, SFAS 142 no longer permits the
amortization of goodwill, but requires that the carrying amount of goodwill be
reviewed and reduced against operations if it is found to be impaired. This
review must be performed on at least an annual basis, but must also be performed
upon the occurrence of an event or circumstance that indicates a possible
reduction in value. SFAS 142 does require the amortization of intangible assets
other than goodwill over their useful economic lives, unless the useful economic
life is determined to be indefinite. These intangible assets are required to be
reviewed for impairment in accordance with SFAS 144: Accounting for Impairment
or Disposal of Long-Lived Assets. Intangible assets that are determined to have
an indefinite economic life may not be amortized and must be reviewed for
impairment in accordance with the terms of SFAS 142. The provisions of SFAS 142
become effective for us beginning January 1, 2002; however, goodwill and other
intangible assets determined to have an indefinite useful life acquired in
business combinations completed after June 30, 2001 will not be amortized. Early
adoption and retroactive application is not permitted for Sonic. While we are
currently evaluating the provisions of SFAS 142, we have not yet determined its
full impact on our consolidated financial statements. As of December 31, 2000,
the carrying amount of goodwill was $668.8 million and represented 37.4% of
total assets and 148.3% of total stockholders' equity. As of September 30, 2001,
the carrying amount of goodwill was $689.2 million and represented 40.8% of
total assets and 140.7% of total stockholders' equity.
In August 2001, the FASB issued SFAS No. 144: Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS 144 establishes a single
accounting model for assets to be disposed of by sale whether previously held
and used or newly acquired. SFAS 144 is effective for fiscal years beginning
after December 15, 2001. We are currently evaluating the provisions of SFAS 144
and have not yet determined the impact on our consolidated financial statements.
26
THE EXCHANGE OFFER
Background and Reasons for the Exchange Offer
We issued the Series B notes on December 10, 1998 in exchange for $125.0
million of Series A notes.
On November 19, 2001, we privately placed $75.0 million of Series C notes.
Simultaneously with the sale of the Series C notes, we entered into a
registration rights agreement with the initial purchasers of the Series C
notes--Merrill Lynch, Pierce, Fenner & Smith Incorporated and Banc of America
Securities LLC. Under this registration rights agreement, we agreed to file this
registration statement regarding the exchange of all of the outstanding Series B
and Series C notes for Series D notes. The terms of the Series D notes will be
identical in all material respects to the Series B and Series C notes. We also
agreed to use our reasonable best efforts to cause this registration statement
to become effective with the Commission. The summary herein of certain
provisions of the registration rights agreement does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of the registration rights agreement.
Under the registration rights agreement we agreed, for the benefit of the
holders of the Series C notes, at our cost, to use our reasonable best efforts
(a) to file with the Commission this registration statement with
respect to the exchange offer for the Series D notes on or before
January 18, 2002,
(b) to cause the exchange offer registration statement to be declared
effective under the Securities Act on or before April 3, 2002,
(c) to keep the exchange offer registration statement effective until
the closing of this exchange offer, and
(d) to cause the exchange offer to be consummated on or before May 3,
2002.
Promptly after this registration statement has been declared effective, we
will offer the Series D notes in exchange for surrender of the Series B notes
and the Series C notes. We will keep the exchange offer open for not less than
30 days (or longer if required by applicable law) after the date notice of the
exchange offer is mailed to the holders of the Series B notes and the Series C
notes. For each Series B note and Series C note validly tendered to us pursuant
to the exchange offer and not withdrawn by the holder thereof, the holder of
each Series B note or Series C note will receive a Series D note having a
principal amount equal to that of the tendered Series B note or Series C note;
provided that no Series B note will be exchanged pursuant to the exchange offer
unless at least $50 million in aggregate face value of the Series B notes are
tendered and not withdrawn. We can provide no assurance that any Series B notes
will be exchanged in this exchange offer. Interest on each Series D note will
accrue from the last date on which interest was paid on the tendered Series B
note or Series C note in exchange therefor. We will not complete the exchange
offer until after our February 1, 2002 interest payment on the Series B and
Series C notes.
If any changes in law or the applicable interpretations of the staff of
the Commission do not permit us to effect this exchange offer, or if for any
other reason this registration statement is not declared effective by April 3,
2002 the exchange offer is not consummated by May 3, 2002, or upon the request
of any of the initial purchasers, or if a holder of the Series C notes is not
permitted by applicable law to participate in the exchange offer or elects to
participate in the exchange offer but does not receive fully tradable Series D
notes pursuant to the exchange offer, we will, in lieu of effecting the
registration of the Series D notes pursuant to this registration statement and
at our cost,
(a) as promptly as practicable, file with the Commission a shelf
registration statement covering resales of the Series C notes,
(b) use our reasonable best efforts to cause the shelf registration
statement to be declared effective under the Securities Act on or
before May 3, 2002 and
(c) use our reasonable best efforts to keep effective the shelf
registration statement for a period of two years after its
effective date (or for such shorter period that will terminate when
all of the Series C notes covered by the shelf registration
statement have been sold pursuant thereto or cease to be
outstanding).
If we file a shelf registration statement, we will provide to each holder
of the Series C notes copies of the prospectus which is a part of the shelf
registration statement, notify each such holder when the shelf registration
statement for the Series C notes has become effective and take certain other
actions as are required to permit unrestricted resales of the Series C notes. A
holder of Series C notes who sells Series C notes pursuant to the shelf
registration statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver the prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the registration rights agreement which are applicable to such a
holder (including certain indemnification obligations).
27
In the event that (a) the exchange offer registration statement is not
filed with the Commission on or prior to January 18, 2002, (b) the exchange
offer registration statement is not declared effective on or prior to April 3,
2002, (c) the exchange offer is not consummated or a shelf registration
statement is not declared effective, in either case, on or prior to May 3, 2002
or (d) the shelf registration statement is declared effective but shall
thereafter become unusable for more than 30 days in the aggregate of any 12
consecutive month period (each such event referred to in clauses (a) through (d)
above, a "Registration Default"), the interest rate borne by the Series C notes
shall be increased by one-quarter of one percent per annum upon the occurrence
of each Registration Default, which increased rate will further increase by one
quarter of one percent each 90-day period that such additional interest
continues to accrue under any Registration Default, with an aggregate maximum
increase in the interest rate equal to one percent per annum. Following the cure
of all Registration Defaults, the accrual of additional interest will cease and
the interest rate will revert to the original rate.
The form and terms of the Series D notes are identical in all material
respects to the form and terms of the Series B and Series C notes. The Series D
notes, like the Series B notes, will be registered under the Securities Act. The
Series C notes are not currently registered under the Securities Act. As a
result, the Series D notes issued in the exchange offer will not bear legends
restricting their transfer and will not contain the registration rights and
liquidated damage provisions contained in the Series C notes. The Series C notes
provide that, if this registration statement relating to the exchange offer had
not been filed by January 18, 2002, declared effective by April 3, 2002, and the
exchange offer is not consummated by May 3, 2002 except under limited
circumstances, we will pay liquidated damages on the Series C notes. Upon the
completion of the exchange offer, you will not be entitled to any liquidated
damages on your Series C notes or any further registration rights under the
registration rights agreement, except under limited circumstances. The exchange
offer is not extended to holders of Series B or Series C notes in any
jurisdiction where the exchange offer does not comply with the securities or
blue sky laws of that jurisdiction.
In this section entitled "The Exchange Offer," the term "holder" means:
o any person in whose name the Series B or Series C notes are registered
on our books;
o any other person who has obtained a properly completed bond power from
the registered holder; or
o any person whose Series B or Series C notes are held of record by DTC
and who wants to deliver these Series B or Series C notes by book-entry
transfer at DTC.
Terms of the Exchange Offer
We are offering to exchange up to $200.0 million total principal amount of
Series D notes for the same aggregate principal amount of Series B and Series C
notes. The Series B and Series C notes must be tendered properly and not
withdrawn on or before expiration of the exchange offer, as described below. In
exchange for Series B and Series C notes properly tendered and accepted, we will
issue a like total principal amount of up to $200.0 million in Series D notes.
The exchange offer and withdrawal rights expire at 5:00 p.m., New York
City time, on _______, February __, 2002. We may extend this deadline for any
reason. We refer to the last day on which tenders will be accepted, whether on
February __, 2002 or any later date to which the exchange offer may be extended,
as the "Expiration Date." You may tender all, some or none of your Series B or
Series C notes.
The exchange offer is for the Series B notes is conditioned upon the valid
tender of at least $50.0 million in aggregate principal amount of Series B
notes. The exchange offer for the Series C notes is not conditioned upon holders
tendering a minimum principal amount of Series B or Series C notes. As of the
date of this prospectus, there is $125.0 million aggregate principal amount of
Series B notes outstanding and $75.0 million aggregate principal amount of
Series C notes outstanding.
You do not have any appraisal or dissenters' rights in the exchange offer.
If you do not tender Series B or Series C notes or you tender Series B or Series
C notes that we do not accept, your Series B or Series C notes will remain
outstanding. Any Series B or Series C notes that remain outstanding after
completion of the exchange offer will be entitled to the benefits of the
indenture under which they were issued. The Series D notes will be entitled to
the benefits of the indenture under which they will be issued. The Series C
notes will not, however, be entitled to any further registration rights under
the registration rights agreement, except under limited circumstances. See the
section entitled "Risk Factors--Failure to exchange your Series B or Series C
notes may have adverse consequences to you" for more information regarding notes
outstanding after the exchange offer.
After the expiration date, we will return to you as soon as reasonably
practicable any tendered Series B or Series C notes that we did not accept for
exchange.
You will not have to pay brokerage commissions or fees or transfer taxes
for exchanging your Series B or Series C notes if you follow the instructions in
the letter of transmittal. We will pay the charges and expenses, other than
those taxes described below, in the exchange offer. See "--Fees and Expenses"
below for further information regarding fees and expenses.
Neither we nor any of our officers or directors make any recommendation as
to whether you should tender your Series B or Series C notes in the exchange
offer. You must make your own decision after reading this prospectus and the
documents
incorporated by reference, including the discussion entitled "Risk
Factors" beginning on page 11, and consulting with your advisors based on your
own financial position and requirements.
We have the right, in accordance with applicable law, at any time:
o to delay the acceptance of the Series B or Series C notes;
o to terminate the exchange offer if we determine that any of the
conditions to the exchange offer has not occurred or has not been
satisfied or waived;
o to extend the expiration date of the exchange offer and keep all
outstanding notes tendered other than those notes properly withdrawn;
and
o to waive any condition or amend the terms of the exchange offer.
If we materially change the terms of the exchange offer, or if we waive a
material condition of the exchange offer, we will promptly distribute a
prospectus supplement to you disclosing the change or waiver. We also will
extend the exchange offer as required by Rule 14e-1 under the Securities
Exchange Act of 1934.
If we exercise any of the rights listed above, we will promptly give oral
or written notice of the action to the exchange agent, and we will issue a
release to appropriate news agencies. In the case of an extension, an
announcement will be made no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date.
Acceptance of Series B or Series C notes for Exchange; Issuance of
Series D notes
If all the conditions to the exchange offer are met or waived, we will
accept for exchange any and all Series B or Series C notes that are validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
expiration date. We will issue $1,000 principal amount at maturity of registered
Series D notes in exchange for each $1,000 principal amount at maturity of
Series B or Series C notes accepted in the exchange offer. Series B and Series C
notes may be tendered only in minimum denominations of $1,000 principal amount.
As of the date of this prospectus, an aggregate of $125.0 million in principal
amount at maturity of the Series B notes are outstanding and an aggregate of
$75.0 million in principal amount at maturity of the Series C notes are
outstanding. This prospectus, together with the accompanying letter of
transmittal, is first being sent on or about January __, 2002, to the nominee of
the DTC and to others believed to have beneficial ownership in the Series B and
Series C notes.
We will be deemed to have exchanged Series B or Series C notes validly
tendered and not withdrawn when we give oral or written notice to the exchange
agent of our acceptance. The exchange agent is an agent for us for receiving
tenders of Series B or Series C notes, letters of transmittal and related
documents. The exchange agent is also an agent for tendering holders for
receiving Series B and Series C notes, letters of transmittal and related
documents and transmitting Series D notes to validly tendering holders. If for
any reason, we:
o delay the acceptance or exchange of any Series B or Series C notes;
o extend the exchange offer; or
o are unable to accept or Series D notes,
then the exchange agent may, on our behalf and subject to Rule 14e-1(c) under
the Exchange Act, retain tendered Series B and Series C notes. Notes that the
exchange agent retains may not be withdrawn, except according to the withdrawal
procedures outlined below in the section entitled "--Withdrawal Rights."
In tendering Series B or Series C notes, you must represent and warrant in
the letter of transmittal or in an agent's message, which is described below,
that:
o you have full power and authority to tender, exchange, sell, assign and
transfer Series B or Series C notes;
o we will acquire good, marketable and unencumbered title to the tendered
Series B or Series C notes, free and clear of all liens, restrictions,
charges and other encumbrances; and
o the Series B or Series C notes tendered for exchange are not subject to
any adverse claims or proxies.
You also must represent, warrant and agree that you will, upon request,
execute and deliver any additional documents that we or the exchange agent
request to complete the exchange, sale, assignment and transfer of the Series B
or Series C notes.
Procedures for Tendering Book-Entry Interests
The Series B and Series C notes were issued as global securities.
Beneficial interests in the global securities, held by direct or indirect
participants in DTC, are shown on, and transfers of these interests are effected
only through, records maintained in book-entry form by DTC with respect to its
participants.
29
If you hold your Series B or Series C notes in the form of book-entry
interests and you wish to tender your Series B or Series C notes for exchange
pursuant to the exchange offer, you must transmit to the exchange agent on or
prior to the expiration date either:
o a written or facsimile copy of a properly completed and duly executed
letter of transmittal, including all other documents required by the
letter of transmittal, to the exchange agent at the address set forth
on the back of cover of this prospectus; or
o a computer-generated message transmitted by means of DTC's Automated
Tender Offer Program system and received by the exchange agent, in
which you acknowledge and agree to be bound by the terms of the letter
of transmittal.
In addition, in order to deliver Series B or Series C notes held in the
form of book-entry interests:
o the exchange agent must receive a confirmation of the book-entry
transfer of these notes into the exchange agent's account at DTC on
or prior to the expiration date; or
o you must comply with the guaranteed delivery procedures described below.
Certificated Series B and Series C Notes
Only registered holders of certificated Series B or Series C notes may
tender those notes in the exchange offer. If your Series B or Series C notes are
certificated notes and you wish to tender those notes for exchange pursuant to
the exchange offer, you must transmit to the exchange agent on or prior to the
expiration date, a written or facsimile copy of a properly completed and duly
executed letter of transmittal, including all other required documents, to the
address set forth on the back cover of this prospectus. In addition, in order to
validly tender your certificated Series B or Series C notes:
o the certificates representing your Series B or Series C notes must be
received by the exchange agent on or prior to the expiration date; or
o you must comply with the guaranteed delivery procedures described below.
Series B and Series C Notes Held Through a Broker
If you hold your Series B or Series C notes through a broker, do not use
the letter of transmittal to direct the tender of your Series B or Series C
notes. You should contact your broker directly for instructions on how to
participate in the exchange offer. Your broker must notify the DTC and cause it
to transfer the notes into the exchange agent's account in accordance with DTC
procedures. The broker must also ensure that the exchange agent receives a
computer-generated message transmitted by means of DTC's Automated Tender Offer
Program system, in which you acknowledge and agree to be bound by the terms of
the letter of transmittal before the exchange offer expires.
Procedures Applicable to All Holders
Delivery of required documents by whatever method you choose is at your
sole risk. Delivery is complete when the exchange agent actually receives the
items to be delivered. You should not deliver any of the required documents to
DTC or us. Delivery of documents to DTC in accordance with its procedures or to
us does not constitute delivery to the exchange agent. If delivery is by mail,
we recommend registered mail, return receipt requested, properly insured, or an
overnight delivery service. In all cases, you should allow sufficient time to
ensure timely delivery.
If you validly tender Series B or Series C notes and you do not withdraw
the tender on or prior to the expiration date, you will have made an agreement
with us in accordance with the terms and subject to the conditions set forth in
this prospectus and in the letter of transmittal.
Signature Guarantees
You do not need to endorse certificates for the Series B or Series C notes
or provide signature guarantees on the letter of transmittal unless:
(1) someone other than the registered holder tenders the certificate; or
(2) you complete the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" in the letter of transmittal.
In the case of (1) or (2) above, you must sign your Series B or Series C
note or provide a properly executed bond power. The signature on the bond power
and on the letter of transmittal must be guaranteed by an eligible institution.
An eligible institution is a member of the S.T.A.M.P. Medallion program, and
generally includes a registered national securities exchange or a member of
30
the National Association of Securities Dealers, Inc., a commercial bank or
a trust company having an office or a correspondent in the United States. Most
banks, brokerage firms and financial institutions are eligible institutions.
Guaranteed Delivery Procedures
If you wish to tender your Series B or Series C notes but your notes are
not immediately available, or time will not permit your notes or other required
documentation to reach the exchange agent on or before the expiration date, or
the procedure for book-entry transfer cannot be completed on a timely basis, you
may still tender your Series B or Series C notes if:
o the tender is made through an eligible institution;
o the exchange agent receives from the eligible institution on or before
the expiration of the exchange offer, a properly completed and duly
executed notice of guaranteed delivery, substantially in the form
provided by us; and
o the exchange agent receives the certificates for all physically
tendered Series B or Series C notes, in proper form for transfer, or a
book-entry confirmation, as the case may be, and a properly completed
letter of transmittal and all other documents required by the letter of
transmittal, within three NYSE trading days after the date of execution
of the notice of guaranteed delivery.
You may deliver the notice of guaranteed delivery by hand, telegram or
mail to the exchange agent and you must include a guarantee by an eligible
institution in the form set forth in the notice.
Determination of Validity
We will resolve all questions regarding the form of documents, validity,
eligibility, time of receipt and acceptance for exchange of any tendered Series
B or Series C notes. Our resolution of these questions as well as our
interpretation of the terms and conditions of the exchange offer, including the
letter of transmittal, is final and binding on all parties. A tender of Series B
or Series C notes is invalid until all irregularities have been cured or waived.
Neither we nor the exchange agent or any other person is under any obligation to
give notice of any irregularities in tenders, and they are not liable for
failing to give any such notice. We reserve the absolute right, in our sole and
absolute discretion, to reject any tenders determined to be in improper form or
unlawful. We also reserve the absolute right to waive any of the conditions of
the exchange offer or any condition or irregularity in the tender of Series B or
Series C by any holder. We need not waive similar conditions or irregularities
in the case of other holders.
If any letter of transmittal, endorsement, bond power, power of attorney,
or any other document required by the letter of transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
that person must indicate that capacity when signing. In addition, unless waived
by us, the person must submit proper evidence satisfactory to us, in our sole
discretion, of his or her authority to so act.
Resales of Series D notes
We are exchanging the Series B and Series C notes for Series D notes in
reliance upon the position of the staff of the Commission, set forth in
interpretive letters to third parties in other similar transactions. We will not
seek our own interpretive letter. As a result, we cannot assure you that the
staff will take the same position on this exchange offer as it did in
interpretive letters to other parties. Based on the staff's letters to other
parties, we believe that holders of Series D notes, other than broker-dealers,
can offer their Series D notes for resale, resell and otherwise transfer the
Series D notes without delivering a prospectus to prospective purchasers.
However, you must acquire the Series D notes in the ordinary course of business
and have no intention of engaging in a distribution of the Series D notes, as a
"distribution" is defined by the Securities Act.
If you are an "affiliate" of us or you intend to distribute Series D
notes, within the meaning of the Securities Act, or if you are a broker-dealer
who purchased Series B or Series C notes from us to resell pursuant to Rule 144A
or any other available exemption under the Securities Act, you:
o cannot rely on the staff's interpretations in the above mentioned
interpretive letters;
o cannot tender Series B or Series C notes in the exchange offer; and
o must comply with the registration and prospectus delivery requirements
of the Securities Act to transfer the Series B or Series C notes,
unless the sale is exempt.
In addition, if you are a broker-dealer who acquired Series B or Series C
notes for your own account as a result of market-making or other trading
activities and you exchange the Series B or Series C notes for Series D notes,
you must deliver a prospectus with any resales of the Series D notes.
31
If you want to exchange your Series B or Series C notes for Series D
notes, you will be required to affirm that you:
. are not an "affiliate" of us;
. are acquiring the Series D notes in the ordinary course of your
business;
. have no arrangement or understanding with any person to participate
in a distribution of the Series D notes, within the meaning of the
Securities Act; and
. are not a broker-dealer, are not engaged in, and do not intend to
engage in, a distribution of the Series D notes, within the meaning
of the Securities Act.
In addition, we may require you to provide information regarding the
number of "beneficial owners" of the Series B or Series C notes within the
meaning of Rule 13d-3 under the Exchange Act. Each broker-dealer that receives
Series D notes for its own account must acknowledge that it acquired the Series
B or Series C notes for its own account as the result of market-making
activities or other trading activities. Each broker-dealer must further agree
that it will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of Series D notes. By making this acknowledgment
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" under the Securities Act. Based on the staff's position
in interpretive letters issued to third parties, we believe that broker-dealers
who acquired Series B or Series C notes for their own accounts as a result of
market-making activities or other trading activities may fulfill their
prospectus delivery requirements with respect to the Series D notes with a
prospectus meeting the requirements of the Securities Act. Accordingly, a
broker-dealer may use this prospectus to satisfy such requirements. We have
agreed that a broker-dealer may use this prospectus for a period ending 180 days
after the expiration date of the exchange offer. You should read the section
entitled "Plan of Distribution" for further information about the use of this
prospectus by broker-dealers. A broker-dealer intending to use this prospectus
in the resale of Series D notes must notify us, on or prior to the expiration
date, that it is a participating broker-dealer. This notice may be given in the
letter of transmittal or may be delivered to the exchange agent. Any
participating broker-dealer who is an "affiliate" of us may not rely on the
staff's interpretive letters and must comply with the registration and
prospectus delivery requirements of the Securities Act when reselling Series D
notes.
Each participating broker-dealer exchanging Series B or Series C notes for
Series D notes agrees that, upon receipt of notice from us:
(a) that any statement contained or incorporated by reference in this
prospectus makes the prospectus untrue in any material respect;
(b) that this prospectus omits to state a material fact necessary to
make the statements contained or incorporated by reference in
this prospectus, in light of the circumstances under which they
were made, not misleading; or
(c) of the occurrence of other events specified in the registration
rights agreement,
the participating broker-dealer will suspend the sale of Series D notes.
Each participating broker-dealer agrees not to resell the Series D notes until:
(1) we have amended or supplemented this prospectus to correct the
misstatement or omission and we furnish copies of the amended or
supplemented prospectus to the participating broker-dealer; or
(2) we give notice that the sale of the Series D notes may be resumed.
If we give notice suspending the sale of Series D notes, it shall extend
the 180-day period during which this prospectus may be used by a participating
broker-dealer by the number of days between the date we give notice of
suspension and the date participating broker-dealers receive copies of the
amended or supplemented prospectus or the date we give notice resuming the sale
of Series D notes.
Withdrawal Rights
You can withdraw tenders of Series B or Series C notes at any time on or
before the expiration date.
For a withdrawal to be effective, you must deliver a written, telegraphic,
telex or facsimile transmission of a notice of withdrawal or an agent's message
to the appropriate exchange agent on or before the expiration date. The notice
of withdrawal must specify the name of the person tendering the Series B or
Series C notes to be withdrawn, the total principal amount of Series B or Series
C notes withdrawn and the name of the registered holder of the Series B or
Series C notes if different from the name of the person tendering the Series B
or Series C notes. If you delivered Series B or Series C notes to the exchange
agent, you must submit the serial numbers of the Series B or Series C notes to
be withdrawn, and the signature on the notice of withdrawal must be guaranteed
by an eligible institution, except in the case of Series B or Series C notes
tendered for the account of an eligible institution. If you tendered Series B or
Series C notes as a book-entry transfer, the notice of withdrawal must specify
the name and number of the account at DTC to be credited with the withdrawal of
Series B or Series C notes. You must deliver the notice of withdrawal to the
exchange agent by written, telegraphic, telex or facsimile transmission, or by
an agent's message. You may
32
not rescind withdrawals of tender. Series B or Series C notes properly withdrawn
may again be tendered at any time on or before the expiration date.
We will determine all questions regarding the validity, form and
eligibility of withdrawal notices. Our determination will be final and binding
on all parties. Neither we nor the exchange agent or any other person is under
any obligation to give notice of any irregularities in withdrawals, and they are
not liable for failing to give any such notice. Withdrawn Series B or Series C
notes will be returned to you after withdrawal as soon as reasonably
practicable.
Interest on Series D notes
The Series D notes will bear interest at a rate of 11% per annum. Interest
is payable semi-annually on February 1 and August 1 of each year. Holders of
Series D notes will receive interest from the date of initial issuance of the
Series D notes, plus an amount equal to the accrued but unpaid interest on the
Series B or Series C notes exchanged for the Series D notes. Interest on the
Series B or Series C notes accepted for exchange will cease to accrue upon
issuance of the Series D notes.
Extension of Tender Period; Termination; Amendment
We expressly reserve the right, in our sole discretion, for any reason,
including the non-satisfaction of any of the conditions for completion described
below, to extend the period of time during which the exchange offer is open or
to amend the terms of the exchange offer in any respect. In any of these cases,
we will make a public announcement of the extension or amendment promptly.
If we materially change the terms of or information concerning the
exchange offer, we will extend the exchange offer. The Commission has stated
that, as a general rule, it believes that an offer should remain open for a
minimum of five business days from the date that notice of the material change
is first given. The length of time the exchange offer must remain open will
depend on the particular facts and circumstances.
If any of the conditions indicated in the next section have not been met,
we reserve the right, in our sole discretion, so long as Series B or Series C
notes have not been accepted for exchange, to delay the acceptance of any Series
B or Series C notes or to terminate the exchange offer and not accept for
exchange any Series B or Series C notes.
If we extend the exchange offer, are delayed in accepting any Series B or
Series C notes or are unable to accept for exchange any Series B or Series C
notes under the exchange offer for any reason, then, without affecting our
rights under the exchange offer, the exchange agent may, on our behalf, retain
all Series B or Series C notes tendered. These notes may not be withdrawn except
as provided in the section entitled "Withdrawal Rights" on page 35. Our
reservation of the right to delay acceptance of any Series B or Series C notes
is subject to applicable law, which requires that we pay the consideration
offered or return the Series B or Series C notes deposited promptly after the
termination or withdrawal of the exchange offer.
We will issue a press release or other public announcement no later than
9:00 a.m., New York City time, on the next business day following any extension,
amendment, non-acceptance or termination of the previously scheduled expiration
date.
Conditions to the Exchange Offer
We may not accept Series B notes for exchange unless at least $50.0
million in aggregate principal amount of Series B notes are validly tendered.
The exchange offer for the Series C notes is not subject to this condition. We
may not accept Series B or Series C notes for exchange and may terminate or not
complete the exchange offer at any time prior to the expiration of the exchange
offer if:
. the staff of the Commission no longer allows the Series D notes to
be offered for resale, resold and otherwise transferred by holders
without compliance with the registration and prospectus delivery
provisions of the Securities Act;
. a governmental body passes any law, statute, rule or regulation
which prohibits or prevents the exchange offer;
. the Commission or any state securities authority issues a stop
order suspending the effectiveness of the registration statement or
initiates or threatens to initiate a proceeding to suspend the
effectiveness of the registration statement; or
. we are unable to obtain any governmental approval that is necessary
to complete the exchange offer.
33
If we reasonably believe that any of the above conditions has occurred, we
may:
. terminate the exchange offer and as promptly as practicable return
all tendered Series B or Series C notes;
. extend the exchange offer;
. waive the unsatisfied condition and, subject to any requirement to
extend the period of time during which the exchange offer is open,
complete the exchange offer; or
. amend the terms of the exchange offer in any respect.
These conditions are solely for our benefit. We may assert these
conditions with respect to all or any portion of the exchange offer regardless
of the circumstances giving rise to them. We may waive any condition in whole or
in part at any time in our discretion. Our failure to exercise our rights under
any of the above conditions does not represent a waiver of these rights. Each
right is an ongoing right that may be asserted at any time. All conditions must
be satisfied or waived prior to the expiration of the exchange offer. Any
determination by us concerning the conditions described above will be final and
binding on all parties.
Exchange Agent
We appointed U.S. Bank Trust National Association as exchange agent for
the exchange offer. You should direct questions and requests for assistance,
requests for additional copies of this prospectus or of the letter of
transmittal and requests for a notice of guaranteed delivery to the following
address for the exchange agent:
U.S. Bank Trust National Association
U.S. Bank Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
Attn: Specialized Finance Group
(800) 934-6802 (telephone)
(651) 244-1537 (facsimile)
If you deliver letters of transmittal or any other required documents to
an address or facsimile number other than those listed above, your tender is
invalid.
Fees and Expenses
We will pay the exchange agent reasonable and customary fees for its
services and reasonable out-of-pocket expenses. We will also pay brokerage
houses and other custodians, nominees and fiduciaries their reasonable
out-of-pocket expenses for sending copies of this prospectus and related
documents to holders of Series B or Series C notes, and for handling or
tendering for their customers.
We will pay the transfer taxes for the exchange of the Series B or Series
C notes in the exchange offer. If, however, Series D notes are delivered to or
issued in the name of a person other than the registered holder, or if a
transfer tax is imposed for any reason other than for the exchange of Series B
or Series C notes in the exchange offer, then the tendering holder will pay the
transfer taxes. If a tendering holder does not submit satisfactory evidence of
payment of taxes or exemption from taxes with the letter of transmittal, the
taxes will be billed directly to the tendering holder.
We will not make any payment to brokers, dealers or other nominees
soliciting acceptances in the exchange offer.
Accounting Treatment
The Series D notes will be recorded at the same carrying value as the
Series B or Series C notes. Accordingly, we will not recognize any gain or loss
on the exchange for accounting purposes.
34
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated income statement data for the years ended
December 31, 1998, 1999 and 2000 and the selected consolidated balance sheet
data as of December 31, 1999 and 2000 are derived from Sonic's audited financial
statements which are incorporated by reference. The selected consolidated income
statement data for the years ended December 31, 1996 and 1997 and the selected
consolidated balance sheet data as of December 31, 1996, 1997 and 1998 are
derived from Sonic's audited consolidated financial statements, none of which
are included in or incorporated by reference in this prospectus. The selected
consolidated balance sheet data as of September 30, 2000 is derived from Sonic's
unaudited consolidated financial statements, which are not included in or
incorporated by reference in this prospectus. The selected consolidated income
statement data for the nine months ended September 30, 2000 and 2001 and the
selected consolidated balance sheet data as of September 30, 2001 are derived
from Sonic's unaudited consolidated financial statements which are incorporated
by reference in this prospectus. In the opinion of management, these unaudited
financial consolidated statements reflect all adjustments necessary for a fair
presentation of Sonic's results of operations and financial condition. All such
adjustments are of a normal recurring nature. The results for interim periods
are not necessarily indicative of the results to be expected for the entire
fiscal year. In accordance with accounting principles generally accepted in the
United States of America, the selected consolidated financial data has been
retroactively restated to reflect Sonic's two-for-one common stock split that
occurred on January 29, 1999. This selected consolidated financial data should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and related notes incorporated by reference herein.
We have accounted for all of our dealership acquisitions using the
purchase method of accounting and, as a result, we do not include in our
financial statements the results of operations of these dealerships prior to the
date they were acquired by us. The selected consolidated financial data of Sonic
discussed below reflect the results of operations and financial positions of
each of our dealerships acquired prior to September 30, 2001. As a result of the
effects of our acquisitions and other potential factors in the future, the
historical consolidated financial information described in selected consolidated
financial data is not necessarily indicative of the results of operations and
financial position of Sonic in the future or the results of operations and
financial position that would have resulted had such acquisitions occurred at
the beginning of the periods presented in the selected consolidated financial
data.
35
Nine Months Ended
Year Ended December 31, September 30,
--------------------------------------------------------- ------------------
1996 1997 1998 1999 2000 2000 2001
---- ---- ---- ---- ---- ---- ----
Income Statement Data (dollars and shares in thousands except per share amounts)
Revenues:
New vehicles $233,979 $343,941 $962,939 $1,968,514 $3,522,049 $2,682,696 $2,770,064
Used vehicles 68,054 85,132 324,740 684,560 1,249,188 962,392 936,990
Wholesale vehicles 25,641 38,785 119,351 250,794 430,513 323,231 319,416
-------- -------- --------- --------- --------- --------- ---------
Total vehicles 327,674 467,858 1,407,030 2,903,868 5,201,750 3,968,319 4,026,470
Parts, service, and collision repair 42,075 57,537 162,660 364,184 687,975 513,920 581,153
Finance and insurance 7,118 10,606 34,011 82,771 162,751 125,362 139,802
-------- -------- --------- --------- --------- --------- ---------
Total revenues 376,867 536,001 1,603,701 3,350,823 6,052,476 4,607,601 4,747,425
Cost of sales 332,122 473,003 1,396,259 2,896,400 5,187,289 3,951,528 4,048,753
-------- -------- --------- --------- --------- --------- ---------
Gross profit 44,745 62,998 207,442 454,423 865,187 656,073 698,672
Selling, general and administrative expenses 32,602 46,770 150,130 326,914 633,356 473,745 527,009
Depreciation and amortization 1,076 1,322 4,607 11,699 22,714 17,344 19,384
------- ------ ------ -------- ------- ------- -------
Operating income 11,067 14,906 52,705 115,810 209,117 164,984 152,279
Other income and expense:
Interest expense, floor plan 5,968 8,007 14,096 22,536 47,109 34,012 30,188
Interest expense, other 433 1,199 9,395 21,586 42,243 31,200 26,989
Other income 355 298 426 1,286 107 109 120
------- ------- ------- ------- ------- ------- -------
Total other expense, net 6,046 8,908 23,065 42,836 89,245 65,103 57,057
------- ------- ------- ------- ------- ------- -------
Income before income taxes and minority interest 5,021 5,998 29,640 72,974 119,872 99,881 95,222
Provision for income taxes 1,924 2,249 11,083 28,325 45,700 38,000 37,135
--------- --------- --------- --------- --------- --------- --------
Income before minority interest 3,097 3,749 18,557 44,649 74,172 61,881 58,087
Minority interest in earnings of subsidiary 114 47 -- -- -- -- --
-------- -------- --------- ---------- ---------- ---------- ---------
Net income $ 2,983 $ 3,702 $ 18,557 $ 44,649 $ 74,172 $ 61,881 $ 58,087
======== ======== ======== ========= ========= ======== ========
Diluted net income per share N/A $ 0.27 $ 0.74 $ 1.27 $ 1.69 $ 1.40 $ 1.40
Weighted average number of diluted shares
outstanding N/A 13,898 24,970 35,248 43,826 44,257 41,511
======== ======== ======== ========= ======== ========
Ratio of earnings to fixed charges (a)
Consolidated Balance Sheet Data: 7.3x 4.1x 3.3x 3.4x 3.0x 3.2x 3.2x
Cash and cash equivalents $ 6,679 $ 18,304 $ 51,834 $ 83,111 $ 109,325 $ 89,813 $ 103,431
Inventories 71,550 156,514 264,971 630,857 773,785 661,175 654,762
Total assets 110,976 291,450 576,103 1,501,102 1,789,248 1,654,0710 1,689,314
Notes payable-floor plan 63,893 133,236 228,158 517,575 684,718 540,950 557,301
Long-term debt (b) 6,719 49,653 145,790 425,894 493,309 498,951 457,032
Total liabilities 84,367 207,085 433,674 1,098,529 1,338,326 1,210,767 1,199,395
Minority interest 314 --- --- --- --- -- --
Stockholders' equity 26,295 84,365 142,429 402,573 450,922 443,304 489,919
- ----------------------------
(a) Fixed charges is defined as interest (other than interest
expense related to notes payable-floor plan) and such portion
of rent expense determined to be representative of the
interest factor (33%). The ratio of earnings to fixed charges
is calculated by adding fixed charges to income before income
taxes and minority interest and dividing the sum by fixed
charges.
(b) Long-term debt includes current maturities of long-term debt,
the payable to our affiliates and the payable to Sonic's
Chairman. See Sonic's Consolidated Financial Statements and
related notes incorporated by reference in this prospectus.
36
DESCRIPTION OF NOTES
The Series D notes will be issued under an Indenture (the "Indenture"),
dated as of November 19, 2001, among Sonic, the Guarantors and U.S. Bank Trust
National Association (the "Trustee"). The Series C notes were issued under the
same Indenture. The Series B notes were issued under an indenture, dated as of
July 1, 1998, among Sonic, the Guarantors and U.S. Bank Trust National
Association. The terms of the Series B, Series C and Series D notes include
those stated in their respective indentures and those made a part of their
respective indentures by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). Parenthetical references to "Section" mean
the applicable section of the Indenture. For definitions of certain capitalized
terms used in this Description of Notes, see "-Certain Definitions."
The following is a summary of the material provisions of the Indenture
governing the Series D notes and does not purport to be complete or to describe
all of the provisions of the Indenture that may be important to you. Where we
refer to particular provisions of the Indenture, including the definitions of
certain terms, such references are qualified in their entirety by reference to
the provisions of the Indenture and those terms made a part of the Indenture by
reference to the Trust Indenture Act. A copy of the Indenture is an exhibit to
the registration statement of which this prospectus is a part. In this
description, the word "company" refers only to Sonic Automotive, Inc. and not to
its subsidiaries, and the word "Note" refers only to the Series D notes.
The form and terms of the Series B notes and the Series D notes are
identical in all material respects. The form and terms of the Series C and
Series D notes are identical, except that:
. the Series D notes have been registered under the Securities Act
and, therefore, will not bear legends restricting transfers; and
. holders of Series D notes will not be, and upon consummation of the
exchange offer, holders of the Series C notes will no longer be,
entitled to rights under the registration rights agreement, except
in limited circumstances described elsewhere in this prospectus.
Principal, Maturity and Interest
The Indenture provides that up to $200.0 million in aggregate principal
amount of notes may be outstanding at any one time. There is an aggregate of
$125.0 million of Series B notes and $75.0 million of Series C notes currently
outstanding. The Series B and Series C notes will be cancelled once they are
exchanged for Series D notes. Consequently, if all of the Series B and Series C
notes participate in the exchange offer, there will be an aggregate of $200.0
million of Series D notes outstanding following the exchange offer.
The Series D notes will mature on August 1, 2008, and will be unsecured
senior subordinated obligations of the Company. As described in "Exchange Offer"
we have agreed to exchange all of our $125.0 million outstanding Series B notes
and all of our $75.0 million of outstanding Series C notes for $200 million of
Series D notes. The exchange offer will not be completed until after our
February 1, 2002 interest payment on the Series B and Series C notes. Each Note
will bear interest at the rate of 11% per annum from the date of its issuance or
from the most recent interest payment date to which interest has been paid,
payable semiannually in arrears on February 1 and August 1 in each year,
commencing August 1, 2002, to the person in whose name the Note (or any
predecessor Note) is registered at the close of business on the January 15 or
July 15 next preceding such interest payment date. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months. (Sections 202,
301 and 309) For U.S. federal income tax purposes, you may elect to amortize the
excess of your purchase price for a Note over the Note's principal amount using
a constant yield method and treat the amortized portion of such excess allocable
to a taxable year as a reduction to interest income on the Note included in the
taxable year. Any election to amortize such excess generally will be applicable
to all notes you hold at the beginning of the first taxable year to which the
election applies and to notes you thereafter acquire, and is irrevocable without
the consent of the Internal Revenue Service. We encourage you to consult your
own tax advisor concerning the foregoing.
Issuance and Methods of Receiving Payments on the Series D notes
Principal of, premium, if any, and interest on the Series D notes will be
payable, and the Series D notes will be exchangeable and transferable, at the
office or agency of the Company in The City of New York maintained for such
purposes (which initially will be the corporate trust office of the Trustee);
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the person entitled thereto as shown on the security
register. (Sections 301, 305 and 1002) The Series D notes will be issued only in
fully registered form without coupons, in denominations of $1,000 and any
integral multiple thereof. (Section 302) No service charge will be made for any
registration of transfer, exchange or redemption of Series D notes, except in
certain circumstances for any tax or other governmental charge that may be
imposed in connection therewith. (Section 305)
37
Subsidiary Guarantees
Payment of the Series D notes will be guaranteed by the Guarantors jointly
and severally, fully and unconditionally, on a senior subordinated basis. The
Guarantors are comprised of all of the direct and indirect Restricted
Subsidiaries of the Company on the Issue Date. Substantially all of the
Company's operations are conducted through its subsidiaries. In addition, if any
Restricted Subsidiary of the Company becomes a guarantor or obligor in respect
of any other Indebtedness of the Company or any of the Restricted Subsidiaries,
the Company shall cause such Restricted Subsidiary to enter into a supplemental
indenture pursuant to which such Restricted Subsidiary shall agree to guarantee
the Company's obligations under the Series D notes. If the Company defaults in
payment of the principal of, premium, if any, or interest on the Series D notes,
each of the Guarantors will be unconditionally, jointly and severally obligated
to duly and punctually pay the same. Certain of the Subsidiary Guarantees may
not be so subordinated.
The obligations of each Guarantor under its Guarantee are limited to the
maximum amount which, after (1) giving effect to all other contingent and fixed
liabilities of such Guarantor, and (2) giving effect to any collections from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under the Indenture, will result in the obligations of
such Guarantor under its Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Guarantor that makes a
payment or distribution under its Guarantee shall be entitled to a contribution
from any other Guarantor in a pro rata amount based on the net assets of each
Guarantor determined in accordance with GAAP.
Notwithstanding the foregoing, in certain circumstances a Guarantee of a
Guarantor may be released pursuant to the provisions of subsection (c) under
"-- Certain Covenants -- Limitation on Issuances of Guarantees of and Pledges
for Indebtedness Restricted Subsidiaries." The Company also may, at any time,
cause a Restricted Subsidiary to become a Guarantor by executing and delivering
a supplemental indenture providing for the guarantee of payment of the Series D
notes by such Restricted Subsidiary on the basis provided in the Indenture.
Optional Redemption
The Series D notes will be subject to redemption at any time on or after
August 1, 2003, at the option of the Company, in whole or in part, on not less
than 30 nor more than 60 days' prior notice, in amounts of $1,000 or an integral
multiple thereof, at the following redemption prices (expressed as percentages
of the principal amount), if redeemed during the 12-month period beginning
August 1 of the years indicated below:
Redemption
Year Price
2003 105.500%
2004 103.667%
2005 101.833%
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date (subject to the
rights of holders of record on relevant record dates to receive interest due on
an interest payment date).
If less than all of the Series D notes are to be redeemed, the Trustee
shall select the Series D notes or portions of them to be redeemed in compliance
with the requirements of the principal national security exchange, if any, on
which the Series D notes are listed. If the Series D notes are not so listed,
the Trustee shall select them on a pro rata basis, by lot or by any other method
the Trustee shall deem fair and reasonable; provided, that Series D notes
redeemed in part shall be redeemed only in integral multiples of $1,000 (subject
to the procedures of The Depository Trust Company or any other Depositary).
(Sections 203, 1101, 1104, 1105 and 1107)
Sinking Fund
The Series D notes will not be entitled to the benefit of any sinking
fund.
Purchase of Series D notes Upon a Change of Control
General
If a Change of Control shall occur at any time, then each holder of Series
D notes shall have the right to require that the Company purchase such holder's
Series D notes in whole or in part in integral multiples of $1,000, at a
purchase price (the
38
"Change of Control Purchase Price") in cash in an amount equal to 101% of the
principal amount of such Series D notes, plus accrued and unpaid interest,
if any, to the date of purchase (the "Change of Control Purchase Date"),
pursuant to the offer described below (the "Change of Control Offer") and in
accordance with the other procedures set forth in the Indenture.
Procedure
Within 30 days of any Change of Control, the Company shall notify the
Trustee and give written notice of the Change of Control to each holder of
Series D notes, by first-class mail, postage prepaid, at his address appearing
in the security register. The notice will state, among other things,
(1) that a Change of Control has occurred and the date of the event;
(2) the circumstances and relevant facts regarding the Change of
Control (including, but not limited to, information with respect to
pro forma historical income, cash flow and capitalization after
giving effect to such Change of Control);
(3) the purchase price and the purchase date which shall be fixed by
the Company on a business day no earlier than 30 days nor later
than 60 days from the date such notice is mailed, or such later
date as is necessary to comply with requirements under the Exchange
Act;
(4) that any Note not tendered will continue to accrue interest;
(5) that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any Series D notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue
interest after the Change of Control Purchase Date; and
(6) certain other procedures that a holder of Series D notes must
follow to accept a Change of Control Offer or to withdraw such
acceptance. (Section 1014)
Stipulations
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient or be able to obtain financing to
pay the Change of Control Purchase Price for all or any of the Series D notes
that might be delivered by holders of the Series D notes seeking to accept the
Change of Control Offer. See "--Ranking." The failure of the Company to make or
consummate the Change of Control Offer or pay the Change of Control Purchase
Price when due will give the Trustee and the holders of the Series D notes the
rights described under "--Events of Default." The Series B notes have a similar
repurchase requirement upon a Change of Control.
In addition to the obligations of the Company under the Indenture with
respect to the Series D notes in the event of a Change of Control, all of the
Company's Indebtedness under our floor plan facilities, the revolving facility
and the construction/mortgage facility also contain an event of default upon a
Change of Control as defined therein which obligates the Company to repay
amounts outstanding under such indebtedness upon an acceleration of the
Indebtedness issued thereunder. In addition, a Change of Control could result in
a termination or nonrenewal of one or more of the Company's franchise agreements
or its agreements with the Manufacturers.
The term "all or substantially all" as used in the definition of "Change
of Control" has not been interpreted under New York law, the governing law of
the Indenture, to represent a specific quantitative test. As a consequence, in
the event the holders of the Series D notes elected to exercise their rights
under the Indenture and the Company elected to contest such election, there
could be no assurance as to how a court interpreting New York law would
interpret the phrase.
The existence of a holder's right to require the Company to repurchase the
holder's Series D notes upon a Change of Control may deter a third party from
acquiring the Company in a transaction which constitutes a Change of Control.
The provisions of the Indenture will not afford holders of the Series D
notes the right to require the Company to repurchase the Series D notes in the
event of a highly leveraged transaction or certain transactions with the
Company's management or its Affiliates, including a reorganization,
restructuring, merger or similar transaction (including, in certain
circumstances, an acquisition of the Company by management or its affiliates)
involving the Company that may adversely affect holders of the Series D notes,
if such transaction is a transaction defined as a Change of Control. A
transaction involving the Company's management or its Affiliates, or a
transaction involving a recapitalization of the Company, will result in a Change
of Control if it is the type of transaction specified by such definition.
The Company will comply with the applicable tender offer rules, including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws or
regulations in connection with a Change of Control Offer.
39
Ranking
General
The payment of the principal of, premium, if any, and interest on, the
Series D notes will be subordinated, as set forth in the Indenture, in right of
payment, to the prior payment in full of all Senior Indebtedness. The Series D
notes will be senior subordinated indebtedness of the Company ranking pari passu
with all other existing and future senior subordinated indebtedness of the
Company and senior to all existing and future Subordinated Indebtedness of the
Company.
Payment Stoppages
Upon the occurrence of any default in the payment of any Designated Senior
Indebtedness beyond any applicable grace period and after the receipt by the
Trustee from a representative of holders of any Designated Senior Indebtedness
(collectively, a "Senior Representative") of written notice of such default, no
payment (other than payments previously made or set aside pursuant to the
provisions described under "--Defeasance or Covenant Defeasance of Indenture")
or distribution of any assets of the Company or any Subsidiary of any kind or
character (excluding certain permitted equity interests or subordinated
securities) may be made on account of the principal of, premium, if any, or
interest on, the Series D notes or on account of the purchase, redemption,
defeasance or other acquisition of or in respect of, the Series D notes unless
and until such default shall have been cured or waived or shall have ceased to
exist or such Designated Senior Indebtedness shall have been discharged or paid
in full after which the Company shall resume making any and all required
payments in respect of the Series D notes, including any missed payments.
Upon the occurrence and during the continuance of any non-payment default
with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may then be accelerated immediately (a "Non-payment Default")
and after the receipt by the Trustee and the Company from a Senior
Representative of written notice of such Non-payment Default, no payment (other
than payments previously made or set aside pursuant to the provisions described
under "--Defeasance or Covenant Defeasance of Indenture") or distribution of any
assets of the Company of any kind of character (excluding certain permitted
equity interests or subordinated securities) may be made by the Company or any
Subsidiary on account of the principal of, premium, if any, or interest on, the
Series D notes or on account of the purchase, redemption, defeasance or other
acquisition of, or in respect of, the Series D notes for the period specified
below (the "Payment Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice of
the Non-payment Default by the Trustee and the Company from a Senior
Representative and shall end on the earliest of:
(i) the 179th day after such commencement;
(ii) the date on which such Non-payment Default (and all other
Non-payment Defaults as to which notice is given after such Payment
Blockage Period is initiated) is cured, waived or ceases to exist
or on which such Designated Senior Indebtedness is discharged or
paid in full; or
(iii) the date on which such Payment Blockage Period (and all Non-payment
Defaults as to which notice is given after such Payment Blockage
Period is initiated) shall have been terminated by written notice
to the Company or the Trustee from the Senior Representative
initiating such Payment Blockage Period.
After the occurrence of any of the dates set forth in clauses (i), (ii) or
(iii), the Company will promptly resume making any and all required payments in
respect of the Series D notes, including any missed payments. In no event will a
Payment Blockage Period extend beyond 179 days from the date of the receipt by
the Company and the Trustee of the notice initiating such Payment Blockage
Period (such 179-day period referred to as the "Initial Period"). Any number of
notices of Non-payment Defaults may be given during the Initial Period; provided
that during any period of 365 consecutive days only one Payment Blockage Period,
during which payment of principal of, premium, if any, or interest on, the
Series D notes may not be made, may commence and the duration of such period may
not exceed 179 days. No Non-payment Default with respect to Designated Senior
Indebtedness that existed or was continuing on the date of the commencement of
any Payment Blockage Period will be, or can be, made the basis for the
commencement of a second Payment Blockage Period, whether or not within a period
of 365 consecutive days, unless such default has been cured or waived for a
period of not less than 90 consecutive days.
If the Company fails to make any payment on the Series D notes when due or
within any applicable grace period, whether or not on account of the payment
blockage provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the holders of the Series D notes
to accelerate the maturity thereof. See "-- Events of Default."
The Indenture will provide that in the event of any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relative to the
Company or its assets, or liquidation, dissolution or other winding up of the
Company, whether voluntary or involuntary, or whether or not involving
insolvency or bankruptcy, or any assignment for the benefit of creditors or
other marshaling of assets or liabilities of the Company, all Senior
Indebtedness must be paid in full before any payment or distribution, excluding
distributions of certain
40
permitted equity interests or subordinated securities, is made on account
of the principal of, premium, if any, or interest on the Series D notes or on
account of the purchase, redemption, defeasance or other acquisition of or in
respect of the Series D notes (other than payments previously made pursuant to
the provisions described under "--Defeasance or Covenant Defeasance of
Indenture").
Liquidation/Insolvency
By reason of such subordination, in the event of liquidation or
insolvency, creditors of the Company who are holders of Senior Indebtedness may
recover more, ratably, than the holders of the Series D notes. Funds which would
be otherwise payable to the holders of the Series D notes will be paid to the
holders of the Senior Indebtedness to the extent necessary to pay the Senior
Indebtedness in full and the Company may be unable to meet its obligations fully
with respect to the Series D notes.
Guarantees
Each Guarantee of a Guarantor will be an unsecured senior subordinated
obligation of such Guarantor, ranking pari passu with, or senior in right of
payment to, all other existing and future Indebtedness of such Guarantor that is
expressly subordinated to Senior Guarantor Indebtedness. The Indebtedness
evidenced by the Guarantees will be subordinated to Senior Guarantor
Indebtedness to substantially the same extent as the Series D notes are
subordinated to Senior Indebtedness and during any period when payment on the
Series D notes is blocked by Designated Senior Indebtedness, payment on the
Guarantees is similarly blocked. However, certain of the Subsidiary Guarantors
may not be so subordinated.
Related Definitions
"Senior Indebtedness" means the principal of, premium, if any, and
interest (including interest, to the extent allowable, accruing after the filing
of a petition initiating any proceeding under any state, federal or foreign
bankruptcy law) on any Indebtedness of the Company (other than as otherwise
provided in this definition), whether outstanding on July 31, 1998 or thereafter
created, incurred or assumed, and whether at any time owing, actually or
contingent, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Series D notes. Notwithstanding the foregoing, "Senior
Indebtedness" shall (x) include the Floor Plan Facility and the Revolving
Facility to the extent the Company is a party to them and (y) not include
(i) Indebtedness evidenced by the Series D notes, the Series B notes or
the Series C notes;
(ii) Indebtedness that is subordinate or junior in right of payment to
any Indebtedness of the Company;
(iii) Indebtedness which when incurred and without respect to any
election under Section 1111(b) of Title 11 United States Code, is
without recourse to the Company;
(iv) Indebtedness which is represented by Redeemable Capital Stock;
(v) any liability for foreign, federal, state, local or other taxes
owed or owing by the Company to the extent such liability
constitutes Indebtedness;
(vi) Indebtedness of the Company to a Subsidiary or any other Affiliate
of the Company or any of such Affiliate's Subsidiaries;
(vii) to the extent it might constitute Indebtedness, amounts owing for
goods, materials or services purchased in the ordinary course of
business or consisting of trade accounts payable owed or owing by
the Company, and amounts owed by the Company for compensation to
employees or services rendered to the Company;
(viii) that portion of any Indebtedness which at the time of issuance is
issued in violation of the Indenture; and
(ix) Indebtedness evidenced by any guarantee of any Subordinated
Indebtedness or Pari Passu Indebtedness.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under
the Floor Plan Facility or the Revolving Facility and (ii) any other Senior
Indebtedness which at the time of determination has an aggregate principal
amount outstanding of at least $25 million and which is specifically designated
in the instrument evidencing such Senior Indebtedness or the agreement under
which such Senior Indebtedness arises as "Designated Senior Indebtedness" by the
Company.
"Senior Guarantor Indebtedness" means the principal of, premium, if any,
and interest (including interest, to the extent allowable, accruing after the
filing of a petition initiating any proceeding under any state, federal or
foreign bankruptcy law) on any Indebtedness of any Guarantor (other than as
otherwise provided in this definition), whether outstanding on July 31, 1998 or
41
thereafter created, incurred or assumed, and whether at any time owing, actually
or contingent, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to any Guarantee. Notwithstanding the foregoing, "Senior
Guarantor Indebtedness" shall (x) include the Floor Plan Facility and the
Revolving Facility to the extent any Guarantor is a party thereto and (y) not
include
(i) Indebtedness evidenced by the Guarantees or the Guarantees with
respect to the Series B notes and Series C notes;
(ii) Indebtedness that is subordinated or junior in right of payment
to any Indebtedness of any Guarantor;
(iii) Indebtedness which when incurred and without respect to any
election under Section 1111(b) of Title 11 United States Code, is without
recourse to any Guarantor;
(iv) Indebtedness which is represented by Redeemable Capital Stock;
(v) any liability for foreign, federal, state, local or other taxes
owed or owing by any Guarantor to the extent such liability constitutes
Indebtedness;
(vi) Indebtedness of any Guarantor to a Subsidiary or any other
Affiliate of the Company or any of such Affiliate's Subsidiaries;
(vii) to the extent it might constitute Indebtedness, amounts owing
for goods, materials or services purchased in the ordinary course of
business or consisting of trade accounts payable owed or owing by such
Guarantor, and amounts owed by such Guarantor for compensation to
employees or services rendered to such Guarantor;
(viii) that portion of any Indebtedness which at the time of
issuance is issued in violation of the Indenture; and
(ix) Indebtedness evidenced by any guarantee of any Subordinated
Indebtedness or Pari Passu Indebtedness.
Limitation on Future Indebtedness
The Indenture will limit, but not prohibit, the incurrence by the Company
and its Subsidiaries of additional Indebtedness. It will prohibit the incurrence
by the Company of Indebtedness that is subordinated in right of payment to any
Senior Indebtedness of the Company and senior in right of payment to the Series
B, Series C or Series D notes.
Certain Covenants
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. The Company will not, and will not cause or
permit any of its Restricted Subsidiaries to, create, issue, incur, assume,
guarantee or otherwise in any manner become directly or indirectly liable for
the payment of or otherwise incur, contingently or otherwise (collectively,
"incur"), any Indebtedness (including any Acquired Indebtedness), unless such
Indebtedness is incurred by the Company or any Guarantor or constitutes Acquired
Indebtedness of a Restricted Subsidiary and, in each case, the Company's
Consolidated Fixed Charge Coverage Ratio for the most recent four full fiscal
quarters for which financial statements are available immediately preceding the
incurrence of such Indebtedness taken as one period is at least equal to or
greater than 2.00:1. (Section 1008)
Notwithstanding the foregoing, the Company and, to the extent specifically
set forth below, the Restricted Subsidiaries may incur each and all of the
following (collectively, the "Permitted Indebtedness"):
(i) Indebtedness of the Company and the Guarantors under the
Revolving Facility, including any refinancing (as defined below)
thereof, in an aggregate principal amount at any one time
outstanding, not to exceed the greater of (a) $75 million or (b)
20% of the Company's Consolidated Tangible Assets, in any case
under the Revolving Facility (including any refinancing thereof)
or in respect of letters of credit thereunder;
(ii) Indebtedness of the Company and the Guarantors under any
Inventory Facility;
(iii) Indebtedness of the Company pursuant to the Series B and Series C
notes and Indebtedness of any Guarantor pursuant to a Guarantee
of the Series B and Series C notes;
42
(iv) Indebtedness of the Company or any Restricted Subsidiary
outstanding on July 31 1998, listed on a schedule to the B
Indenture and not otherwise referred to in this definition of
"Permitted Indebtedness";
(v) Indebtedness of the Company owing to a Restricted Subsidiary;
provided that any Indebtedness of the Company owing to a
Restricted Subsidiary that is not a Guarantor is made pursuant to
an intercompany note in the form attached to the Indenture and is
unsecured and is subordinated in right of payment from and after
such time as the Series D notes shall become due and payable
(whether at Stated Maturity, acceleration or otherwise) to the
payment and performance of the Company's obligations under the
Series D notes; provided, further, that any disposition, pledge
or transfer of any such Indebtedness to a Person (other than a
disposition, pledge or transfer to a Restricted Subsidiary) shall
be deemed to be an incurrence of such Indebtedness by the Company
or other obligor not permitted by this clause (v);
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary owing to the
Company or another Wholly Owned Restricted Subsidiary; provided
that any such Indebtedness is made pursuant to an intercompany
note in the form attached to the Indenture; provided, further,
that (a) any disposition, pledge or transfer of any such
Indebtedness to a Person (other than a disposition, pledge or
transfer to the Company or a Wholly Owned Restricted Subsidiary)
shall be deemed to be an incurrence of such Indebtedness by the
obligor not permitted by this clause (vi), and (b) any
transaction pursuant to which any Wholly Owned Restricted
Subsidiary, which has Indebtedness owing to the Company or any
other Wholly Owned Restricted Subsidiary, ceases to be a Wholly
Owned Restricted Subsidiary shall be deemed to be the incurrence
of Indebtedness by such Wholly Owned Restricted Subsidiary that
is not permitted by this clause (vi);
(vii) guarantees of any Restricted Subsidiary made in accordance with
the provisions of "-- Limitation on Issuances of Guarantees of
and Pledges for Indebtedness";
(viii) obligations of the Company or any Guarantor entered into in the
ordinary course of business (a) pursuant to Interest Rate
Agreements designed to protect the Company or any Restricted
Subsidiary against fluctuations in interest rates in respect of
Indebtedness of the Company or any Restricted Subsidiary as long
as such obligations do not exceed the aggregate principal amount
of such Indebtedness then outstanding, (b) under any Currency
Hedging Agreements, relating to (i) Indebtedness of the Company
or any Restricted Subsidiary and/or (ii) obligations to purchase
or sell assets or properties, in each case, incurred in the
ordinary course of business of the Company or any Restricted
Subsidiary; provided, however, that such Currency Hedging
Agreements do not increase the Indebtedness or other obligations
of the Company or any Restricted Subsidiary outstanding other
than as a result of fluctuations in foreign currency exchange
rates or by reason of fees, indemnities and compensation payable
thereunder or (c) under any Commodity Price Protection Agreements
which do not increase the amount of Indebtedness or other
obligations of the Company or any Restricted Subsidiary
outstanding other than as a result of fluctuations in commodity
prices or by reason of fees, indemnities and compensation payable
thereunder;
(ix) Indebtedness of the Company or any Restricted Subsidiary
represented by Capital Lease Obligations or Purchase Money
Obligations or other Indebtedness incurred or assumed in
connection with the acquisition or development of real or
personal, movable or immovable, property in each case incurred
for the purpose of financing or refinancing all or any part of
the purchase price or cost of construction or improvement of
property used in the business of the Company, in an aggregate
principal amount pursuant to this clause (ix) not to exceed $20
million outstanding at any time; provided that the principal
amount of any Indebtedness permitted under this clause (ix) did
not in each case at the time of incurrence exceed the Fair Market
Value, as determined by the Company in good faith, of the
acquired or constructed asset or improvement so financed;
(x) obligations arising from agreements by the Company or a
Restricted Subsidiary to provide for indemnification, customary
purchase price closing adjustments, earn-outs or other similar
obligations, in each case, incurred in connection with the
acquisition or disposition of any business or assets of a
Restricted Subsidiary;
(xi) Indebtedness evidenced by letters of credit in the ordinary
course of business to support the Company's or any Restricted
Subsidiary's insurance or self-insurance obligations for workers'
compensation and other similar insurance coverages;
(xii) any renewals, extensions, substitutions, refundings, refinancings
or replacements (collectively, a "refinancing") of any
Indebtedness described in clauses (iii) and (iv) of this
definition of "Permitted Indebtedness," including any successive
refinancings so long as the borrower under such refinancing is
the Company or, if not the Company, the same as the borrower of
the Indebtedness being refinanced and the aggregate principal
amount of Indebtedness represented thereby (or if such
Indebtedness provides for an
43
amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity
thereof, the original issue price of such Indebtedness plus any
accreted value attributable thereto since the original issuance
of such Indebtedness) does not exceed the initial principal
amount of such Indebtedness plus the lesser of (I) the stated
amount of any premium or other payment required to be paid in
connection with such a refinancing pursuant to the terms of the
Indebtedness being refinanced or (II) the amount of premium or
other payment actually paid at such time to refinance the
Indebtedness, plus, in either case, the amount of expenses of the
Company incurred in connection with such refinancing and (A) in
the case of any refinancing of Indebtedness that is Subordinated
Indebtedness, such new Indebtedness is made subordinated to the
Series D notes at least to the same extent as the Indebtedness
being refinanced and (B) in the case of Pari Passu Indebtedness
or Subordinated Indebtedness, as the case may be, such
refinancing does not reduce the Average Life to Stated Maturity
or the Stated Maturity of such Indebtedness; and
(xiii) Indebtedness of the Company and its Restricted Subsidiaries or
any Guarantor in addition to that described in clauses (i)
through (xii) above, and any renewals, extensions, substitutions,
refinancings or replacements of such Indebtedness, so long as the
aggregate principal amount of all such Indebtedness shall not
exceed $10 million outstanding at any one time in the aggregate.
For purposes of determining compliance with this "Limitation on
Indebtedness" covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness permitted by this
covenant, the Company in its sole discretion shall classify such item of
Indebtedness and only be required to include the amount of such Indebtedness as
one of such types.
Limitation on Restricted Payments. (a)The Company will not, and will not
cause or permit any Restricted Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Company's Capital Stock (other than
dividends or distributions payable solely in shares of its
Qualified Capital Stock or in options, warrants or other rights
to acquire shares of such Qualified Capital Stock);
(ii) purchase, redeem, defease or otherwise acquire or retire for
value, directly or indirectly, the Company's Capital Stock or any
Capital Stock of any Affiliate of the Company, including any
Subsidiary of the Company (other than Capital Stock of any Wholly
Owned Restricted Subsidiary of the Company), or options, warrants
or other rights to acquire such Capital Stock;
(iii) make any principal payment on, or repurchase, redeem, defease,
retire or otherwise acquire for value, prior to any scheduled
principal payment, sinking fund payment or maturity, any
Subordinated Indebtedness;
(iv) declare or pay any dividend or distribution on any Capital Stock
of any Restricted Subsidiary to any Person (other than:
(a) to the Company or any of its Wholly Owned Restricted
Subsidiaries; or
(b)dividends and distributions made by a Restricted
Subsidiary:
(1) organized as a partnership, limited liability
company or similar pass-through entity to the holders
of its Capital Stock in amounts sufficient to satisfy
the tax liabilities arising from their ownership of
such Capital Stock; or
(2) on a pro rata basis to all stockholders of such
Restricted Subsidiary); or
(v) make any Investment in any Person (other than any Permitted
Investments)
(any of the foregoing actions described in clauses (i) through (v), other than
any such action that is a Permitted Payment (as defined below), collectively,
"Restricted Payments") (the amount of any such Restricted Payment, if other than
cash, shall be the Fair Market Value of the assets proposed to be transferred,
as determined by the board of directors of the Company, whose determination
shall be conclusive and evidenced by a board resolution), unless
(1) immediately before and immediately after giving effect to
such proposed Restricted Payment on a pro forma basis, no Default or
Event of Default shall have occurred and be continuing and such
Restricted Payment shall not be an event which is, or after notice or
lapse of time or both, would be, an "event of default" under the terms
of any Indebtedness of the Company or its Restricted Subsidiaries;
(2) immediately before and immediately after giving effect to
such Restricted Payment on a pro forma basis, the Company could incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness)
under the provisions described under "-- Limitation on Indebtedness;"
and
44
(3) after giving effect to the proposed Restricted Payment, the
aggregate amount of all such Restricted Payments declared or made
after July 31, 1998 and all Designation Amounts does not exceed the
sum of:
(A) $5 million;
(B) 50% of the aggregate Consolidated Net Income of the
Company accrued on a cumulative basis during the period beginning
on the first day of the Company's fiscal quarter during which
July 31, 1998 fell and ending on the last day of the Company's
last fiscal quarter during which such date fell ending prior to
the date of the Restricted Payment, or, if such aggregate
cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss;
(C) the aggregate Net Cash Proceeds received after July 31,
1998 by the Company either (x) as capital contributions in the
form of common equity to the Company or (y) from the issuance or
sale (other than to any of its Subsidiaries) of Qualified Capital
Stock of the Company or any options, warrants or rights to
purchase such Qualified Capital Stock of the Company (except, in
each case, to the extent such proceeds are used to purchase,
redeem or otherwise retire Capital Stock or Subordinated
Indebtedness as set forth below in clause (ii) or (iii) of
paragraph (b) below) (and excluding the Net Cash Proceeds from
the issuance of Qualified Capital Stock financed, directly or
indirectly, using funds borrowed from the Company or any
Subsidiary until and to the extent such borrowing is repaid);
(D) the aggregate Net Cash Proceeds received after July 31,
1998, by the Company (other than from any of its Subsidiaries)
upon the exercise of any options, warrants or rights to purchase
Qualified Capital Stock of the Company (and excluding the Net
Cash Proceeds from the exercise of any options, warrants or
rights to purchase Qualified Capital Stock financed, directly or
indirectly, using funds borrowed from the Company or any
Subsidiary until and to the extent such borrowing is repaid);
(E) the aggregate Net Cash Proceeds received after July 31,
1998, by the Company from the conversion or exchange, if any, of
debt securities or Redeemable Capital Stock of the Company or its
Restricted Subsidiaries into or for Qualified Capital Stock of
the Company plus, to the extent such debt securities or
Redeemable Capital Stock were issued after July 31, 1998, upon
the conversion or exchange of such debt securities or Redeemable
Capital Stock, the aggregate of Net Cash Proceeds from their
original issuance (and excluding the Net Cash Proceeds from the
conversion or exchange of debt securities or Redeemable Capital
Stock financed, directly or indirectly, using funds borrowed from
the Company or any Subsidiary until and to the extent such
borrowing is repaid); and
(F)(a) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after July 31,
1998, an amount (to the extent not included in Consolidated Net
Income) equal to the lesser of the return of capital with respect
to such Investment and the initial amount of such Investment, in
either case, less the cost of the disposition of such Investment
and net of taxes, and (b) in the case of the designation of an
Unrestricted Subsidiary as a Restricted Subsidiary (as long as
the designation of such Subsidiary as an Unrestricted Subsidiary
was deemed a Restricted Payment), the Fair Market Value of the
Company's interest in such Subsidiary provided that such amount
shall not in any case exceed the amount of the Restricted Payment
deemed made at the time the Subsidiary was designated as an
Unrestricted Subsidiary.
(b) Notwithstanding the foregoing, and in the case of
clauses (ii) through (iv) below, so long as no Default or Event
of Default is continuing or would arise therefrom, the foregoing
provisions shall not prohibit the following actions (each of
clauses (i) through (iv) and (viii) being referred to as a
"Permitted Payment"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment was
permitted by the provisions of paragraph (a) of this Section and such
payment shall have been deemed to have been paid on such date of
declaration and shall not have been deemed a "Permitted Payment" for
purposes of the calculation required by paragraph (a) of this Section;
(ii) the repurchase, redemption, or other acquisition or
retirement for value of any shares of any class of Capital Stock of
the Company in exchange for, including any such exchange pursuant to
the exercise of a conversion right or privilege in connection with
which cash is paid in lieu of the issuance of fractional shares or
scrip, or out of the Net Cash Proceeds of a substantially concurrent
issuance and sale for cash (other than to a Subsidiary) of, other
shares of Qualified Capital Stock of the Company; provided that the
Net
45
Cash Proceeds from the issuance of such shares of Qualified Capital
Stock are excluded from clause (3)(C) of paragraph (a) of this
Section;
(iii) the repurchase, redemption, defeasance, retirement or
acquisition for value or payment of principal of any Subordinated
Indebtedness or Redeemable Capital Stock in exchange for, or in an
amount not in excess of the Net Cash Proceeds of, a substantially
concurrent issuance and sale for cash (other than to any Subsidiary of
the Company) of any Qualified Capital Stock of the Company, provided
that the Net Cash Proceeds from the issuance of such shares of
Qualified Capital Stock are excluded from clause (3)(C) of paragraph
(a) of this Section;
(iv) the repurchase, redemption, defeasance, retirement,
refinancing, acquisition for value or payment of principal of any
Subordinated Indebtedness (other than Redeemable Capital Stock) (a
"refinancing") through the substantially concurrent issuance of new
Subordinated Indebtedness of the Company, provided that any such new
Subordinated Indebtedness
(1) shall be in a principal amount that does not exceed the
principal amount so refinanced (or, if such Subordinated
Indebtedness provides for an amount less than the principal
amount thereof to be due and payable upon a declaration of
acceleration thereof, then such lesser amount as of the date of
determination), plus the lesser of (I) the stated amount of any
premium or other payment required to be paid in connection with
such a refinancing pursuant to the terms of the Indebtedness
being refinanced or (II) the amount of premium or other payment
actually paid at such time to refinance the Indebtedness, plus,
in either case, the amount of expenses of the Company incurred in
connection with such refinancing;
(2) has an Average Life to Stated Maturity greater than the
remaining Average Life to Stated Maturity of the Series D notes;
(3) has a Stated Maturity for its final scheduled principal
payment later than the Stated Maturity for the final scheduled
principal payment of the Series D notes; and
(4) is expressly subordinated in right of payment to the
Series D notes at least to the same extent as the Subordinated
Indebtedness to be refinanced;
(v) the purchase, redemption, or other acquisition or retirement
for value of any class of Capital Stock of the Company from employees,
former employees, directors or former directors of the Company or any
Subsidiary pursuant to the terms of the agreements pursuant to which
such Capital Stock was acquired in an amount not to exceed $1.0
million in the aggregate in any calendar year;
(vi) the repurchase, redemption or other acquisition or
retirement for value of Capital Stock of the Company issued pursuant
to acquisitions by the Company to the extent required by or needed to
comply with the requirements of any of the Manufacturers with which
the Company or a Restricted Subsidiary is a party to a franchise
agreement;
(vii) the repurchase, redemption, defeasance, retirement or
acquisition for value or payment of principal on the Smith
Subordinated Loan; and
(viii) the payment of the contingent purchase price of an
acquisition to the extent such payment would be deemed a Restricted
Payment. (Section 1009)
Limitation on Transactions with Affiliates. The Company will not, and will
not cause or permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into any transaction or series of related transactions
(including, without limitation, the sale, purchase, exchange or lease of assets,
property or services) with or for the benefit of any Affiliate of the Company
(other than the Company or a Wholly Owned Restricted Subsidiary) unless such
transaction or series of related transactions is entered into in good faith and
in writing and
(a) such transaction or series of related transactions is on
terms that are no less favorable to the Company or such Restricted
Subsidiary, as the case may be, than those that would be available in
a comparable transaction in arm's-length dealings with an unrelated
third party;
(b) with respect to any transaction or series of related
transactions involving aggregate value in excess of $500,000 the
Company delivers either an officers' certificate to the Trustee
certifying that such transaction or series of related transactions
complies with clause (a) above or such transaction or series of
related transactions is approved by a majority of the Disinterested
Directors of the board of directors of the Company, or in the event
there is only one Disinterested Director, by such Disinterested
Director; and
46
(c) with respect to any transaction or series of related
transactions involving aggregate value in excess of $1 million, either
(i) such transaction or series of related transactions has been
approved by a majority of the Disinterested Directors of the board of
directors of the Company, or in the event there is only one
Disinterested Director, by such Disinterested Director, or (ii) the
Company delivers to the Trustee a written opinion of an investment
banking firm of national standing or other recognized independent
expert with experience appraising the terms and conditions of the type
of transaction or series of related transactions for which an opinion
is required stating that the transaction or series of related
transactions is fair to the Company or such Restricted Subsidiary from
a financial point of view;
provided, however, that this provision shall not apply to:
(i) compensation and employee benefit arrangements with any
officer or director of the Company, including under any stock
option or stock incentive plans, entered into in the ordinary
course of business;
(ii) any transaction permitted as a Restricted Payment
pursuant to the covenant described in "--Limitation on Restricted
Payments";
(iii) the payment of customary fees to directors of the
Company and its Restricted Subsidiaries;
(iv) any transaction with any officer or member of the Board
of Directors of the Company involving indemnification
arrangements; and
(v) loans or advances to officers of the Company in the
ordinary course of business not to exceed $1 million in any
calendar year. (Section 1010)
Limitation on Liens. The Company will not, and will not cause or permit
any Restricted Subsidiary to, directly or indirectly, (1) create, incur or
affirm any Lien of any kind securing any Pari Passu Indebtedness or Subordinated
Indebtedness, including any assumption, guarantee or other liability with
respect thereto by any Restricted Subsidiary, upon any property or assets
(including any intercompany notes) of the Company or any Restricted Subsidiary
owned on July 31, 1998 or acquired after July 31, 1998, or (2) assign or convey
any right to receive any income or profits from such liens, unless the Series D
notes or a Guarantee in the case of Liens of a Guarantor are directly secured
equally and ratably with (or, in the case of Subordinated Indebtedness, prior or
senior thereto, with the same relative priority as the Series D notes shall have
with respect to such Subordinated Indebtedness) the obligation or liability
secured by such Lien except for Liens:
(A) securing any Indebtedness which became Indebtedness pursuant
to a transaction permitted under "--Consolidation, Merger, Sale of
Assets" or securing Acquired Indebtedness which was created prior to
(and not created in connection with, or in contemplation of) the
incurrence of such Pari Passu Indebtedness or Subordinated
Indebtedness (including any assumption, guarantee or other liability
with respect thereto by any Restricted Subsidiary) and which
Indebtedness is permitted under the provisions of "-- Limitation on
Indebtedness"; or
(B) securing any Indebtedness incurred in connection with any
refinancing, renewal, substitutions or replacements of any such
Indebtedness described in clause (A), so long as the aggregate
principal amount of Indebtedness represented thereby (or if such
Indebtedness provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of
the maturity thereof, the original issue price of such Indebtedness
plus any accreted value attributable thereto since the original
issuance of such Indebtedness) is not increased by such refinancing by
an amount greater than the lesser of:
(i) the stated amount of any premium or other payment
required to be paid in connection with such a refinancing
pursuant to the terms of the Indebtedness being refinanced; or
(ii) the amount of premium or other payment actually paid at
such time to refinance the Indebtedness, plus, in either case,
the amount of expenses of the Company incurred in connection with
such refinancing,
provided, however, that in the case of clauses (A) and (B), any such Lien
only extends to the assets that were subject to such Lien securing such
Indebtedness prior to the related acquisition by the Company or its Restricted
Subsidiaries. Notwithstanding the foregoing, any Lien securing the Series D
notes granted pursuant to this covenant shall be automatically and
unconditionally released and discharged upon the release by the holders of the
Pari Passu Indebtedness or Subordinated Indebtedness described above of their
Lien on the property or assets of the Company or any Restricted Subsidiary
(including any deemed release upon payment in full of all obligations under such
Indebtedness), at such time as the holders of all such Pari Passu Indebtedness
or
47
Subordinated Indebtedness also release their Lien on the property or assets of
the Company or such Restricted Subsidiary, or upon any sale, exchange or
transfer to any Person not an Affiliate of the Company of the property or assets
secured by such Lien, or of all of the Capital Stock held by the Company or any
Restricted Subsidiary in, or all or substantially all the assets of, any
Restricted Subsidiary creating such Lien. (Section 1011)
Limitation on Sale of Assets. (a) The Company will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly,
consummate an Asset Sale unless (i) at least 80% of the consideration from such
Asset Sale consists of:
(A) cash or Cash Equivalents,
(B) the assumption of Senior Indebtedness or Senior Guarantor
Indebtedness by the party acquiring the assets from the Company of any
Restricted Subsidiary,
(C) Replacement Assets or
(D) a combination of any of the foregoing; and
(ii) the Company or such Restricted Subsidiary receives consideration at
the time of such Asset Sale at least equal to the Fair Market Value of the
shares or assets subject to such Asset Sale (as determined by the board of
directors of the Company and evidenced in a board resolution); provided that any
notes or other obligations received by the Company or any such Restricted
Subsidiary from any transferee of assets from the Company or such Restricted
Subsidiary that are converted by the Company or such Restricted Subsidiary into
cash at Fair Market Value within 30 days after receipt shall be deemed to be
cash for purposes of this provision.
(b) If:
(A) all or a portion of the Net Cash Proceeds of any Asset Sale
are not required to be applied to repay permanently any Senior
Indebtedness or Senior Guarantor Indebtedness then outstanding as
required by the terms thereof; or
(B) the Company determines not to apply such Net Cash Proceeds to
the permanent prepayment of such Senior Indebtedness or Senior
Guarantor Indebtedness; or
(C) if no such Senior Indebtedness or Senior Guarantor
Indebtedness is then outstanding, then the Company or a Restricted
Subsidiary may within 365 days of the Asset Sale invest the Net Cash
Proceeds in Replacement Assets. The amount of such Net Cash Proceeds
not used or invested within 365 days of the Asset Sale as set forth in
this paragraph constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10 million or
more, the Company will apply the Excess Proceeds to the repayment of the
Series D notes and any other Pari Passu Indebtedness outstanding with similar
provisions requiring the Company to make an offer to purchase such
Indebtedness with the proceeds from any Asset Sale as follows:
(A) the Company will make an offer to purchase (an "Offer") from
all holders of the Series D notes in accordance with the procedures
set forth in the Indenture in the maximum principal amount (expressed
as a multiple of $1,000) of Series D notes that may be purchased out
of an amount (the "Note Amount") equal to the product of such Excess
Proceeds multiplied by a fraction, the numerator of which is the
outstanding principal amount of the Series D notes, and the
denominator of which is the sum of the outstanding principal amount of
the Series D notes and such Pari Passu Indebtedness (subject to
proration in the event such amount is less than the aggregate Offered
Price (as defined herein) of all Series D notes tendered); and
(B) to the extent required by such Pari Passu Indebtedness to
permanently reduce the principal amount of such Pari Passu
Indebtedness, the Company will make an offer to purchase or otherwise
repurchase or redeem Pari Passu Indebtedness (a "Pari Passu Offer") in
an amount (the "Pari Passu Debt Amount") equal to the excess of the
Excess Proceeds over the Note Amount. However, in no event will the
Company be required to make a Pari Passu Offer in a Pari Passu Debt
Amount exceeding the principal amount of such Pari Passu Indebtedness
plus the amount of any premium required to be paid to repurchase such
Pari Passu Indebtedness. The offer price for the Series D notes will
be payable in cash in an amount equal to 100% of the principal amount
of the Series D notes plus accrued and unpaid interest, if any, to the
date (the "Offer Date") such Offer is consummated (the "Offered
Price"), in accordance with the procedures set forth in the Indenture.
To the extent that the aggregate Offered Price of the Series D notes
tendered pursuant to the Offer is less than the Note Amount relating
thereto or the aggregate amount of Pari Passu Indebtedness that is
purchased in a Pari Passu Offer is less than the Pari Passu Debt
48
Amount, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of
Series D notes and Pari Passu Indebtedness surrendered by holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall
select the Series D notes to be purchased on a pro rata basis.
Upon the completion of the purchase of all the Series D notes
tendered pursuant to an Offer and the completion of a Pari Passu
Offer, the amount of Excess Proceeds, if any, shall be reset at
zero.
(d) If the Company becomes obligated to make an Offer pursuant to clause
(c) above, the Series D notes and the Pari Passu Indebtedness shall be
purchased by the Company, at the option of the holders thereof, in whole or in
part in integral multiples of $1,000, on a date that is not earlier than 30
days and not later than 60 days from the date the notice of the Offer is given
to holders, or such later date as may be necessary for the Company to comply
with the requirements under the Exchange Act.
(e) The Indenture will provide that the Company will comply with the
applicable tender offer rules, including Rule 14e-1 under the Exchange Act,
and any other applicable securities laws or regulations in connection with an
Offer. (Section 1012)
Limitation on Issuances of Guarantees of and Pledges for Indebtedness. (a)
The Company will not cause or permit any Restricted Subsidiary, other than a
Guarantor, directly or indirectly, to secure the payment of any Senior
Indebtedness of the Company and the Company will not, and will not permit any
Restricted Subsidiary to, pledge any intercompany notes representing obligations
of any Restricted Subsidiary (other than a Guarantor) to secure the payment of
any Senior Indebtedness unless in each case such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a guarantee of payment of the Series D notes by such Restricted
Subsidiary. The guarantee shall be on the same terms as the guarantee of the
Senior Indebtedness (if a guarantee of Senior Indebtedness is granted by any
such Restricted Subsidiary) except that the guarantee of the Series D notes need
not be secured and shall be subordinated to the claims against such Restricted
Subsidiary in respect of Senior Indebtedness to the same extent as the Series D
notes are subordinated to Senior Indebtedness of the Company under the
Indenture.
(b) The Company will not cause or permit any Restricted Subsidiary
(which is not a Guarantor), directly or indirectly, to guarantee, assume or in
any other manner become liable with respect to any Indebtedness of the Company
or any Restricted Subsidiary unless such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture to the Indenture providing for a
Guarantee of the Series D notes on the same terms as the guarantee of such
Indebtedness except that
(A) such guarantee need not be secured unless required pursuant to
"--Limitation on Liens,"
(B) if such Indebtedness is by its terms Senior Indebtedness, any
such assumption, guarantee or other liability of such Restricted Subsidiary with
respect to such Indebtedness shall be senior to such Restricted Subsidiary's
Guarantee of the Series D notes to the same extent as such Senior Indebtedness
is senior to the Series D notes and
(C) if such Indebtedness is by its terms expressly subordinated to
the Series D notes, any such assumption, guarantee or other liability of such
Restricted Subsidiary with respect to such Indebtedness shall be subordinated to
such Restricted Subsidiary's Guarantee of the Series D notes at least to the
same extent as such Indebtedness is subordinated to the Series D notes.
(c) Notwithstanding the foregoing, any Guarantee by a Restricted
Subsidiary of the Series D notes shall provide by its terms that it (and all
Liens securing the same) shall be automatically and unconditionally released and
discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Company's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary, which transaction
is in compliance with the terms of the Indenture and pursuant to which
transaction such Subsidiary is released from all guarantees, if any, by it of
other Indebtedness of the Company or any Restricted Subsidiaries or (ii) the
release by the holders of the Indebtedness of the Company of their security
interest or their guarantee by such Restricted Subsidiary (including any deemed
release upon payment in full of all obligations under such Indebtedness), at
such time as (A) no other Indebtedness of the Company has been secured or
guaranteed by such Restricted Subsidiary, as the case may be, or (B) the holders
of all such other Indebtedness which is secured or guaranteed by such Restricted
Subsidiary also release their security interest in or guarantee by such
Restricted Subsidiary (including any deemed release upon payment in full of all
obligations under such Indebtedness). (Section 1013)
Limitation on Senior Subordinated Indebtedness. The Company will not, and
will not permit or cause any Guarantor to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise in any manner become directly or
indirectly liable for or with respect to or otherwise permit to exist any
Indebtedness that is subordinate in right of payment to any Indebtedness of the
Company or such Guarantor, as the case may be, unless such Indebtedness is also
pari passu with the Series D notes or the Guarantee of such Guarantor or
subordinated in right of payment to the Series D notes or such Guarantee at
least to the same extent as the Series D notes or such Guarantee are
subordinated in right of payment to Senior Indebtedness or Senior Indebtedness
of such Guarantor, as the case may be, as set forth in the Indenture. (Section
1017)
49
Limitation on Subsidiary Preferred Stock. The Company will not permit
(a) any Restricted Subsidiary of the Company to issue, sell or transfer any
Preferred Stock, except for (i) Preferred Stock issued or sold to, held by or
transferred to the Company or a Wholly Owned Restricted Subsidiary, and (ii)
Preferred Stock issued by a Person prior to the time
(A) such Person becomes a Restricted Subsidiary,
(B) such Person merges with or into a Restricted Subsidiary or
(C) a Restricted Subsidiary merges with or into such Person;
provided that such Preferred Stock was not issued or incurred by such
Person in anticipation of the type of transaction contemplated by subclause (A),
(B) or (C) or
(b) any Person (other than the Company or a Wholly Owned Restricted
Subsidiary) to acquire Preferred Stock of any Restricted Subsidiary from the
Company or any Restricted Subsidiary, except, in the case of clause (a) or (b),
upon the acquisition of all the outstanding Capital Stock of such Restricted
Subsidiary in accordance with the terms of the Indenture. (Section 1015)
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to
(i) pay dividends or make any other distribution on its Capital Stock or
any other interest or participation in or measured by its profits,
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary,
(iii) make any Investment in the Company or any other Restricted Subsidiary
or
(iv) transfer any of its properties or assets to the Company or any other
Restricted Subsidiary, except for:
(a) any encumbrance or restriction pursuant to an agreement in effect on
July 31, 1998;
(b) any encumbrance or restriction, with respect to a Restricted Subsidiary
that was not a Restricted Subsidiary of the Company on July 31, 1998, in
existence at the time such Person becomes a Restricted Subsidiary of the Company
and not incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary, provided that such encumbrances and
restrictions are not applicable to the Company or any Restricted Subsidiary or
the properties or assets of the Company or any Restricted Subsidiary other than
such Subsidiary which is becoming a Restricted Subsidiary;
(c) customary provisions contained in an agreement that has been entered
into for the sale or other disposition of all or substantially all of the
Capital Stock or assets of a Restricted Subsidiary; provided however that the
restrictions are applicable only to such Restricted Subsidiary or assets;
(d) any encumbrance or restriction existing under or by reason of
applicable law;
(e) customary provisions restricting subletting or assignment of any lease
governing any leasehold interest of any Restricted Subsidiary;
(f) covenants in franchise agreements with Manufacturers customary for
franchise agreements in the automobile retailing industry;
(g) any encumbrance or restriction contained in any Purchase Money
Obligations for property to the extent such restriction or encumbrance restricts
the transfer of such property;
(h) any encumbrances or restrictions in security agreements securing
Indebtedness (other than Subordinated Indebtedness) of a Guarantor (including
any Inventory Facility (to the extent that such Liens are otherwise incurred in
accordance with "-- Limitation on Liens") that restrict the transfer of property
subject to such agreements, provided that any such encumbrance or restriction is
released to the extent the underlying Lien is released or the related
Indebtedness is repaid; and
(i) any encumbrance or restriction existing under any agreement that
extends, renews, refinances or replaces the agreements containing the
encumbrances or restrictions in the foregoing clauses (a) and (b), or in this
clause (i), provided that
50
the terms and conditions of any such encumbrances or restrictions are no
more restrictive in any material respect than those under or pursuant to
the agreement evidencing the Indebtedness so extended, renewed, refinanced
or replaced. (Section 1016)
Limitation on Unrestricted Subsidiaries. The Company may designate after
the Issue Date any Subsidiary as an "Unrestricted Subsidiary" under the
Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(b) the Company would be permitted to make an Investment (other than a
Permitted Investment) at the time of Designation (assuming the effectiveness of
such Designation) pursuant to the first paragraph of "-- Limitation on
Restricted Payments" above in an amount (the "Designation Amount") equal to the
greater of (1) the net book value of the Company's interest in such Subsidiary
calculated in accordance with GAAP or (2) the Fair Market Value of the Company's
interest in such Subsidiary as determined in good faith by the Company's board
of directors;
(c) the Company would be permitted under the Indenture to incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
covenant described under "-- Limitation on Indebtedness" at the time of such
Designation (assuming the effectiveness of such Designation);
(d) such Unrestricted Subsidiary does not own any Capital Stock in any
Restricted Subsidiary of the Company which is not simultaneously being
designated an Unrestricted Subsidiary;
(e) such Unrestricted Subsidiary is not liable, directly or indirectly,
with respect to any Indebtedness other than Unrestricted Subsidiary
Indebtedness, provided that an Unrestricted Subsidiary may provide a Guarantee
for the Series D notes; and
(f) such Unrestricted Subsidiary is not a party to any agreement, contract,
arrangement or understanding at such time with the Company or any Restricted
Subsidiary unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company or, in the event such condition is not satisfied, the
value of such agreement, contract, arrangement or understanding to such
Unrestricted Subsidiary shall be deemed a Restricted Payment.
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
"-- Limitation on Restricted Payments" for all purposes of the Indenture in the
Designation Amount.
The Indenture will also provide that the Company shall not and shall not
cause or permit any Restricted Subsidiary to at any time (x) provide credit
support for, or subject any of its property or assets, other than the Capital
Stock of any Unrestricted Subsidiary, to the satisfaction of, any Indebtedness
of any Unrestricted Subsidiary, including any undertaking, agreement or
instrument evidencing such Indebtedness, (other than Permitted Investments in
Unrestricted Subsidiaries) or (y) be directly or indirectly liable for any
Indebtedness of any Unrestricted Subsidiary. For purposes of the foregoing, the
Designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall
be deemed to be the Designation of all of the Subsidiaries of such Subsidiary.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(a) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation;
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if
incurred at such time, have been permitted to be incurred for all
purposes of the Indenture; and
(c) unless such redesignated Subsidiary shall not have any Indebtedness
outstanding (other than Indebtedness that would be Permitted
Indebtedness), immediately after giving effect to such proposed
Revocation, and after giving pro forma effect to the incurrence of
any such Indebtedness of such redesignated Subsidiary as if such
Indebtedness was incurred on the date of the Revocation, the
Company could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the covenant described under
"--Limitation on Indebtedness."
All Designations and Revocations must be evidenced by a resolution of the
board of directors of the Company delivered to the Trustee certifying compliance
with the foregoing provisions. (Section 1018)
Provision of Financial Statements. Whether or not the Company is subject
to Section 13(a) or 15(d) of the Exchange Act, the Company and each Guarantor
(to the extent such Guarantor would be required if subject to Section 13(a) or
15(d) of the Exchange Act) will, to the extent permitted under the Exchange Act,
file with the Commission the annual reports, quarterly reports and other
documents which the Company and such Guarantor would have been required to file
with the Commission pursuant to Sections 13(a) or 15(d) if the Company or such
Guarantor were so subject. The documents are to be filed with the Commission on
or prior to the date (the "Required Filing Date") by which the Company and such
Guarantor would have been
51
required so to file such documents if the Company and such Guarantor were
so subject. The Company will also in any event (x) within 15 days of each
Required Filing Date
(i) transmit by mail to all holders, as their names and addresses
appear in the security register, without cost to such holders; and
(ii) file with the Trustee copies of the annual reports, quarterly
reports and other documents which the Company and such Guarantor
would have been required to file with the Commission pursuant to
Sections 13(a) or 15(d) of the Exchange Act if the Company and such
Guarantor were subject to either of such Sections; and
(y) if filing such documents by the Company and such Guarantor with the
Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective holder at the Company's cost.
If any Guarantor's financial statements would be required to be included in
the financial statements filed or delivered pursuant to the Indenture if the
Company were subject to Section 13(a) or 15(d) of the Exchange Act, the Company
shall include such Guarantor's financial statements in any filing or delivery
pursuant to the Indenture. The Indenture also provides that, so long as any of
the Series C notes remain outstanding, the Company will make available to any
prospective purchaser of Series C notes or beneficial owner of Series C notes in
connection with any sale thereof the information required by Rule 144A(d)(4)
under the Securities Act, until such time as the Company has either exchanged
the Series C notes for Series D notes or until such time as the holders thereof
have disposed of such Series C notes pursuant to an effective registration
statement under the Securities Act. (Section 1019)
Additional Covenants. The Indenture also contains covenants with respect to
the following matters:
(i) payment of principal, premium and interest;
(ii) maintenance of an office or agency in The City of New York;
(iii) arrangements regarding the handling of money held in trust;
(iv) maintenance of corporate existence;
(v) payment of taxes and other claims;
(vi) maintenance of properties; and
(vii) maintenance of insurance.
Consolidation, Merger, Sale of Assets
The Company
The Company will not, in a single transaction or through a series of
related transactions, (1) consolidate with or merge with or into any other
Person; (2) sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets to any Person or group of
Persons; or (3) permit any of its Restricted Subsidiaries to enter into any such
transaction or series of related transactions if such transaction or series of
related transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of the Company and its Restricted Subsidiaries on a
Consolidated basis to any other Person or group of Persons, unless at the time
and after giving effect thereto:
(i) either (a) the Company will be the continuing corporation (in the
case of a consolidation or merger involving the Company) or (b) the
Person (if other than the Company) formed by such consolidation or
into which the Company is merged or the Person which acquires by
sale, assignment, conveyance, transfer, lease or disposition all or
substantially all of the properties and assets of the Company and
its Restricted Subsidiaries on a Consolidated basis (the "Surviving
Entity") will be a corporation duly organized and validly existing
under the laws of the United States of America, any state thereof
or the District of Columbia and such Person expressly assumes, by a
supplemental indenture, in a form reasonably satisfactory to the
Trustee, all the obligations of the Company under the Series D
notes, the Indenture and the Registration Rights Agreement (as that
term is defined under "Exchange Offer; Registration Rights"), as
the case may be, and the Series D notes, the Indenture and the
Registration Rights Agreement will remain in full force and effect
as so supplemented;
(ii) the Indenture and the Registration Rights Agreement will remain in
full force and effect as so supplemented;
52
(iii) immediately before and immediately after giving effect to such
transaction on a pro forma basis (and treating any Indebtedness not
previously an obligation of the Company or any of its Restricted
Subsidiaries which becomes the obligation of the Company or any of
its Restricted Subsidiaries as a result of such transaction as
having been incurred at the time of such transaction), no Default
or Event of Default will have occurred and be continuing;
(iv) immediately before and immediately after giving effect to such
transaction on a pro forma basis (on the assumption that the
transaction occurred on the first day of the four-quarter period
for which financial statements are available ending immediately
prior to the consummation of such transaction with the appropriate
adjustments with respect to the transaction being included in such
pro forma calculation), the Company (or the Surviving Entity if the
Company is not the continuing obligor under the Indenture) could
incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the provisions of "-- Certain Covenants --
Limitation on Indebtedness;"
(v) at the time of the transaction, each Guarantor, if any, unless it
is the other party to the transactions described above, will have
by supplemental indenture confirmed that its Guarantee shall apply
to such Person's obligations under the Indenture and under the
Series D notes;
(vi) at the time of the transaction if any of the property or assets of
the Company or any of its Restricted Subsidiaries would thereupon
become subject to any Lien, the provisions of "-- Certain Covenants
-- Limitation on Liens" are complied with; and
(vii) at the time of the transaction the Company or the Surviving Entity
will have delivered, or caused to be delivered, to the Trustee, in
form and substance reasonably satisfactory to the Trustee, an
officers' certificate and an opinion of counsel, each to the effect
that such consolidation, merger, transfer, sale, assignment,
conveyance, transfer, lease or other transaction and the
supplemental indenture in respect thereof comply with the Indenture
and that all conditions precedent therein provided for relating to
such transaction have been complied with. (Section 801)
The Guarantors
Each Guarantor will not, and the Company will not permit a Guarantor to,
in a single transaction or through a series of related transactions, (1)
consolidate with or merge with or into any other Person (other than the Company
or any Guarantor); (2) sell, assign, convey, transfer, lease or otherwise
dispose of all or substantially all of its properties and assets on a
Consolidated basis to any Person or group of Persons (other than the Company or
any Guarantor); or (3) permit any of its Restricted Subsidiaries to enter into
any such transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in a sale assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Guarantor and its Restricted Subsidiaries on a Consolidated basis
to any other Person or group of Persons (other than the Company or any
Guarantor), unless at the time and after giving effect thereto:
(i) either (a) the Guarantor will be the continuing corporation, in the
case of a consolidation or merger involving the Guarantor or (b)
the Person (if other than the Guarantor) formed by such
consolidation or into which such Guarantor is merged or the Person
which acquires by sale, assignment, conveyance, transfer, lease or
disposition all or substantially all of the properties and assets
of the Guarantor and its Restricted Subsidiaries on a Consolidated
basis (the "Surviving Guarantor Entity") is duly organized and
validly existing under the laws of the United States of America,
any state thereof or the District of Columbia and such Person
expressly assumes, by a supplemental indenture, in a form
reasonably satisfactory to the Trustee, all the obligations of such
Guarantor under its Guarantee of the Series D notes, the Indenture
and the Registration Rights Agreement and such Guarantee, Indenture
and Registration Rights Agreement will remain in full force and
effect;
(ii) immediately before and immediately after giving effect to such
transaction on a pro forma basis, no Default or Event of Default
will have occurred and be continuing; and
(iii) at the time of the transaction such Guarantor or the Surviving
Guarantor Entity will have delivered, or caused to be delivered, to
the Trustee, in form and substance reasonably satisfactory to the
Trustee, an officers' certificate and an opinion of counsel, each
to the effect that such consolidation, merger, transfer, sale,
assignment, conveyance, lease or other transaction and the
supplemental indenture in respect thereof comply with the Indenture
and that all conditions precedent therein provided for relating to
such transaction have been complied with.
However, the foregoing limitations do not apply to any Guarantor whose
Guarantee of the Series D notes is unconditionally released and discharged in
accordance with paragraph (c) under the provisions of " -- Certain Covenants --
Limitation on Issuances of Guarantees of and Pledges for Indebtedness."
(Section 801)
In the event of any transaction (other than a transfer by lease or a sale
of substantially all of the assets of the Company or a Guarantor that results in
the sale, assignment, conveyance, transfer or other disposition of assets
constituting or accounting for less than 95% of the consolidated assets,
revenues or Consolidated Net Income (Loss) of the Company or such Guarantor, as
the
53
case may be) described in and complying with the conditions listed in the two
immediately preceding subsections in which the Company or any Guarantor, as
the case may be, is not the continuing corporation, the successor Person formed
or remaining or to which such transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company or such
Guarantor, as the case may be, under the Indenture, the Series D notes and/or
the related Guarantees, as the case may be, and the Company or any Guarantor, as
the case may be, shall be discharged from all obligations and covenants under
the Indenture and the Series D notes or its Guarantee, as the case may be.
(Section 802)
Events of Default
An Event of Default will occur under the Indenture if:
(1) there shall be a default in the payment of any interest on any Note
when it becomes due and payable, and such default shall continue for a period of
30 days, whether or not prohibited by the subordination provisions of the
Indenture;
(2) there shall be a default in the payment of the principal of (or
premium, if any, on) any Note at its Maturity (upon acceleration, optional or
mandatory redemption if any, required repurchase or otherwise), whether or not
prohibited by the subordination provisions of the Indenture;
(3) (a) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company or any Guarantor under the Indenture or any
Guarantee (other than a default in the performance, or breach, of a covenant or
agreement which is specifically dealt with in clause (1), (2) or in clause (b),
(c) or (d) of this clause (3)) and such default or breach shall continue for a
period of 60 days after written notice (30 days in the case of a default in the
covenants described under "-- Certain Covenants -- Limitation on Indebtedness"
or "-- Limitation on Restricted Payments") has been given, by certified mail,
(x) to the Company by the Trustee or (y) to the Company and the Trustee by the
holders of at least 25% in aggregate principal amount of the outstanding Series
D notes;
(b) there shall be a default in the performance or breach of the
provisions described in "--Consolidation, Merger, Sale of Assets";
(c) the Company shall have failed to consummate an Offer in accordance
with the provisions of "--Certain Covenants-- Limitation on Sale of
Assets"; or
(d) the Company shall have failed to consummate a Change of Control
Offer in accordance with the provisions of "--Purchase of Series D
notes Upon a Change of Control";
(4) one or more defaults, individually or in the aggregate, shall have
occurred under any of the agreements, indentures or instruments under which the
Company or any Restricted Subsidiary then has outstanding Indebtedness in excess
of $20 million in principal amount, individually or in the aggregate, and either
(a) such default results from the failure to pay such Indebtedness at its stated
final maturity or (b) such default or defaults resulted in the acceleration of
the maturity of such Indebtedness;
(5) any Guarantee shall for any reason cease to be, or shall for any
reason be asserted in writing by any Guarantor or the Company not to be, in full
force and effect and enforceable in accordance with its terms, except to the
extent contemplated by the Indenture and any such Guarantee;
(6) one or more final judgments, orders or decrees (not subject to appeal)
of any court or regulatory or administrative agency for the payment of money in
excess of $20 million, either individually or in the aggregate (exclusive of any
portion of any such payment covered by insurance, if and to the extent the
insurer has acknowledged in writing its liability therefor), shall be rendered
against the Company, any Guarantor or any Subsidiary or any of their respective
properties and shall not be discharged or fully binded and there shall have been
a period of 60 consecutive days during which a stay of enforcement of such
judgment or order, by reason of an appeal or otherwise, shall not be in effect;
(7) any holder or holders of at least $20 million in aggregate principal
amount of Indebtedness of the Company, any Guarantor or any Restricted
Subsidiary after a default under such Indebtedness shall notify the Trustee of
the intended sale or disposition of any assets of the Company, any Guarantor or
any Subsidiary that have been pledged to or for the benefit of such holder or
holders to secure such Indebtedness or shall commence proceedings, or take any
action, including by way of set-off, to retain in satisfaction of such
Indebtedness or to collect on, seize, dispose of or apply in satisfaction of
Indebtedness, assets of the Company, any Guarantor or any Restricted Subsidiary,
including funds on deposit or held pursuant to lock-box and other similar
arrangements;
(8) there shall have been the entry by a court of competent jurisdiction
of (a) a decree or order for relief in respect of the Company or any Significant
Restricted Subsidiary in an involuntary case or proceeding under any applicable
Bankruptcy Law or (b) a decree or order:
54
(i) adjudging the Company or any Significant Restricted Subsidiary
bankrupt or insolvent;
(ii) seeking reorganization, arrangement, adjustment or composition of
or in respect of the Company or any Significant Restricted
Subsidiary under any applicable federal or state law;
(iii) appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company or any
Significant Restricted Subsidiary or of any substantial part of
their respective properties; or
(iv) ordering the winding up or liquidation of their respective affairs,
and any such decree or order for relief shall continue to be in
effect, or any such other decree or order shall be unstayed and in
effect, for a period of 60 consecutive days; or
(9) (a) the Company or any Significant Restricted Subsidiary commences a
voluntary case or proceeding under any Applicable Bankruptcy Law or any other
case or proceeding to be adjudicated bankrupt or insolvent,
(b) the Company or any Significant Restricted Subsidiary consents to the
entry of a decree or order for relief in respect of the Company or such
Significant Restricted Subsidiary in an involuntary case or proceeding under any
applicable Bankruptcy Law or to the commencement of any bankruptcy or insolvency
case or proceeding against it,
(c) the Company or any Significant Restricted Subsidiary files a petition
or answer or consent seeking reorganization or relief under any applicable
federal or state law,
(d) the Company or any Significant Restricted Subsidiary
(i) Consents to the filing of such petition or the appointment of, or
taking possession by, a custodian, Receiver, liquidator, assignee,
trustee, sequestrator or similar official of the Company or such
Significant Restricted Subsidiary or of any substantial part of
their respective properties,
(ii) makes an assignment for the benefit of creditors or
(iii) admits in writing its inability to pay its debts generally as they
become due or
(e) the Company or any Significant Restricted Subsidiary takes any
corporate action in furtherance of any such actions in this paragraph (9).
(Section 501)
Result of Events of Default
If an Event of Default (other than as specified in clauses (8) and (9) of
the prior paragraph) shall occur and be continuing with respect to the
Indenture, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Series D notes then outstanding may, and the Trustee at
the request of such holders shall, declare all unpaid principal of, premium, if
any, and accrued interest on all Series D notes to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by the holders of the Series D notes). Upon any such declaration, such
principal, premium, if any, and interest shall become due and payable
immediately. If an Event of Default specified in clause (8) or (9) of the prior
paragraph occurs and is continuing, then all the Series D notes shall ipso facto
become and be due and payable immediately in an amount equal to the principal
amount of the Series D notes, together with accrued and unpaid interest, if any,
to the date the Series D notes become due and payable, without any declaration
or other act on the part of the Trustee or any holder. Thereupon, the Trustee
may, at its discretion, proceed to protect and enforce the rights of the holders
of Series D notes by appropriate judicial proceedings.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of Series D notes outstanding by written
notice to the Company and the Trustee, may rescind and annul such declaration
and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum sufficient to
pay
(i) all sums paid or advanced by the Trustee under the Indenture and
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel,
(ii) all overdue interest on all Series D notes then outstanding;
(iii) the principal of and premium, if any, on any Series D notes then
outstanding which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne
by the Series D notes and
(iv) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate borne by the Series D notes;
55
(b) the rescission would not conflict with any judgment or decree of
a court of competent jurisdiction, and
(c) all Events of Default, other than the non-payment of principal of,
premium, if any, and interest on the Series D notes which have become due solely
by such declaration of acceleration, have been cured or waived as provided in
the Indenture. No such rescission shall affect any subsequent default or impair
any right consequent thereon. (Section 502)
Waiver of Default by Noteholders
The holders of not less than a majority in aggregate principal amount of
the Series D notes outstanding may on behalf of the holders of all outstanding
Series D notes waive any past default under the Indenture and its consequences,
except a default (i) in the payment of the principal of, premium, if any, or
interest on any Note, which may only be waived with the consent of each holder
of Series D notes affected or (ii) in respect of a covenant or provision which
under the Indenture cannot be modified or amended without the consent of the
holder of each Note affected by such modification or amendment. (Section 513)
Legal Rights of Noteholders
No holder of any of the Series D notes has any right to institute any
proceedings with respect to the Series D notes, the Indenture or any remedy
thereunder, unless
(1) the holders of at least 25% in aggregate principal amount of the
outstanding Series D notes have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding
as Trustee under the Series D notes and the Indenture;
(2) the Trustee has failed to institute such proceeding within 15 days
after receipt of such notice; and
(3) the Trustee, within such 15-day period, has not received directions
inconsistent with such written request by holders of a majority in
aggregate principal amount of the outstanding Series D notes.
Such limitations do not, however, apply to a suit instituted by a holder
of a Note for the enforcement of the payment of the principal of, premium, if
any, or interest on such Note on or after the respective due dates expressed in
such Note.
Notice to and Action of Trustees
The Company is required to notify the Trustee within five business days of
the occurrence of any Default. The Company is required to deliver to the
Trustee, on or before a date not more than 60 days after the end of each fiscal
quarter and not more than 120 days after the end of each fiscal year, a written
statement as to compliance with the Indenture, including whether or not any
Default has occurred. (Section 1020) The Trustee is under no obligation to
exercise any of the rights or powers vested in it by the Indenture at the
request or direction of any of the holders of the Series D notes unless such
holders offer to the Trustee security or indemnity satisfactory to the Trustee
against the costs, expenses and liabilities which might be incurred thereby.
(Section 603)
The Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of the Company or any Guarantor, if any, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions, provided that if it acquires any
conflicting interest it must eliminate such conflict upon the occurrence of an
Event of Default or else resign.
Defeasance or Covenant Defeasance of Indenture
The Company may, at its option and at any time, elect to have the
obligations of the Company, any Guarantor and any other obligor upon the Series
D notes discharged with respect to the outstanding Series D notes
("defeasance"). Such defeasance means that the Company, any such Guarantor and
any other obligor under the Indenture shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding Series D
notes, except for
(i) the rights of holders of such outstanding Series D notes to receive
payments in respect of the principal of, premium, if any, and
interest on such Series D notes when such payments are due,
(ii) the Company's obligations with respect to the Series D notes
concerning issuing temporary Series D notes, registration of Series
D notes, mutilated, destroyed, lost or stolen Series D notes, and
the maintenance of an office or agency for payment and money for
security payments held in trust,
(iii) the rights, powers, trusts, duties and immunities of the Trustee
and
(iv) the defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company and any Guarantor released with respect to
certain covenants that are described in the Indenture ("covenant defeasance")
and thereafter any omission
56
to comply with such obligations shall not constitute a Default or an Event of
Default with respect to the Series D notes. In the event covenant defeasance
occurs, certain events (not including non-payment, bankruptcy and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Series D notes. (Sections 401, 402 and 403)
In order to exercise either defeasance or covenant defeasance,
(i) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the holders of the Series D notes, cash in
United States dollars, U.S. Government Obligations (as defined in
the Indenture), or a combination thereof, in such amounts as will
be sufficient, in the opinion of a nationally recognized firm of
independent public accountants or a nationally recognized
investment banking firm, to pay and discharge the principal of,
premium, if any, and interest on the outstanding Series D notes
on the Stated Maturity (or on any date after August 1, 2003 (such
date being referred to as the "Defeasance Redemption Date"), if
at or prior to electing either defeasance or covenant defeasance,
the Company has delivered to the Trustee an irrevocable notice to
redeem all of the outstanding Series D notes on the Defeasance
Redemption Date);
(ii) in the case of defeasance, the Company shall have delivered to
the Trustee an opinion of independent counsel in the United
States stating that (A) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or
(B) since July 1, 1998, there has been a change in the applicable
federal income tax law, in either case to the effect that, and
based thereon such opinion of independent counsel in the United
States shall confirm that, the holders of the outstanding Series
D notes will not recognize income, gain or loss for federal
income tax purposes as a result of such defeasance and will be
subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
defeasance had not occurred;
(iii) in the case of covenant defeasance, the Company shall have
delivered to the Trustee an opinion of independent counsel in the
United States to the effect that the holders of the outstanding
Series D notes will not recognize income, gain or loss for
federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such covenant defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as clauses (8)
or (9) under the first paragraph under "-- Events of Default" are
concerned, at any time during the period ending on the 91st day
after the date of deposit (other than a Default which results
from the borrowing of amounts to finance the defeasance and which
borrowing does not result in a breach or violation of, or
constitute a default, under any other material agreement or
instrument to which the Company or any Restricted Subsidiary is a
party or to which it is bound);
(v) such defeasance or covenant defeasance shall not cause the
Trustee for the Series D notes to have a conflicting interest as
defined in the Indenture in violation of and for purposes of the
Trust Indenture Act with respect to any other securities of the
Company or any Guarantor;
(vi) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a Default under, the
Indenture or any other material agreement or instrument to which
the Company, any Guarantor or any Restricted Subsidiary is a
party or by which it is bound;
(vii) such defeasance or covenant defeasance shall not result in the
trust arising from such deposit constituting an investment
company within the meaning of the Investment Company Act of 1940,
as amended, unless such trust shall be registered under such Act
or exempt from registration thereunder;
(viii) the Company will have delivered to the Trustee an opinion of
independent counsel in the United States to the effect that
(assuming that no holder of any Series D notes would be
considered an insider of the Company under any applicable
bankruptcy or insolvency law) after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(ix) the Company shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Company
with the intent of preferring the holders of the Series D notes
or any Guarantee over the other creditors of the Company or any
Guarantor with the intent of defeating, hindering, delaying or
defrauding creditors of the Company, any Guarantor or others;
(x) no event or condition shall exist that would prevent the Company
from making payments of the principal of, premium, if any, and
interest on the Series D notes on the date of such deposit or at
any time ending on the 91st day after the date of such deposit;
and
57
(xi) the Company will have delivered to the Trustee an officers'
certificate and an opinion of independent counsel, each stating
that all conditions precedent provided for relating to either the
defeasance or the covenant defeasance, as the case may be, have
been complied with.(Section 404)
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Series D notes as expressly provided for in the Indenture) as to all outstanding
Series D notes under the Indenture when
(a) either (i) all such Series D notes theretofore authenticated and
delivered (except lost, stolen or destroyed Series D notes which
have been replaced or paid or Series D notes whose payment has
been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from
such trust as provided for in the Indenture) have been delivered
to the Trustee for cancellation or (ii) all Series D notes not
theretofore delivered to the Trustee for cancellation
(x) have become due and payable,
(y) will become due and payable at their Stated Maturity within
one year, or
(z) are to be called for redemption within one year under
arrangements reasonably satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company; and the Company or any
Guarantor has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust an
amount in United States dollars sufficient to pay and
discharge the entire Indebtedness on the Series D notes not
theretofore delivered to the Trustee for cancellation,
including the principal of, premium, if any, and accrued
interest on such Series D notes at such Maturity, Stated
Maturity or redemption date;
(b) the Company or any Guarantor has paid or caused to be paid all
other sums payable under the Indenture by the Company and any
Guarantor; and
(c) the Company has delivered to the Trustee an officers' certificate
and an opinion of independent counsel in form and substance
reasonably satisfactory to the Trustee each stating that (i) all
conditions precedent under the Indenture relating to the
satisfaction and discharge of such Indenture have been complied
with and (ii) such satisfaction and discharge will not result in
a breach or violation of, or constitute a default under, the
Indenture or any other material agreement or instrument to which
the Company, any Guarantor or any Restricted Subsidiary is a
party or by which the Company, any Guarantor or any Restricted
Subsidiary is bound. (Section 1201)
Modifications and Amendments
With Noteholder Consent
Modifications and amendments of the Indenture may be made by the Company,
each Guarantor, if any, and the Trustee with the consent of the holders of at
least a majority in aggregate principal amount of the Series D notes then
outstanding; provided, however, that no such modification or amendment may,
without the consent of the holder of each outstanding Note affected thereby:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, or change to an earlier date any redemption
date of, or waive a default in the payment of the principal of, premium,
if any, or interest on, any such Note or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the coin or currency in which the principal
of any such Note or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on
or after the redemption date);
(ii) amend, change or modify the obligation of the Company to make
and consummate an Offer with respect to any Asset Sale or Asset Sales in
accordance with "--Certain Covenants -- Limitation on Sale of Assets" or
the obligation of the Company to make and consummate a Change of Control
Offer in the event of a Change of Control in accordance with "--Purchase
of Series D notes Upon a Change of Control," including, in each case,
amending, changing or modifying any definitions relating thereto, but only
to the extent such definitions relate thereto;
(iii) reduce the percentage in principal amount of such outstanding
Series D notes, the consent of whose holders is required for any such
supplemental indenture, or the consent of whose holders is required for
any waiver or compliance with certain provisions of the Indenture;
58
(iv) modify any of the provisions relating to supplemental
indentures requiring the consent of holders or relating to the waiver of
past defaults or relating to the waiver of certain covenants, except to
increase the percentage of such outstanding Series D notes required for
any such actions or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the holder
of each such Note affected thereby;
(v) except as otherwise permitted under "--Consolidation, Merger,
Sale of Assets," consent to the assignment or transfer by the Company or
any Guarantor of any of its rights and obligations under the Indenture; or
(vi) amend or modify any of the provisions of the Indenture in any
manner which subordinates the Series D notes issued under the Indenture in
right of payment to any other Indebtedness of the Company or which
subordinates any Guarantee in right of payment to any other Indebtedness
of the Guarantor issuing such Guarantee. (Section 902)
Without Noteholder Consent
Notwithstanding the foregoing, without the consent of any holders of the
Series D notes, the Company, any Guarantor, any other obligor under the Series D
notes and the Trustee may modify or amend the Indenture:
(a) to evidence the succession of another Person to the Company or a
Guarantor or any other obligor upon the Series D notes, and the
assumption by any such successor of the covenants of the Company
or such Guarantor or obligor in the Indenture and in the Series D
notes and in any Guarantee in accordance with "-- Consolidation,
Merger, Sale of Assets;"
(b) to add to the covenants of the Company, any Guarantor or any other
obligor upon the Series D notes for the benefit of the holders of
the Series D notes or to surrender any right or power conferred
upon the Company or any Guarantor or any other obligor upon the
Series D notes, as applicable, in the Indenture, in the Series D
notes or in any Guarantee;
(c) to cure any ambiguity, or to correct or supplement any provision
in the Indenture or in any supplemental indenture, the Series D
notes or any Guarantee which may be defective or inconsistent with
any other provision in the Indenture, the Series D notes or any
Guarantee or to make any other provisions with respect to matters
or questions arising under the Indenture, the Series D notes or
any Guarantee; provided that, in each case, such provisions shall
not adversely affect the interest of the holders of the Series D
notes;
(d) to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the
Trust Indenture Act;
(e) to add a Guarantor under the Indenture;
(f) to evidence and provide the acceptance of the appointment of a
successor Trustee under the Indenture; or
(g) to mortgage, pledge, hypothecate or grant a security interest in
favor of the Trustee for the benefit of the holders of the Series
D notes as additional security for the payment and performance of
the Company's and any Guarantor's obligations under the Indenture,
in any property, or assets, including any of which are required to
be mortgaged, pledged or hypothecated, or in which a security
interest is required to be granted to the Trustee pursuant to the
Indenture or otherwise. (Section 901)
The holders of a majority in aggregate principal amount of the Series D
notes outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture. (Section 1021)
Governing Law
The Indenture, the Series D notes and any Guarantee will be governed by,
and construed in accordance with, the laws of the State of New York, without
giving effect to the conflicts of law principles thereof.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
as Trustee with such conflict or resign as Trustee. (Sections 608 and 611)
The holders of a majority in principal amount of the then outstanding
Series D notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions.
59
The Indenture provides that in case an Event of Default occurs, which has not
been cured, the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any holder of Series
D notes unless such holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense. (Sections
512, 601 and 603)
Certain Definitions
"Acquired Indebtedness" means Indebtedness of a Person:
(i) existing at the time such Person becomes a Restricted Subsidiary
or
(ii) assumed in connection with the acquisition of assets from such
Person, in each case, other than Indebtedness incurred in
connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary or such acquisition, as the case may be.
Acquired Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Restricted Subsidiary, as the case may be.
"Affiliate" means, with respect to any specified Person:
(i) any other Person directly or indirectly controlling or controlled
by or under direct or indirect common control with such specified
Person;
(ii) any other Person that owns, directly or indirectly, five percent
or more of such specified Person's Capital Stock or any officer or
director of any such specified Person or other Person or, with
respect to any natural Person, any person having a relationship
with such Person by blood, marriage or adoption not more remote
than first cousin; or
(iii) any other Person, five percent or more of the Voting Stock of
which is beneficially owned or held directly or indirectly by such
specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition, including, without limitation, by way of merger,
consolidation or sale and leaseback transaction (collectively, a "transfer"),
directly or indirectly, in one or a series of related transactions, of:
(i) any Capital Stock of any Restricted Subsidiary (other than
directors' qualifying shares and transfers of Capital Stock
required by a Manufacturer to the extent the Company does not
receive cash or Cash Equivalents for such Capital Stock);
(ii) all or substantially all of the properties and assets of any
division or line of business of the Company or any Restricted
Subsidiary; or
(iii) any other properties or assets of the Company or any Restricted
Subsidiary other than in the ordinary course of business.
For the purposes of this definition, the term "Asset Sale" shall not
include any transfer of properties and assets:
(A) that is governed by the provisions described under
"--Consolidation, Merger, Sale of Assets,"
(B) that is by the Company to any Wholly Owned Restricted
Subsidiary, or by any Restricted Subsidiary to the Company
or any Wholly Owned Restricted Subsidiary in accordance
with the terms of the Indenture,
(C) that is of obsolete equipment,
(D) that consists of defaulted receivables for collection or
any sale, transfer or other disposition of defaulted
receivables for collection, or
60
(E) the Fair Market Value of which in the aggregate does not
exceed $2.5 million in any transaction or series of related
transactions.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"B Indenture" means the Indenture, dated as of July 1,1998, among the
Company, the Trustee and the other parties thereto providing for the issuance of
the Series B notes in aggregate principal amount of $125 million as such
indenture has been and may be amended from time to time.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar United States federal or state law or foreign law
relating to bankruptcy, insolvency, receivership, winding up, liquidation,
reorganization or relief of debtors or any amendment to, succession to or change
in any such law.
"Capital Lease Obligation" of any Person means any obligation of such
Person and its Subsidiaries on a Consolidated basis under any capital lease of
real or personal property which, in accordance with GAAP, is required to be
recorded as a capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations, or other equivalents, however designated, of such Person's
capital stock or other equity interests whether now outstanding or issued after
the Issue Date, partnership interests (whether general or limited), any other
interest or participation that confers on a Person that right to receive a share
of the profits and losses of, or distributions of assets of (other than a
distribution in respect of Indebtedness), the issuing Person and any rights
(other than debt securities convertible into Capital Stock), warrants or options
exchangeable for or convertible into such Capital Stock.
"Cash Equivalents" means
(i) marketable direct obligations, maturing not more than one year
after the date of acquisition, issued by the United States of
America, or an instrumentality or agency thereof, and guaranteed
fully as to principal, premium, if any, and interest by the United
States of America,
(ii) any certificate of deposit, maturing not more than one year after
the date of acquisition, issued by a commercial banking
institution that is a member of the Federal Reserve System and
that has combined capital and surplus and undivided profits of not
less than $500 million, whose debt has a rating, at the time as of
which any investment therein is made, of "P-1" (or higher)
according to Moody's Investors Service, Inc. ("Moody's") or any
successor rating agency or "A-1" (or higher) according to Standard
Poor's Rating Group, a division of McGraw Hill, Inc. ("S&P"), or
any successor rating agency,
(iii) commercial paper, maturing not more than 180 days after the date
of acquisition, issued by a corporation (other than an Affiliate
or Subsidiary of the Company) organized and existing under the
laws of the United States of America with a rating, at the time as
of which any investment therein is made, of "P-1" (or higher)
according to Moody's or "A-1" (or higher) according to S&P and
(iv) any money market deposit accounts issued or offered by a domestic
commercial bank having capital and surplus in excess of $500
million; provided that the short term debt of such commercial bank
has a rating, at the time of Investment, of "P-1" (or higher)
according to Moody's or "A-1" (or higher) according to S&P.
"Change of Control" means the occurrence of any of the following events:
(i) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than Permitted Holders, is
or becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a Person shall be deemed
to have beneficial ownership of all shares that such Person has
the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total outstanding Voting Stock
of the Company;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the board of directors of the
Company (together with any new directors whose election to such
board or whose nomination for election by the stockholders of the
Company was approved by a vote of 66 2/3% of the directors then
still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously
so approved), cease for any reason to constitute a majority of
such board of directors then in office;
61
(iii) the Company consolidates with or merges with or into any Person or
sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets to any Person, or any
Person consolidates with or merges into or with the Company, in
any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than any such
transaction where:
(A) the outstanding Voting Stock of the Company is
changed into or exchanged for (x) Voting Stock
of the surviving corporation which is not
Redeemable Capital Stock or (y) cash,
securities and other property (other than
Capital Stock of the surviving corporation) in
an amount which could be paid by the Company as
a Restricted Payment as described under "--
Certain Covenants -- Limitation on Restricted
Payments" (and such amount shall be treated as
a Restricted Payment subject to the provisions
in the Indenture described under "-- Certain
Covenants -- Limitation on Restricted
Payments"); and
(B) immediately after such transaction, no "person"
or "group," other than Permitted Holders, is
the beneficial owner (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a
person shall be deemed to have beneficial
ownership of all securities that such person
has the right to acquire, whether such right is
exercisable immediately or only after the
passage of time), directly or indirectly, more
than 35% of the total outstanding Voting Stock
of the surviving corporation; or
(iv) the Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution other than in a transaction which
complies with the provisions described under "-- Consolidation,
Merger, Sale of Assets."
For purposes of this definition, any transfer of an equity interest of an entity
that was formed for the purpose of acquiring voting stock of the Company will be
deemed to be a transfer of such portion of such voting stock as corresponds to
the portion of the equity of such entity that has been so transferred.
"Class A Common Stock" means the Company's Class A common stock, par value
$.01 per share, or any successor common stock thereto.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of the Indenture such Commission is not existing and performing the
duties now assigned to it under the Securities Act, Exchange Act and Trust
Indenture Act then the body performing such duties at such time.
"Commodity Price Protection Agreement" means any forward contract,
commodity swap, commodity option or other similar financial agreement or
arrangement relating to, or the value which is dependent upon, fluctuations in
commodity prices.
"Company" means Sonic Automotive, Inc., a corporation incorporated under
the laws of Delaware, until a successor Person shall have become such pursuant
to the applicable provisions of the Indenture, and thereafter "Company" shall
mean such successor Person.
"Consolidated Fixed Charge Coverage Ratio" of any Person means, for any
period, the ratio of:
(a) the sum of Consolidated Net Income (Loss), and in each case to
the extent deducted in computing Consolidated Net Income (Loss)
for such period, Consolidated Interest Expense, Consolidated
Income Tax Expense and Consolidated Non-cash Charges for such
period, of such Person and its Restricted Subsidiaries on a
Consolidated basis, all determined in accordance with GAAP, less
all noncash items increasing Consolidated Net Income for such
period and less all cash payments during such period relating to
noncash charges that were added back to Consolidated Net Income
in determining the Consolidated Fixed Charge Coverage Ratio in
any prior period to
(b) the sum of Consolidated Interest Expense for such period and cash
and noncash dividends paid on any Preferred Stock of such Person
during such period, in each case after giving pro forma effect to
(i) the incurrence of the Indebtedness giving rise to the
need to make such calculation and (if applicable) the
application of the net proceeds therefrom, including
to refinance other Indebtedness, as if such
Indebtedness was incurred, and the application of such
proceeds occurred, on the first day of such period;
(ii) the incurrence, repayment or retirement of any other
Indebtedness by the Company and its Restricted
Subsidiaries since the first day of such period as if
such Indebtedness was incurred, repaid or retired at
the beginning of such period (except that, in making
such computation, the amount of Indebtedness under any
revolving credit facility shall be computed based upon
the average daily balance of such Indebtedness during
such period);
62
(iii) in the case of Acquired Indebtedness or any
acquisition occurring at the time of the incurrence of
such Indebtedness, the related acquisition, assuming
such acquisition had been consummated on the first day
of such period; and
(iv) any acquisition or disposition by the Company and its
Restricted Subsidiaries of any company or any business
or any assets out of the ordinary course of business,
whether by merger, stock purchase or sale or asset
purchase or sale, or any related repayment of
Indebtedness, in each case since the first day of such
period, assuming such acquisition or disposition had
been consummated on the first day of such period;
provided that
(i) in making such computation, the Consolidated Interest
Expense attributable to interest on any Indebtedness
computed on a pro forma basis and (A) bearing a
floating interest rate shall be computed as if the
rate in effect on the date of computation had been the
applicable rate for the entire period and (B) which
was not outstanding during the period for which the
computation is being made but which bears, at the
option of such Person, a fixed or floating rate of
interest, shall be computed by applying at the option
of such Person either the fixed or floating rate and
(ii) in making such computation, the Consolidated Interest
Expense of such Person attributable to interest on any
Indebtedness under a revolving credit facility
computed on a pro forma basis shall be computed based
upon the average daily balance of such Indebtedness
during the applicable period.
"Consolidated Income Tax Expense" of any Person means, for any period, the
provision for federal, state, local and foreign income taxes of such Person and
its Consolidated Restricted Subsidiaries for such period as determined in
accordance with GAAP.
"Consolidated Interest Expense" of any Person means, without duplication,
for any period, the sum of
(a) the interest expense of such Person and its Restricted
Subsidiaries for such period, on a Consolidated basis (other than
interest expense under any Inventory Facility), including,
without limitation,
(i) amortization of debt discount,
(ii) the net costs associated with Interest Rate
Agreements, Currency Hedging Agreements and Commodity
Price Protection Agreements (including amortization of
discounts),
(iii) the interest portion of any deferred payment
obligation,
(iv) all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers
acceptance financing and
(v) accrued interest, plus
(b) (i) the interest component of the Capital Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such Person and
its Restricted Subsidiaries during such period and (ii) all
capitalized interest of such Person and its Restricted
Subsidiaries; plus
(c) the interest expense under any Guaranteed Debt of such Person and
any Restricted Subsidiary to the extent not included under clause
(a)(iv) above, whether or not paid by such Person or its
Restricted Subsidiaries.
"Consolidated Net Income (Loss)" of any Person means, for any period, the
Consolidated net income (or loss) of such Person and its Restricted Subsidiaries
for such period on a Consolidated basis as determined in accordance with GAAP,
adjusted, to the extent included in calculating such net income (or loss), by
excluding, without duplication,
(i) all extraordinary gains or losses net of taxes (less
all fees and expenses relating thereto),
(ii) the portion of net income (or loss) of such Person
and its Restricted Subsidiaries on a Consolidated
basis allocable to minority interests in
unconsolidated Persons or Unrestricted Subsidiaries
to the extent that cash dividends or distributions
have not actually been received by such Person or
one of its Consolidated Restricted Subsidiaries,
63
(iii) net income (or loss) of any Person combined with such Person or any
of its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination,
(iv) any gain or loss, net of taxes, realized upon the termination of
any employee pension benefit plan,
(v) gains or losses, net of taxes (less all fees and expenses relating
thereto), in respect of dispositions of assets other than in the
ordinary course of business,
(vi) the net income of any Restricted Subsidiary to the extent that the
declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is not at the time permitted,
directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary
or its stockholders,
(vii) any restoration to net income of any contingency reserve, except to
the extent provision for such reserve was made out of income
accrued at any time following July 31, 1998, or
(viii) any net gain arising from the acquisition of any securities or
extinguishment, under GAAP, of any Indebtedness of such Person.
"Consolidated Non-cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges of such Person
and its subsidiaries on a Consolidated basis for such period, as determined in
accordance with GAAP, excluding any non-cash charge which requires an accrual or
reserve for cash charges for any future period.
"Consolidated Tangible Assets" of any Person means (a) all amounts that
would be shown as assets on a Consolidated balance sheet of such Person and its
Restricted Subsidiaries prepared in accordance with GAAP, less (b) the amount
thereof constituting goodwill and other intangible assets as calculated in
accordance with GAAP.
"Consolidation" means, with respect to any Person, the consolidation of
the accounts of such Person and each of its subsidiaries if and to the extent
the accounts of such Person and each of its subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP. The term
"Consolidated" shall have a similar meaning.
"Currency Hedging Agreements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
foreign exchange contracts, currency swap agreements or other similar agreements
or arrangements designed to protect against the fluctuations in currency values.
"Default" means any event which is, or after notice or passage of any time
or both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of related transactions, a member of the board of directors of the Company who
does not have any material direct or indirect financial interest in or with
respect to such transaction or series of transactions.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute, and the rules and regulations promulgated by the
Commission thereunder.
"Series D notes" means the 11% Senior Subordinated Notes due 2008, Series
D issued in the Exchange Offer.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length free market transaction between
an informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy. Fair Market Value shall be determined
by the board of directors of the Company acting in good faith and shall be
evidenced by a resolution of the board of directors.
"Floor Plan Facility" means an agreement from Ford Motor Credit Company,
or any other bank or asset-based lender pursuant to which the Company or any
Restricted Subsidiary incurs Indebtedness all of the net proceeds of which are
used to purchase, finance or refinance vehicles and/or vehicle parts and
supplies to be sold in the ordinary course of business of the Company and its
Restricted Subsidiaries and which may not be secured except by a Lien that does
not extend to or cover any property other than the property of the dealership(s)
which use the proceeds of the Floor Plan Facility.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, which
(i) for the purpose of determining compliance with the covenants contained in
the Indenture were in effect as of July 31,1998 and (ii) for purposes of
complying with the reporting requirements contained in the Indenture are in
effect from time to time.
"Guarantee" means the guarantee by any Guarantor of the Company's
Indenture Obligations.
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"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
guaranteed directly or indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an agreement:
(i) to pay or purchase such Indebtedness or to advance or supply funds
for the payment or purchase of such Indebtedness,
(ii) to purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of enabling
the debtor to make payment of such Indebtedness or to assure the
holder of such Indebtedness against loss,
(iii) to supply funds to, or in any other manner invest in, the debtor
(including any agreement to pay for property or services without
requiring that such property be received or such services be
rendered),
(iv) to maintain working capital or equity capital of the debtor, or
otherwise to maintain the net worth, solvency or other financial
condition of the debtor or to cause such debtor to achieve certain
levels of financial performance or
(v) otherwise to assure a creditor against loss;
provided that the term "guarantee" shall not include endorsements for collection
or deposit, in either case in the ordinary course of business.
"Guarantor" means any Subsidiary which is a guarantor of the Series D
notes, including any Person that is required to execute a guarantee of the
Series D notes pursuant to " -- Certain Covenants -- Limitation on Liens" or
"--Limitation on Issuance of Guarantees of and Pledges for Indebtedness"
covenant until a successor replaces such party pursuant to the applicable
provisions of the Indenture and, thereafter, shall mean such successor.
"Indebtedness" means, with respect to any Person, without duplication,
(i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any
trade payables and other accrued current liabilities arising in the
ordinary course of business, but including, without limitation, all
obligations, contingent or otherwise, of such Person in connection
with any letters of credit issued under letter of credit
facilities, acceptance facilities or other similar facilities,
(ii) all obligations of such Person evidenced by bonds, notes,
debentures or other similar instruments,
(iii) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property acquired
by such Person (even if the rights and remedies of the seller or
lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade
payables arising in the ordinary course of business,
(iv) all obligations of such Person under Interest Rate Agreements,
Currency Hedging Agreements or Commodity Price Protection
Agreements of such Person,
(v) all Capital Lease Obligations of such Person,
(vi) all Indebtedness referred to in clauses (i) through (v) above of
other Persons and all dividends of other Persons, the payment of
which is secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by)
any Lien, upon or with respect to property, including, without
limitation, accounts and contract rights owned by such Person, even
though such Person has not assumed or become liable for the payment
of such Indebtedness,
(vii) all Guaranteed Debt of such Person,
(viii) all Redeemable Capital Stock issued by such Person valued at the
greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued and unpaid dividends,
(ix) Preferred Stock of any Restricted Subsidiary of the Company which
is not a Guarantor and
(x) any amendment, supplement, modification, deferral, renewal,
extension, refunding or refinancing of any liability of the types
referred to in clauses (i) through (ix) above.
For purposes hereof, the "maximum fixed repurchase price" of any
Redeemable Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable
65
Capital Stock were purchased on any date on which Indebtedness shall be
required to be determined pursuant to the Indenture, and if such price is based
upon, or measured by, the Fair Market Value of such Redeemable Capital Stock,
such Fair Market Value to be determined in good faith by the board of directors
of the issuer of such Redeemable Capital Stock.
"Indenture Obligations" means the obligations of the Company and any other
obligor under the Indenture or under the Series D notes, including any
Guarantor, to pay principal of, premium, if any, and interest when due and
payable, and all other amounts due or to become due under or in connection with
the Indenture, the Series D notes and the performance of all other obligations
to the Trustee and the holders under the Indenture and the Series D notes,
according to the respective terms thereof.
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) and/or other types of interest rate
hedging agreements from time to time.
"Inventory Facility" means any Floor Plan Facility or any other agreement,
including pursuant to a commercial paper program, pursuant to which the Company
or any Restricted Subsidiary incurs Indebtedness, the net proceeds of which are
used to purchase, finance or refinance vehicles and/or vehicle parts and
supplies to be sold in the ordinary course of business of the Company and its
Restricted Subsidiaries and which may not be secured except by a Lien that does
not extend to or cover any property other than the property of the dealership(s)
which use the proceeds of the Inventory Facility.
"Investment" means, with respect to any Person, directly or indirectly,
any advance, loan, including guarantees, or other extension of credit or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase, acquisition or ownership by such Person of any Capital Stock, bonds,
notes, debentures or other securities issued or owned by any other Person and
all other items that would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"Issue Date" means the original issue date of the Series D notes under the
Indenture.
"Lien" means any mortgage or deed of trust, charge, pledge, lien
(statutory or otherwise), privilege, security interest, assignment, deposit,
arrangement, easement, hypothecation, claim, preference, priority or other
encumbrance upon or with respect to any property of any kind (including any
conditional sale, capital lease or other title retention agreement, any leases
in the nature thereof, and any agreement to give any security interest), real or
personal, movable or immovable, now owned or hereafter acquired. A Person will
be deemed to own subject to a Lien any property which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, Capitalized Lease Obligation or other title retention agreement.
"Manufacturer" means a vehicle manufacturer which is a party to a
dealership franchise agreement with the Company or any Restricted Subsidiary.
"Maturity" means, when used with respect to the Series D notes, the date
on which the principal of the Series D notes becomes due and payable as therein
provided or as provided in the Indenture, whether at Stated Maturity, the Offer
Date or the redemption date and whether by declaration of acceleration, Offer in
respect of Excess Proceeds, Change of Control Offer in respect of a Change of
Control, call for redemption or otherwise.
"Net Cash Proceeds" means
(a) with respect to any Asset Sale by any Person, the proceeds from
that sale (without duplication in respect of all Asset Sales) in
the form of cash or Temporary Cash Investments including payments
in respect of deferred payment obligations when received in the
form of, or stock or other assets when disposed of for, cash or
Temporary Cash Investments (except to the extent that such
obligations are financed or sold with recourse to the Company or
any Restricted Subsidiary) net of
(i) brokerage commissions and other reasonable fees and
expenses (including fees and expenses of counsel and
investment bankers) related to such Asset Sale,
(ii) provisions for all taxes payable as a result of such Asset
Sale,
(iii) payments made to retire Indebtedness where payment of such
Indebtedness is secured by the assets or properties the
subject of such Asset Sale,
(iv) amounts required to be paid to any Person (other than the
Company or any Restricted Subsidiary) owning a beneficial
interest in the assets subject to the Asset Sale and
(v) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in
accordance with GAAP, against any liabilities associated
with such Asset Sale and retained by the
66
Company or any Restricted Subsidiary, as the case may be,
after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities,
liabilities related to environmental matters and
liabilities under any indemnification obligations
associated with such Asset Sale, all as reflected in an
officers' certificate delivered to the Trustee and
(b) with respect to any issuance or sale of Capital Stock or options,
warrants or rights to purchase Capital Stock, or debt securities
or Capital Stock that have been converted into or exchanged for
Capital Stock as referred to under "-- Certain Covenants --
Limitation on Restricted Payments," the proceeds of such issuance
or sale in the form of cash or Temporary Cash Investments
including payments in respect of deferred payment obligations when
received in the form of, or stock or other assets when disposed of
for, cash or Temporary Cash Investments (except to the extent that
such obligations are financed or sold with recourse to the Company
or any Restricted Subsidiary), net of attorney's fees,
accountant's fees and brokerage, consultation, underwriting and
other fees and expenses actually incurred in connection with such
issuance or sale and net of taxes paid or payable as a result
thereof.
"Pari Passu Indebtedness" means (a) any Indebtedness of the Company that
is pari passu in right of payment to the Series D notes, including without
limitation, the Series B notes, and (b) with respect to any Guarantee,
Indebtedness which ranks pari passu in right of payment to such Guarantee,
including, without limitation, the Guarantees with respect to the Series B
notes.
"Permitted Holders" means:
(i) Mr. O. Bruton Smith or Mr. William S. Egan and their respective
guardians, conservators, committees, or attorneys-in-fact;
(ii) lineal descendants of Mr. Smith or Mr. Egan (in either case, a
"Descendant") and their respective guardians, conservators,
committees or attorneys-in-fact; and
(iii) each "Family Controlled Entity," as defined herein. The term
"Family Controlled Entity" means
(a) any not-for-profit corporation if at least 80% of its board
of directors is composed of Mr. Smith, Mr. Egan and/or
Descendants;
(b) any other corporation if at least 80% of the value of its
outstanding equity is owned by a Permitted Holder;
(c) any partnership if at least 80% of the value of the
partnership interests are owned by a Permitted Holder;
(d) any limited liability or similar company if at least 80% of
the value of the company is owned by a Permitted Holder;
and
(e) any trusts created for the benefit of any of the persons
listed in clauses (i) or (ii) of this definition.
"Permitted Investment" means:
(i) Investments in any Wholly Owned Restricted Subsidiary or any Person
which, as a result of such Investment, (a) becomes a Wholly Owned
Restricted Subsidiary or (b) is merged or consolidated with or
into, or transfers or conveys substantially all of its assets to,
or is liquidated into, the Company or any Wholly Owned Restricted
Subsidiary;
(ii) Indebtedness of the Company or a Restricted Subsidiary described
under clauses (v), (vi) and (vii) of the definition of "Permitted
Indebtedness;"
(iii) Investments in any of the Series B, Series C or Series D notes, as
the case may be; provided, however, that the aggregate amount of
such Investments shall not exceed $125 million;
(iv) Temporary Cash Investments;
(v) Investments acquired by the Company or any Restricted Subsidiary in
connection with an Asset Sale permitted under "--Certain Covenants
-- Limitation on Sale of Assets" to the extent such Investments are
non-cash proceeds as permitted under such covenant;
(vi) any Investment to the extent the consideration therefor consists of
Qualified Capital Stock of the Company or any Restricted
Subsidiary;
67
(vii) Investments representing Capital Stock or obligations issued to
the Company or any Restricted Subsidiary in the ordinary course of
the good faith settlement of claims against any other Person by
reason of a composition or readjustment of debt or a
reorganization of any debtor or any Restricted Subsidiary;
(viii) prepaid expenses advanced to employees in the ordinary course of
business or other loans or advances to employees in the ordinary
course of business not to exceed $1 million in the aggregate at
any one time outstanding;
(ix) Investments in existence on July 31, 1998; and
(x) in addition to the Investments described in clauses (i) through
(ix) above, Investments in an amount not to exceed $10 million in
the aggregate at any one time outstanding.
In connection with any assets or property contributed or transferred to any
Person as an Investment, such property and assets shall be equal to the Fair
Market Value at the time of Investment.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" means, with respect to any Person, any Capital Stock of
any class or classes, however designated, which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over the
Capital Stock of any other class in such Person.
"Purchase Money Obligation" means any Indebtedness secured by a Lien on
assets related to the business of the Company and any additions and accessions
thereto, which are purchased by the Company at any time after July 31, 1998;
provided that
(i) the security agreement or conditional sales or other title
retention contract pursuant to which the Lien on such assets is
created (collectively a "Purchase Money Security Agreement")
shall be entered into within 90 days after the purchase or
substantial completion of the construction of such assets and
shall at all times be confined solely to the assets so
purchased or acquired, any additions and accessions thereto and
any proceeds therefrom,
(ii) at no time shall the aggregate principal amount of the
outstanding Indebtedness secured thereby be increased, except
in connection with the purchase of additions and accessions
thereto and except in respect of fees and other obligations in
respect of such Indebtedness and
(iii) (A) the aggregate outstanding principal amount of Indebtedness
secured thereby (determined on a per asset basis in the case of
any additions and accessions) shall not at the time such
Purchase Money Security Agreement is entered into exceed 100%
of the purchase price to the Company of the assets subject
thereto or
(B) the Indebtedness secured thereby shall be with recourse
solely to the assets so purchased or acquired, any additions
and accessions thereto and any proceeds therefrom.
"Qualified Capital Stock" of any Person means any and all Capital Stock
of such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, either by its
terms or by the terms of any security into which it is convertible or
exchangeable or otherwise,
(1) is or upon the happening of an event or passage of time
would be, required to be redeemed prior to the final Stated
Maturity of the principal of the Series D notes,
(2) is redeemable at the option of the holder thereof at any
time prior to such final Stated Maturity (other than upon a
change of control of the Company in circumstances where the
holders of the Series D notes would have similar rights),
or
(3) is convertible into or exchangeable for debt securities at
any time prior to any such Stated Maturity at the option of
the holder thereof.
"Replacement Assets" means properties and assets (other than cash or any
Capital Stock or other security) that will be used in a business of the Company
or its Restricted Subsidiaries existing on July 31, 1998 or in business
reasonably related thereto.
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the board of directors of the Company by a board resolution
delivered to the Trustee as an Unrestricted Subsidiary pursuant to and in
compliance with the covenant described under "-- Certain Covenants -- Limitation
on Unrestricted Subsidiaries."
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"Revolving Facility" means the Credit Agreement among the Company, the
Guarantors and Ford Motor Credit Company, dated as of December 15, 1997, as such
agreement, in whole or in part, may have been or may be amended, renewed,
extended, substituted, refinanced, restructured, replaced, supplemented or
otherwise modified from time to time, including, without limitation, any
successive renewals, extensions, substitutions, refinancings, restructurings,
replacements, supplementations or other modifications of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute, and the rules and regulations promulgated by the Commission
thereunder.
"Significant Restricted Subsidiary" means, at any particular time, any
Restricted Subsidiary that, together with the Restricted Subsidiaries of such
Restricted Subsidiary (i) accounted for more than five percent of the
Consolidated revenues of the Company and its Restricted Subsidiaries for their
most recently completed fiscal year or (ii) is or are the owner(s) of more than
five percent of the Consolidated assets of the Company and its Restricted
Subsidiaries as at the end of such fiscal year, all as calculated in accordance
with GAAP and as shown on the Consolidated financial statements of the Company
and its Restricted Subsidiaries for such fiscal year.
"Smith Subordinated Loan" means the subordinated loan from O. Bruton Smith
to the Company in the principal amount of $5.5 million in existence on the Issue
Date.
"Stated Maturity" means, when used with respect to any Indebtedness or any
installment of interest thereon, the dates specified in such Indebtedness as the
fixed date on which the principal of such Indebtedness or such installment of
interest, as the case may be, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor subordinated in right of payment to the Series D notes or the
Guarantee of such Guarantor, as the case may be.
"Subsidiary" of a Person means:
(i) any corporation more than 50% of the outstanding voting
power of the Voting Stock of which is owned or controlled,
directly or indirectly, by such Person or by one or more
other Subsidiaries of such Person, or by such Person and
one or more other Subsidiaries of such Person,
(ii) any limited partnership of which such Person or any
Subsidiary of such Person is a general partner, or
(iii) any other Person in which such Person, or one or more other
Subsidiaries of such Person, or such Person and one or more
other Subsidiaries, directly or indirectly, has more than
50% of the outstanding partnership or similar interests or
has the power, by contract or otherwise, to direct or cause
the direction of the policies, management and affairs
thereof.
"Temporary Cash Investments" means:
(i) any evidence of Indebtedness, maturing not more than one
year after the date of acquisition, issued by the United
States of America, or an instrumentality or agency thereof,
and guaranteed fully as to principal, premium, if any, and
interest by the United States of America;
(ii) any certificate of deposit, maturing not more than one year
after the date of acquisition, issued by, or time deposit
of, a commercial banking institution that is a member of
the Federal Reserve System and that has combined capital
and surplus and undivided profits of not less than $500
million, whose debt has a rating, at the time as of which
any investment therein is made, of "P-1" (or higher)
according to Moody's or any successor rating agency or
"A-1" (or higher) according to S&P or any successor rating
agency;
(iii) commercial paper, maturing not more than one year after the
date of acquisition, issued by a corporation (other than an
Affiliate or Subsidiary of the Company) organized and
existing under the laws of the United States of America
with a rating, at the time as of which any investment
therein is made, of "P-1" (or higher) according to Moody's
or "A-1" (or higher) according to S&P and
(iv) any money market deposit accounts issued or offered by a
domestic commercial bank having capital and surplus in
excess of $500 million; provided that the short term debt
of such commercial bank has a rating, at the time of
Investment, of "P-1" (or higher) according to Moody's or
"A-1" (or higher) according to S&P.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended,
or any successor statute.
69
"Unrestricted Subsidiary" means any Subsidiary of the Company (other than
a Guarantor) designated as such pursuant to and in compliance with the covenant
described under "-- Certain Covenants -- Limitation on Unrestricted
Subsidiaries."
"Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary
means Indebtedness of such Unrestricted Subsidiary
(i) as to which neither the Company nor any Restricted
Subsidiary is directly or indirectly liable (by virtue of
the Company or any such Subsidiary being the primary
obligor on, guarantor of, or otherwise liable in any
respect to, such Indebtedness), except Guaranteed Debt of
the Company or any Restricted Subsidiary to any Affiliate,
in which case (unless the incurrence of such Guaranteed
Debt resulted in a Restricted Payment at the time of
incurrence) the Company shall be deemed to have made a
Restricted Payment equal to the principal amount of any
such Indebtedness to the extent guaranteed at the time such
Affiliate is designated an Unrestricted Subsidiary and
(ii) which, upon the occurrence of a default with respect
thereto, does not result in, or permit any holder of any
Indebtedness of the Company or any Subsidiary to declare, a
default on such Indebtedness of the Company or any
Subsidiary or cause the payment thereof to be accelerated
or payable prior to its Stated Maturity; provided that
notwithstanding the foregoing any Unrestricted Subsidiary
may guarantee the Series D notes.
"Voting Stock" means Capital Stock of the class or classes pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of such Person (irrespective of whether or not at the time Capital
Stock of any other class or classes shall have or might have voting power by
reason of the happening of any contingency).
"Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares and shares of
Capital Stock of a Restricted Subsidiary which a Manufacturer requires to be
held by another Person and which Capital Stock, together with any related
contractual arrangements, has no significant economic value with respect to
distributions of profits or losses in ordinary circumstances) is owned by the
Company or another Wholly Owned Restricted Subsidiary (other than directors'
qualifying shares).
Book-Entry Delivery and Form
The Series D notes will be issued only in fully registered form, without
interest coupons, in denominations of $1,000 and integral multiples thereof. The
Series D notes will not be issued in bearer form.
Global Notes
The Series D notes initially will be represented by one or more Series D
notes in registered, global form without interest coupons (collectively, the
"Global Note"). The Global Notes will be deposited upon issuance with the
Trustee as custodian for The Depository Trust Company ("DTC"), in New York, New
York, and registered in the name of DTC or its nominee, in each case for credit
to an account of a direct or indirect participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. In addition, transfer of beneficial interests in the Global Notes will
be subject to the applicable rules and procedures of DTC and its direct or
indirect participants, which may change from time to time. Beneficial interests
in the Global Notes may not be exchanged for Series D notes in certificated form
except in the limited circumstances described below. See "-- Exchanges of
Book-Entry Notes for Certificated Notes."
Initially, the Trustee will act as Paying Agent and Registrar. The Series
D notes may be presented for registration of transfer and exchange at the
offices of the Registrar.
Exchange of Book-Entry Notes for Certificated Notes
A beneficial interest in a Global Note may not be exchanged for a Note
in certificated form unless:
(i) DTC (x) notifies the Company that it is unwilling or unable
to continue as depositary for the Global Note or (y) has
ceased to be a clearing agency registered under the
Exchange Act, and in either case the Company thereupon
fails to appoint a successor depositary;
(ii) the Company, at its option, notifies the Trustee in writing
that it elects to cause the issuance of the Series D notes
in certificated form; or
(iii) there shall have occurred and be continuing an Event of
Default or any event which after notice or lapse of time or
both would be an Event of Default with respect to the
Series D notes.
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In all cases, certificated Notes delivered in exchange for any Global Note
or beneficial interests in such Global Note will be registered in the names, and
issued in any approved denominations, requested by or on behalf of the
depositary, in accordance with its customary procedures. Any certificated Note
issued in exchange for an interest in a Global Note will bear the legend
restricting transfers that is borne by such Global Note. Any such exchange will
be effected through the DWAC system and an appropriate adjustment will be made
in the records of the registrar of the Series D notes to reflect a decrease in
the principal amount of the relevant Global Note.
Certain Book-Entry Procedures for Global Notes
The following description of the operations and procedures of DTC are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of the DTC settlement system and are subject to
changes by them. The Company takes no responsibility for these operations and
procedures and urges investors to contact the system or their participants
directly to discuss these matters.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the initial purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests in, and transfers of ownership interests
in, each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established
by it:
(1) upon deposit of the Global Notes, DTC will credit the accounts
of Participants designated by the initial purchasers with portions of the
principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown
on, and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners
of beneficial interest in the Global Notes).
Investors in the Global Notes who are Participants in DTC's system may
hold their interests therein directly through DTC. Investors in the Global Notes
who are not Participants may hold their interests therein indirectly through
organizations which are Participants in such system. All interests in a Global
Note may be subject to the procedures and requirements of DTC. The laws of some
states require that certain Persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer beneficial
interests in a Global Note to such Persons will be limited to that extent.
Because DTC can act only on behalf of Participants, which in turn act on behalf
of Indirect Participants, the ability of a Person having beneficial interests in
a Global Note to pledge such interests to Persons that do not participate in the
DTC system, or otherwise take actions in respect of such interests, may be
affected by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interests in the Global Notes will
not have Series D notes registered in their names, will not receive physical
delivery of Series D notes in certificated form and will not be considered the
registered owners or "Holders" thereof under the Indenture for any purpose.
Payments in respect of the principal of, and interest and premium on a
Global Note registered in the name of DTC or its nominee will be payable to DTC
in its capacity as the registered Holder under the Indenture. Under the terms of
the Indenture, the Company and the Trustee will treat the Persons in whose names
the notes, including the Global Notes, are registered as the owners thereof for
the purpose of receiving payments and for all other purposes. Consequently,
neither the Company, the Guarantors, the Trustee nor any agent of the Company,
the Guarantors or the Trustee has or will have any responsibility or liability
for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or
Indirect Participant's records relating to the beneficial ownership
interests in the Global Notes; or
(2) any other matter relating to the actions and practices of DTC
or any of its Participants or Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date unless DTC has reason to believe it will not receive
payment on such payment date. Each relevant Participant is credited with an
71
amount proportionate to its beneficial ownership of an interest in the
principal amount of the relevant security as shown on the records of DTC.
Payments by the Participants and the Indirect Participants to the beneficial
owners of Series D notes will be governed by standing instructions and customary
practices and will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the Trustee, the Company
or the Guarantors. None of the Company, the Guarantors nor the Trustee will be
liable for any delay by DTC or any of its Participants in identifying the
beneficial owners of the notes; and the Company, the Guarantors and the Trustee
may conclusively rely on and will be protected in relying on instructions from
DTC or its nominee for all purposes.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Series D notes only at the direction of one or more
Participants to whose account DTC has credited the interests in the Global Notes
and only in respect of such portion of the aggregate principal amount of the
notes as to which such Participant or Participants has or have given such
direction. However, if there is an Event of Default under the Series D notes,
DTC reserves the right to exchange the Global Notes for legended notes in
certificated form, and to distribute such notes to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interests in the Global Notes among participants in DTC, it is
under no obligation to perform or to continue to perform such procedures, and
may discontinue such procedures at any time. None of the Company, the
Guarantors, the Trustee or any of their respective agents will have any
responsibility for the performance by DTC or its respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
Same Date Settlement and Payment
The Company will make payments in respect of the Series D notes
represented by the Global Notes (including principal, premium, if any and
interest) by wire transfer of immediately available funds to the accounts
specified by the Global Note Holder. The Company will make all payments of
principal, interest and premium, with respect to Certificated Notes by wire
transfer of immediately available funds to the accounts specified by the holders
thereof or, if no such account is specified, by mailing a check to each such
holder's registered address. The Series D notes represented by the Global Notes
are expected to be eligible to trade in the PORTAL market and to trade in DTC's
Same-Day Funds Settlement System, and any permitted secondary market trading
activity in such notes will, therefore, be required by DTC to be settled in
immediately available funds. The Company expects that secondary trading in any
Certificated Notes will also be settled in immediately available funds.
72
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of the material U.S. federal income
tax consequences associated with the exchange of Series B or Series C notes for
Series D notes issued in the exchange offer. The discussion is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations,
judicial authorities, published positions of the Internal Revenue Service (the
"IRS") and other applicable authorities, all as in effect on the date hereof and
all of which are subject to change or differing interpretations (possibly with
retroactive effect). The discussion does not address all of the tax consequences
that may be relevant to a particular holder or to certain holders subject to
special treatment under U.S. federal income tax laws (including, but not limited
to, certain financial institutions, partnerships or other pass-through entities,
insurance companies, broker-dealers and persons holding their notes as part of a
"straddle," "hedge," or "conversion transaction"). This discussion is limited to
persons that hold their Series B, Series C or Series D notes as capital assets.
We have not sought, and do not intend to seek, a ruling from the IRS regarding
the matters discussed herein. Our counsel has not rendered any legal opinion
regarding any tax consequences relating to us or to an investor in the Series D
notes.
The exchange of Series B or Series C notes for Series D notes issued in
the exchange offer should not be treated as an "exchange" for U.S. federal
income tax purposes because the Series D notes issued in the exchange offer
should not be considered to differ materially in kind or extent from the Series
B or Series C notes. Rather, the Series D notes issued in the exchange offer
received by a holder should be treated as a continuation of the Series B or
Series C notes in the hands of such holder. As a result there should be no U.S.
federal income tax consequences to holders exchanging Series B or Series C notes
for Series D notes issued in the exchange offer, and any exchanging holder of
Series B or Series C notes should have the same tax basis and holding period in,
and income in respect of, the Series D notes as such holder had in the Series B
or Series C notes immediately prior to the exchange.
Perspective holders of the Series D notes being issued in the exchange
offer are urged to consult their tax advisors concerning the particular tax
consequences of exchanging such holders' Series B or Series C notes for the
Series D notes being issued in the exchange offer, including the applicability
and effect of any state, local or foreign income and other tax laws.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Series D notes for its own account for
Series B or Series C notes pursuant to this exchange offer, must acknowledge
that it will deliver a prospectus in connection with any resale of Series D
notes. This prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Series D notes
received in exchange for Series B or Series C notes where the Series B or Series
C notes we acquired as a result of market-making activities or other trading
activities. We have agreed that, for a period of 180 days after the expiration
date, we will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resales. In addition, we
agreed for a period of 180 days from November 8, 2001, the date of the offering
memorandum distributed in connection with the sale of the Series C notes, not to
directly or indirectly offer, sell, grant any options to purchase or otherwise
dispose of any debt securities other than in connection with this exchange
offer, except for borrowings under our existing floor plan facilities,
construction/mortgage facility and revolving facility.
We will not receive any proceeds from any sale of Series D notes by
broker-dealers. Series D notes received by broker-dealers for their own account
pursuant to this exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Series D notes or a combination of these methods
of resale, at market prices prevailing at the time of resale, at prices related
to prevailing market prices or at negotiated prices. Any resale may be made
directly to purchasers or to or through broker or dealers who receive
compensation in the form of commissions or concessions from a broker-dealer
and/or the purchasers of Series D notes. Any broker-dealer that resells Series D
notes that were received by it for its own account pursuant to this exchange
offer and any broker or dealer that participates in a distribution of the Series
D notes may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, and any profit on any such resale of Series D notes and
any commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act of 1933. The letter of
transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act of 1933.
LEGAL MATTERS
The validity of the Series D notes being offered hereby will be passed
upon for Sonic by Moore & Van Allen PLLC, Charlotte, North Carolina.
73
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference from Sonic Automotive, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 2000 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
74
================================================================================
[SONIC LOGO]
Offer to Exchange All of Our Outstanding
Registered 11% Senior Subordinated Notes Due 2008, Series B
And
Unregistered 11% Senior Subordinated Notes Due 2008, Series C
For
Registered 11% Senior Subordinated Notes Due 2008, Series D
--------------------------------
PROSPECTUS
--------------------------------
All certificates for Series B or Series C notes being tendered, executed
Letters of Transmittal and any other required documents should be sent to the
Exchange Agent at the address below or tendered pursuant to DTC's Automated
Tender Offer Program.
All questions and requests for assistance and requests for additional
copies of the prospectus, the Letter of Transmittal and any other required
documents should be directed to the Exchange Agent.
The Exchange Agent for the Exchange Offer is:
U.S. Bank Trust National Association
U.S. Bank Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
Attn: Specialized Finance Group
(800) 934-6802 (telephone)
(651) 244-1537 (facsimile)
You should confirm deliveries sent by facsimile.
(Originals of all documents submitted by facsimile should be sent promptly
by registered or certified mail, or by hand delivery or overnight courier)
____________________, 2002
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of directors and officers.
The Company's Bylaws effectively provide that the Company shall, to
the full extent permitted by Section 145 of the General Corporation Law of the
State of Delaware, as amended from time to time ("Section 145"), indemnify all
persons whom it may indemnify pursuant thereto. In addition, the Company's
Certificate of Incorporation eliminates personal liability of its directors to
the full extent permitted by Section 102(b)(7) of the General Corporation Law of
the State of Delaware, as amended from time to time ("Section 102(b)(7)").
Section 145 permits a corporation to indemnify its directors and
officers against expenses (including attorney's fees), judgments, fines and
amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by a third party if such
directors or officers acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reason to believe
their conduct was unlawful. In a derivative action, indemnification may be made
only for expenses actually and reasonably incurred by directors and officers in
connection with the defense or settlement of an action or suit and only with
respect to a matter as to which they shall have acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation, except that no indemnification shall be made if such person
shall have been adjudged liable to the corporation, unless and only to the
extent that the court in which the action or suit was brought shall determine
upon application that the defendant officers or directors are reasonably
entitled to indemnity for such expenses despite such adjudication of liability.
Section 102(b)(7) provides that a corporation may eliminate or limit
that personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith of which involve intentional
misconduct or a knowing violation of law, (iii) for willful or negligent conduct
in paying dividends or repurchasing stock out of other than lawfully available
funds or (iv) for any transaction from which the director derived an improper
personal benefit. No such provision shall eliminate or limit the liability of a
director for any act or omission occurring prior to the date when such provision
becomes effective.
The Company maintains insurance against liabilities under the
Securities Act of 1933 for the benefit of its officers and directors.
Section 4(b) of the Registration Rights Agreement (filed as Exhibit
4.1 to this Registration Statement) provides that the holders of the Series B
and Series C Notes covered by this Registration Statement severally and not
jointly will indemnify and hold harmless the Company, the Guarantors, and their
respective officers, directors, partners, employees, representatives and agents
from and against any loss, liability, claim, damage or expense caused by any
untrue statement or omission, or alleged untrue statement or omission, in the
Registration Statement, in the Prospectus or in any amendment or supplement
thereto, in each case to the extent that the statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company by the holders of the Series B and Series C Notes covered by this
Registration Statement expressly for use therein, provided, however, that no
such holder of the Series B and Series C Notes shall be liable for any claims
hereunder in excess of the amount of net proceeds received by such holder of the
Series B and Series C Notes from the sale of Registrable Securities pursuant to
such Registration Statement.
Item 21. Exhibits and Financial Statement Schedules.
Exhibit No. Description
- ----------- -----------
4.1 Specimen Certificate representing Class A Common Stock (incorporated by
reference to Exhibit 4.1 to the Registration Statement on Form S-1 (Reg.
No. 333-33295) (the "Form S-1")).
4.2 Form of 11% Senior Subordinated Note due 2008, Series B (incorporated by
reference to Exhibit 4.3 to Sonic's Registration Statement on Form S-4
(Reg. No. 333-64397 and 333-64397-001 through 333-64397-044) (the "Form
S-4")).
II-1
4.3 Indenture dated as of July 1, 1998 among Sonic, as issuer, the
subsidiaries of Sonic named therein, as guarantors, and U.S. Bank Trust
National Association, as trustee (the "Trustee"), relating to the 11%
Senior Subordinated Notes due 2008 (incorporated by reference to Exhibit
4.2 to the Form S-4).
4.4 First Supplemental Indenture dated as of December 31, 1999 among Sonic, as
issuer, the subsidiaries of Sonic named therein, as guarantors and
additional guarantors, and the Trustee, relating to the 11% Senior
Subordinated Notes due 2008 (incorporated by reference to Exhibit 4.2a to
the 1999 Form 10-K).
4.5 Second Supplemental Indenture dated as of September 15, 2000 among Sonic,
as issuer, the subsidiaries of Sonic named therein, as guarantors and
additional guarantors, and the Trustee, relating to the 11% Senior
Subordinated Notes due 2008 (incorporated by reference to Exhibit 4.4 to
Sonic's Quarterly Report on Form 10-Q for the quarter ended September 30,
2000 (the "September 30, 2000 Form 10-Q")).
4.6 Third Supplemental Indenture dated as of March 31, 2001 among Sonic, as
issuer, the subsidiaries of Sonic named therein, as guarantors and
additional guarantors, and the Trustee, relating to the 11% Senior
Subordinated Notes due 2008 (incorporated by reference to Exhibit 4.6 to
Sonic's Quarterly Report on Form 10-Q for the quarter ended June 30,
2001).
4.7 Fourth Supplemental Indenture dated as of November 19, 2001 among Sonic,
as issuer, the subsidiaries of Sonic named therein, as guarantors and
additional guarantors, and the Trustee, relating to the 11% Senior
Subordinated Notes due 2008.
4.8 Registration Rights Agreement dated as of June 30, 1997 among Sonic, O.
Bruton Smith, Bryan Scott Smith, William S. Egan and Sonic Financial
Corporation (incorporated by reference to Exhibit 4.2 to the Form S-1).
4.9 Form of 11% Senior Subordinated Note due 2008, Series D.
4.10 Indenture dated as of November 19, 2001 among Sonic, as issuer, the
subsidiaries of Sonic named therein, as guarantors, and U.S. Bank Trust
National Association, as trustee (the "Trustee"), relating to the 11%
Senior Subordinated Notes due 2008.
4.11 Registration Rights Agreement dated as of November 19, 2001 among Sonic,
the Guarantors named therein and Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Banc of America Securities LLC.
4.12 Purchase Agreement dated as of November 8, 2001 between Sonic Automotive,
Inc., the Guarantors named therein and Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith, Incorporated and Banc of America Securities LLC.
4.13 Subordination Agreement dated as of November 19, 2001 between O. Bruton
Smith and U.S. Bank Trust National Association.
5.1** Opinion of Moore & Van Allen PLLC regarding the validity of the securities
being registered.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Moore & Van Allen PLLC (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page hereto).
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of U.S. Bank Trust National Association.
99.1 Form of Letter of Transmittal.
99.2 Notice of Guaranteed Delivery.
** To be filed by amendment.
II-2
Item 22. Undertakings.
Each of the undersigned Registrants hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
such Registrant's annual report pursuant to section 13(a) or section 15 (d) of
the Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrants pursuant to the foregoing provisions, or otherwise,
each of the Registrants has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by a
Registrant of expenses incurred or paid by a director, officer or controlling
person of such Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, such Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Each of the undersigned Registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
Each of the undersigned Registrants hereby undertakes to supply by
means of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
SONIC AUTOMOTIVE, INC.
By: /s/ Theodore M. Wright
---------------------------------------------
Theodore M. Wright
Vice President, Treasurer and
Chief Financial Officer
POWER OF ATTORNEY
Each of the undersigned directors and officers of Registrant, by his
execution hereof, hereby constitutes and appoints B. Scott Smith, Theodore M.
Wright and Stephen K. Coss, and each of them with full power of substitution, as
his or her true and lawful attorneys-in-fact and agents, to do any and all acts
and things for him or her, and in his or her name, place and stead, to execute
and sign any and all pre-effective and post-effective amendments to such
Registration Statement and any additional registration statement pursuant to
Rule 462(b) under the Securities Act of 1933, and file the same, together with
all exhibits and schedules thereto and all other documents in connection
therewith, with the Commission and with such state securities authorities as may
be appropriate, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all intents and
purposes as the undersigned might or could do in person, and hereby ratifying
and confirming all the acts of said attorneys-in-fact and agents, or any of
them, which they may lawfully do in the premises or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
/s/ O. Bruton Smith Chairman, Chief Executive Officer and December 14, 2001
- ------------------------------ Director (principal executive
O. Bruton Smith officer)
/s/ Thomas A. Price Vice Chairman and Director December 14, 2001
- ------------------------------
Thomas A. Price
/s/ B. Scott Smith President, Chief Operating Officer December 14, 2001
- ------------------------------ and Director
B. Scott Smith
/s/ Theodore M. Wright Chief Financial Officer (principal December 14, 2001
- ------------------------------ financial and accounting officer),
Theodore M. Wright Vice President, Treasurer and
Director
/s/ Jeffrey C. Rachor Executive Vice President of Retail December 14, 2001
- ------------------------------ Operations and Director
Jeffrey C. Rachor
/s/ William R. Brooks Director December 14, 2001
- ------------------------------
William R. Brooks
/s/ William P. Benton Director December 14, 2001
- ------------------------------
William P. Benton
II-4
/s/ William I. Belk Director December 14, 2001
- -----------------------------
William I. Belk
/s/ H. Robert Heller Director December 14, 2001
- -----------------------------
H. Robert Heller
/s/ Maryann N. Keller Director December 14, 2001
- -----------------------------
Maryann N. Keller
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
AUTOBAHN, INC.
CAPITOL CHEVROLET AND IMPORTS, INC.
COBB PONTIAC CADILLAC, INC.
FA SERVICE CORPORATION
FAA AUTO FACTORY, INC.
FAA BEVERLY HILLS, INC.
FAA CAPITOL F, INC.
FAA CONCORD H, INC.
FAA CONCORD N, INC.
FAA DUBLIN N, INC.
FAA DUBLIN VWD, INC.
FAA HOLDING CORP.
FAA MARIN D, INC.
FAA MARIN F, INC.
FAA MARIN LR, INC.
FAA POWAY D, INC.
FAA POWAY G, INC.
FAA POWAY H, INC.
FAA SANTA MONICA V, INC.
FAA SERRAMONTE H, INC.
FAA SERRAMONTE, INC.
FAA STEVENS CREEK, INC.
FAA TORRANCE CPJ, INC.
FORT MILL FORD, INC.
FRANCISCAN MOTORS, INC.
FRONTIER OLDSMOBILE-CADILLAC, INC.
HMC FINANCE ALABAMA, INC.
KRAMER MOTORS INCORPORATED
L DEALERSHIP GROUP, INC.
MARCUS DAVID CORPORATION
RIVERSIDE NISSAN, INC.
ROYAL MOTOR COMPANY, INC.
SANTA CLARA IMPORTED CARS, INC.
SMART NISSAN, INC.
SONIC AUTOMOTIVE - 1400 AUTOMALL DRIVE,
COLUMBUS, INC.
SONIC AUTOMOTIVE - 1455 AUTOMALL DRIVE,
COLUMBUS, INC.
SONIC AUTOMOTIVE - 1495 AUTOMALL DRIVE,
COLUMBUS, INC.
SONIC AUTOMOTIVE - 1500 AUTOMALL DRIVE,
COLUMBUS, INC.
SONIC AUTOMOTIVE - 3700 WEST BROAD STREET,
COLUMBUS, INC.
SONIC AUTOMOTIVE - 4000 WEST BROAD STREET,
COLUMBUS, INC.
SONIC AUTOMOTIVE 2424 LAURENS RD., GREENVILLE,
INC.
SONIC AUTOMOTIVE 2752 LAURENS RD., GREENVILLE,
INC.
Sonic - Bethany H, Inc.
SONIC - BUENA PARK H, INC.
SONIC - CAPITAL CHEVROLET, INC.
SONIC - CLASSIC DODGE, INC.
Sonic - Coast Cadillac, Inc.
SONIC - FORT MILL CHRYSLER JEEP, INC.
II-6
SONIC - FORT MILL DODGE, INC.
SONIC - GLOVER, INC.
SONIC - HARBOR CITY H, INC.
SONIC - MANHATTAN FAIRFAX, INC.
SONIC - MANHATTAN WALDORF, INC.
SONIC - MONTGOMERY FLM, INC.
SONIC - NEWSOME CHEVROLET WORLD, INC.
SONIC - NEWSOME OF FLORENCE, INC.
SONIC - NORTH CHARLESTON, INC.
SONIC - NORTH CHARLESTON DODGE, INC.
SONIC - RIVERSIDE, INC.
SONIC - RIVERSIDE AUTO FACTORY, INC.
SONIC - ROCKVILLE IMPORTS, INC.
SONIC - ROCKVILLE MOTORS, INC.
SONIC - STEVENS CREEK B, INC.
SONIC - WEST COVINA T, INC.
SONIC - WEST RENO CHEVROLET, INC.
SONIC - WILLIAMS BUICK, INC.
SONIC - WILLIAMS CADILLAC, INC.
SONIC - WILLIAMS IMPORTS, INC.
SPEEDWAY CHEVROLET, INC.
STEVENS CREEK CADILLAC, INC.
TOWN AND COUNTRY FORD, INCORPORATED
TRANSCAR LEASING, INC.
VILLAGE IMPORTED CARS, INC.
WINDWARD, INC.
By: /s/ Theodore M. Wright
------------------------------------------
Theodore M. Wright
Vice President and Treasurer
POWER OF ATTORNEY
Each of the undersigned directors and officers of the above named
Registrants, by his execution hereof, hereby constitutes and appoints B. Scott
Smith, Theodore M. Wright and Stephen K. Coss, and each of them, with full power
of substitution, as his or her true and lawful attorneys-in-fact and agents, to
do any and all acts and things for him or her, and in his or her name, place and
stead, to execute and sign any and all pre-effective and post-effective
amendments to such Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and file the
same, together with all exhibits and schedules thereto and all other documents
in connection therewith, with the Commission and with such state securities
authorities as may be appropriate, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as the undersigned might or could do in person, and
hereby ratifying and confirming all the acts of said attorneys-in-fact and
agents, or any of them, which they may lawfully do in the premises or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
--------- ----- ----
/s/ O. Bruton Smith President and Director (principal December 14, 2001
- ---------------------------- executive officer)
O. Bruton Smith
/s/ B. Scott Smith Vice President and Director December 14, 2001
- ----------------------------
B. Scott Smith
/s/ Theodore M. Wright Vice President, Treasurer, and December 14, 2001
- ---------------------------- Director
Theodore M. Wright
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
FIRSTAMERICA AUTOMOTIVE, INC.
By: /s/ Theodore M. Wright
---------------------------------------
Theodore M. Wright
Vice President and Treasurer
POWER OF ATTORNEY
Each of the undersigned directors and officers of the above named
Registrants, by his execution hereof, hereby constitutes and appoints B. Scott
Smith, Theodore M. Wright and Stephen K. Coss, and each of them, with full power
of substitution, as his or her true and lawful attorneys-in-fact and agents, to
do any and all acts and things for him or her, and in his or her name, place and
stead, to execute and sign any and all pre-effective and post-effective
amendments to such Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and file the
same, together with all exhibits and schedules thereto and all other documents
in connection therewith, with the Commission and with such state securities
authorities as may be appropriate, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as the undersigned might or could do in person, and
hereby ratifying and confirming all the acts of said attorneys-in-fact and
agents, or any of them, which they may lawfully do in the premises or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
--------- ----- ----
/s/ O. Bruton Smith Chairman, Chief Executive Officer December 14, 2001
- --------------------------- and Director (principal executive
O. Bruton Smith officer)
/s/ B. Scott Smith President and Director December 14, 2001
- ----------------------------
B. Scott Smith
/s/ Theodore M. Wright Vice President, Treasurer, and December 14, 2001
- --------------------------- Director
Theodore M. Wright
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
FREEDOM FORD, INC.
SONIC AUTOMOTIVE - BONDESEN, INC.
SONIC AUTOMOTIVE - CLEARWATER, INC.
SONIC AUTOMOTIVE COLLISION CENTER OF CLEARWATER,
INC.
SONIC AUTOMOTIVE - 1307 N. DIXIE HWY., NSB, INC.
SONIC AUTOMOTIVE - 1720 MASON AVE., DB, INC.
SONIC AUTOMOTIVE - 1919 N. DIXIE HWY., NSB, INC.
SONIC AUTOMOTIVE - 21699 U.S. HWY 19 N., INC.
SONIC AUTOMOTIVE - 241 RIDGEWOOD AVE., HH, INC.
SONIC AUTOMOTIVE - 6008 N. DALE MABRY, FL, INC.
SONIC - FM, INC.
SONIC - FM NISSAN, INC.
SONIC - FM VW, INC.
SONIC - FREELAND, INC.
SONIC - LLOYD NISSAN, INC.
SONIC - LLOYD PONTIAC - CADILLAC, INC.
SONIC - SHOTTENKIRK, INC.
By: /s/ Theodore M. Wright
--------------------------------------------
Theodore M. Wright
Vice President and Treasurer
POWER OF ATTORNEY
Each of the undersigned directors and officers of the above named
Registrants, by his execution hereof, hereby constitutes and appoints B. Scott
Smith, Theodore M. Wright and Stephen K. Coss, and each of them, with full power
of substitution, as his or her true and lawful attorneys-in-fact and agents, to
do any and all acts and things for him or her, and in his or her name, place and
stead, to execute and sign any and all pre-effective and post-effective
amendments to such Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and file the
same, together with all exhibits and schedules thereto and all other documents
in connection therewith, with the Commission and with such state securities
authorities as may be appropriate, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as the undersigned might or could do in person, and
hereby ratifying and confirming all the acts of said attorneys-in-fact and
agents, or any of them, which they may lawfully do in the premises or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
--------- ----- ----
/s/ O. Bruton Smith Director December 14, 2001
- -----------------------------
O. Bruton Smith
/s/ B. Scott Smith President and Director (principal December 14, 2001
- ----------------------------- executive officer)
B. Scott Smith
/s/ Theodore M. Wright Vice President, Treasurer, and December 14, 2001
- ----------------------------- Director
Theodore M. Wright
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
SONIC AUTOMOTIVE - 9103 E. INDEPENDENCE, NC, LLC
SONIC DEVELOPMENT, LLC
SONIC - LAKE NORMAN CHRYSLER JEEP, LLC
SONIC - LAKE NORMAN DODGE, LLC
SONIC - WILLIAMS MOTORS, LLC
SRE HOLDING, LLC
On behalf of itself and the following
entities as sole member of
SRE ALABAMA-2, LLC
SRE ALABAMA-3, LLC
SREALESTATE ARIZONA-1, LLC
SREALESTATE ARIZONA-2, LLC
SREALESTATE ARIZONA-3, LLC
SREALESTATE ARIZONA-4, LLC
SRE FLORIDA-1, LLC
SRE FLORIDA-2, LLC
SRE FLORIDA-3, LLC
SRE NEVADA-1, LLC
SRE NEVADA-2, LLC
SRE NEVADA-3, LLC
SRE SOUTH CAROLINA-2, LLC
SRE TENNESSEE-1, LLC
SRE TENNESSEE-2, LLC
SRE TENNESSEE-3, LLC
SRE VIRGINIA-1, LLC
By: Sonic Automotive, Inc., sole member
By: /s/ Theodore M. Wright
--------------------------------------
Theodore M. Wright
Vice President and Treasurer
POWER OF ATTORNEY
Each of the undersigned managers and officers of the above named
Registrants, by his execution hereof, hereby constitutes and appoints B. Scott
Smith, Theodore M. Wright and Stephen K. Coss, and each of them, with full power
of substitution, as his or her true and lawful attorneys-in-fact and agents, to
do any and all acts and things for him or her, and in his or her name, place and
stead, to execute and sign any and all pre-effective and post-effective
amendments to such Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and file the
same, together with all exhibits and schedules thereto and all other documents
in connection therewith, with the Commission and with such state securities
authorities as may be appropriate, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as the undersigned might or could do in person, and
hereby ratifying and confirming all the acts of said attorneys-in-fact and
agents, or any of them, which they may lawfully do in the premises or cause to
be done by virtue hereof.
II-10
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
--------- ----- ----
/s/ O. Bruton Smith President and Manager (principal December 14, 2001
- --------------------------- executive officer)
O. Bruton Smith
/s/ B. Scott Smith Vice President and Manager December 14, 2001
- ---------------------------
B. Scott Smith
/s/ Theodore M. Wright Vice President, Treasurer, and December 14, 2001
- --------------------------- Manager
Theodore M. Wright
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
SONIC AUTOMOTIVE - 1720 MASON AVE., DB, LLC
SONIC - FM AUTOMOTIVE, LLC
By: Sonic Automotive, Inc., sole member
By: /s/ Theodore M. Wright
---------------------------------------
Theodore M. Wright
Vice President and Treasurer
POWER OF ATTORNEY
Each of the undersigned managers and officers of the above named
Registrants, by his execution hereof, hereby constitutes and appoints B. Scott
Smith, Theodore M. Wright and Stephen K. Coss, and each of them, with full power
of substitution, as his or her true and lawful attorneys-in-fact and agents, to
do any and all acts and things for him or her, and in his or her name, place and
stead, to execute and sign any and all pre-effective and post-effective
amendments to such Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and file the
same, together with all exhibits and schedules thereto and all other documents
in connection therewith, with the Commission and with such state securities
authorities as may be appropriate, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as the undersigned might or could do in person, and
hereby ratifying and confirming all the acts of said attorneys-in-fact and
agents, or any of them, which they may lawfully do in the premises or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
--------- ----- ----
/s/ O. Bruton Smith Manager December 14, 2001
- ----------------------------
O. Bruton Smith
/s/ B. Scott Smith President and Manager (principal December 14, 2001
- ---------------------------- executive officer)
B. Scott Smith
/s/ Theodore M. Wright Vice President, Treasurer, and December 14, 2001
- ---------------------------- Manager
Theodore M. Wright
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
SONIC AUTOMOTIVE OF GEORGIA, INC.
On behalf of itself and the following
entities as General Partner:
SONIC - GLOBAL IMPORTS, L.P.
SONIC PEACHTREE INDUSTRIAL BLVD., L.P.
On behalf of itself and the
following entities as a Member
SONIC AUTOMOTIVE - 5260
PEACHTREE INDUSTRIAL BLVD.,
LLC
SONIC AUTOMOTIVE - 5585
PEACHTREE INDUSTRIAL BLVD.,
LLC
SRE GEORGIA-1, L.P.
SRE GEORGIA-2, L.P.
SRE GEORGIA-3, L.P.
By: /s/ Theodore M. Wright
-------------------------------------------
Theodore M. Wright
Vice President and Treasurer
POWER OF ATTORNEY
Each of the undersigned directors and officers of the above named
Registrants, by his execution hereof, hereby constitutes and appoints B. Scott
Smith, Theodore M. Wright and Stephen K. Coss, and each of them, with full power
of substitution, as his or her true and lawful attorneys-in-fact and agents, to
do any and all acts and things for him or her, and in his or her name, place and
stead, to execute and sign any and all pre-effective and post-effective
amendments to such Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and file the
same, together with all exhibits and schedules thereto and all other documents
in connection therewith, with the Commission and with such state securities
authorities as may be appropriate, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as the undersigned might or could do in person, and
hereby ratifying and confirming all the acts of said attorneys-in-fact and
agents, or any of them, which they may lawfully do in the premises or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
/s/ O. Bruton Smith President (principal executive December 14, 2001
- ---------------------------- officer)
O. Bruton Smith
/s/ B. Scott Smith Vice President and Director
- ----------------------------
B. Scott Smith
/s/ Theodore M. Wright Vice President, Treasurer, and December 14, 2001
- ---------------------------- Director
Theodore M. Wright
Assistant Secretary, Assistant December 14, 2001
- --------------------------- Treasurer and Director
Peggy McFarland
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
SONIC OF TEXAS, INC.
On behalf of itself and the following
entities as General Partner:
PHILPOTT MOTORS, LTD.
SONIC AUTOMOTIVE OF TEXAS, L.P.
SONIC AUTOMOTIVE - 3401 N. MAIN, TX, L.P.
SONIC AUTOMOTIVE - 4701 I-10 EAST, TX, L.P.
SONIC AUTOMOTIVE - 5221 I-10 EAST, TX, L.P.
SONIC - CAMP FORD, L.P.
SONIC -CARROLLTON V, L.P.
SONIC - FORT WORTH T, L.P.
SONIC - HOUSTON V, L.P.
SONIC - LUTE RILEY, L.P.
SONIC - PARK PLACE A, L.P.
SONIC - READING, L.P.
SONIC - RICHARDSON F, L.P.
SONIC - SAM WHITE NISSAN, L.P.
SRE TEXAS-1, L.P.
SRE TEXAS-2, L.P.
SRE TEXAS-3, L.P.
On behalf of the following entities as a
Member:
SONIC - LS, LLC
On behalf of itself and the
following entity as General
Partner:
SONIC - LS CHEVROLET, L.P.
By: /s/ Theodore M. Wright
-------------------------------------------
Theodore M. Wright
Vice President and Treasurer
POWER OF ATTORNEY
Each of the undersigned directors and officers of the above named
Registrants, by his execution hereof, hereby constitutes and appoints B. Scott
Smith, Theodore M. Wright and Stephen K. Coss, and each of them, with full power
of substitution, as his or her true and lawful attorneys-in-fact and agents, to
do any and all acts and things for him or her, and in his or her name, place and
stead, to execute and sign any and all pre-effective and post-effective
amendments to such Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and file the
same, together with all exhibits and schedules thereto and all other documents
in connection therewith, with the Commission and with such state securities
authorities as may be appropriate, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as the undersigned might or could do in person, and
hereby ratifying and confirming all the acts of said attorneys-in-fact and
agents, or any of them, which they may lawfully do in the premises or cause to
be done by virtue hereof.
II-14
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
--------- ----- ----
/s/ O. Bruton Smith President (principal executive December 14, 2001
- --------------------------- officer)
O. Bruton Smith
/s/ B. Scott Smith Vice President and Director December 14, 2001
- ---------------------------
B. Scott Smith
/s/ Theodore M. Wright Vice President, Treasurer, and December 14, 2001
- --------------------------- Director
Theodore M. Wright
Assistant Secretary, Assistant December 14, 2001
- -------------------------- Treasurer and Director
Roger A. Elswick
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
SONIC - VOLVO LV, LLC
On behalf of itself and the following
entity as a Member
SONIC AUTOMOTIVE SERVICING
COMPANY, LLC
By: /s/ Theodore M. Wright
------------------------------------------
Theodore M. Wright
Vice President and Treasurer
POWER OF ATTORNEY
Each of the undersigned managers and officers of the above named
Registrants, by his execution hereof, hereby constitutes and appoints B. Scott
Smith, Theodore M. Wright and Stephen K. Coss, and each of them, with full power
of substitution, as his or her true and lawful attorneys-in-fact and agents, to
do any and all acts and things for him or her, and in his or her name, place and
stead, to execute and sign any and all pre-effective and post-effective
amendments to such Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and file the
same, together with all exhibits and schedules thereto and all other documents
in connection therewith, with the Commission and with such state securities
authorities as may be appropriate, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as the undersigned might or could do in person, and
hereby ratifying and confirming all the acts of said attorneys-in-fact and
agents, or any of them, which they may lawfully do in the premises or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
--------- ----- ----
/s/ O. Bruton Smith Chief Executive Officer (principal December 14, 2001
- --------------------------- executive officer)
O. Bruton Smith
/s/ B. Scott Smith President and Manager December 14, 2001
- ---------------------------
B. Scott Smith
/s/ Theodore M. Wright Vice President, Treasurer and December 14, 2001
- --------------------------- Manager
Theodore M. Wright
/s/ Jeffrey C. Rachor Manager December 14, 2001
- ---------------------------
Jeffrey C. Rachor
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
SONIC - INTEGRITY DODGE LV, LLC
SONIC - LAS VEGAS C EAST, LLC
SONIC - LAS VEGAS C WEST, LLC
By: /s/ Theodore M. Wright
------------------------------------------
Theodore M. Wright
Vice President and Treasurer
POWER OF ATTORNEY
Each of the undersigned managers and officers of the above named
Registrants, by his execution hereof, hereby constitutes and appoints B. Scott
Smith, Theodore M. Wright and Stephen K. Coss, and each of them, with full power
of substitution, as his or her true and lawful attorneys-in-fact and agents, to
do any and all acts and things for him or her, and in his or her name, place and
stead, to execute and sign any and all pre-effective and post-effective
amendments to such Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and file the
same, together with all exhibits and schedules thereto and all other documents
in connection therewith, with the Commission and with such state securities
authorities as may be appropriate, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as the undersigned might or could do in person, and
hereby ratifying and confirming all the acts of said attorneys-in-fact and
agents, or any of them, which they may lawfully do in the premises or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
--------- ----- ----
Chief Executive Officer (principal December 14, 2001
/s/ O. Bruton Smith executive officer)
- ----------------------------
O. Bruton Smith
/s/ B. Scott Smith President and Manager December 14, 2001
- ----------------------------
B. Scott Smith
/s/ Theodore M. Wright Vice President, Treasurer and December 14, 2001
- ---------------------------- Manager
Theodore M. Wright
/s/ Jeffrey C. Rachor Manager December 14, 2001
- ----------------------------
Jeffrey C. Rachor
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
SONIC AUTOMOTIVE OF TENNESSEE, INC.
On behalf of itself and the following
entities as Member:
SONIC AUTOMOTIVE OF CHATTANOOGA,
LLC
SONIC AUTOMOTIVE OF NASHVILLE, LLC
SONIC AUTOMOTIVE - 2490 SOUTH LEE
HIGHWAY, LLC
SONIC AUTOMOTIVE - 6025 INTERNATIONAL
DRIVE, LLC
SONIC - 2185 CHAPMAN ROAD,
CHATTANOOGA, LLC
SONIC - SUPERIOR OLDSMOBILE, LLC
TOWN AND COUNTRY CHRYSLER-
PLYMOUTH-JEEP, LLC
TOWN AND COUNTRY DODGE OF
CHATTANOOGA, LLC
TOWN AND COUNTRY FORD OF
CLEVELAND, LLC
TOWN AND COUNTRY JAGUAR, LLC
By: /s/ Theodore M. Wright
---------------------------------------------
Theodore M. Wright
Vice President and Treasurer
POWER OF ATTORNEY
Each of the undersigned directors and officers of the above named
Registrants, by his execution hereof, hereby constitutes and appoints B. Scott
Smith, Theodore M. Wright and Stephen K. Coss, and each of them, with full power
of substitution, as his or her true and lawful attorneys-in-fact and agents, to
do any and all acts and things for him or her, and in his or her name, place and
stead, to execute and sign any and all pre-effective and post-effective
amendments to such Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and file the
same, together with all exhibits and schedules thereto and all other documents
in connection therewith, with the Commission and with such state securities
authorities as may be appropriate, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as the undersigned might or could do in person, and
hereby ratifying and confirming all the acts of said attorneys-in-fact and
agents, or any of them, which they may lawfully do in the premises or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
--------- ----- ----
/s/ B. Scott Smith President, Chief Executive Officer December 14, 2001
- ---------------------------- and Director (principal executive
B. Scott Smith officer)
/s/ Theodore M. Wright Vice President, Treasurer and December 14, 2001
- ---------------------------- Director
Theodore M. Wright
/s/ Jeffrey C. Rachor Director December 14, 2001
- ----------------------------
Jeffrey C. Rachor
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
SONIC AUTOMOTIVE - 3741 S. NOVA RD., PO, INC.
By: /s/ Theodore M. Wright
----------------------------------------
Theodore M. Wright
Vice President and Treasurer
POWER OF ATTORNEY
Each of the undersigned directors and officers of the above named
Registrants, by his execution hereof, hereby constitutes and appoints B. Scott
Smith, Theodore M. Wright and Stephen K. Coss, and each of them, with full power
of substitution, as his or her true and lawful attorneys-in-fact and agents, to
do any and all acts and things for him or her, and in his or her name, place and
stead, to execute and sign any and all pre-effective and post-effective
amendments to such Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and file the
same, together with all exhibits and schedules thereto and all other documents
in connection therewith, with the Commission and with such state securities
authorities as may be appropriate, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as the undersigned might or could do in person, and
hereby ratifying and confirming all the acts of said attorneys-in-fact and
agents, or any of them, which they may lawfully do in the premises or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
--------- ----- ----
/s/ B. Scott Smith President and Director (principal December 14, 2001
- ----------------------------- executive officer)
B. Scott Smith
/s/ Theodore M. Wright Vice President, Treasurer and December 14, 2001
- ----------------------------- Director
Theodore M. Wright
/s/ Jeffrey C. Rachor Director December 14, 2001
- -----------------------------
Jeffrey C. Rachor
II-19
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
FAA CAPITOL N, INC.
FAA CONCORD T, INC.
FAA POWAY T, INC.
FAA SAN BRUNO, INC.
FAA SERRAMONTE L, INC.
By: /s/ Theodore M. Wright
----------------------------------------
Theodore M. Wright
Vice President and Treasurer
POWER OF ATTORNEY
Each of the undersigned directors and officers of the above named
Registrants, by his execution hereof, hereby constitutes and appoints B. Scott
Smith, Theodore M. Wright and Stephen K. Coss, and each of them, with full power
of substitution, as his or her true and lawful attorneys-in-fact and agents, to
do any and all acts and things for him or her, and in his or her name, place and
stead, to execute and sign any and all pre-effective and post-effective
amendments to such Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and file the
same, together with all exhibits and schedules thereto and all other documents
in connection therewith, with the Commission and with such state securities
authorities as may be appropriate, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as the undersigned might or could do in person, and
hereby ratifying and confirming all the acts of said attorneys-in-fact and
agents, or any of them, which they may lawfully do in the premises or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
--------- ----- ----
December 14, 2001
/s/ O. Bruton Smith President and Director (principal
- ----------------------------- executive officer)
O. Bruton Smith
/s/ B. Scott Smith Vice President and Director December 14, 2001
- -----------------------------
B. Scott Smith
/s/ Theodore M. Wright Vice President, Treasurer, December 14, 2001
- ----------------------------- and Director
Theodore M. Wright
/s/ Thomas A. Price Vice President and Director December 14, 2001
- -----------------------------
Thomas A. Price
II-20
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
FAA LAS VEGAS H, INC.
By: /s/ Theodore M. Wright
---------------------------------------
Theodore M. Wright
Vice President and Treasurer
POWER OF ATTORNEY
Each of the undersigned directors and officers of the above named
Registrants, by his execution hereof, hereby constitutes and appoints B. Scott
Smith, Theodore M. Wright and Stephen K. Coss, and each of them, with full power
of substitution, as his or her true and lawful attorneys-in-fact and agents, to
do any and all acts and things for him or her, and in his or her name, place and
stead, to execute and sign any and all pre-effective and post-effective
amendments to such Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and file the
same, together with all exhibits and schedules thereto and all other documents
in connection therewith, with the Commission and with such state securities
authorities as may be appropriate, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as the undersigned might or could do in person, and
hereby ratifying and confirming all the acts of said attorneys-in-fact and
agents, or any of them, which they may lawfully do in the premises or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
--------- ----- ----
/s/ O. Bruton Smith Chairman, Chief Executive Officer December 14, 2001
- ----------------------------- and Director (principal
O. Bruton Smith executive officer)
/s/ Theodore M. Wright Vice President, Treasurer, and December 14, 2001
- ----------------------------- Director
Theodore M. Wright
Assistant Secretary, Assistant December 14, 2001
- ----------------------------- Treasurer and Director
David Plummer
II-21
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
SONIC AUTOMOTIVE OF NEVADA, INC.
On behalf of itself and the following
entities as Member:
SONIC AUTOMOTIVE OF CHATTANOOGA,
LLC
SONIC AUTOMOTIVE OF NASHVILLE, LLC
SONIC AUTOMOTIVE - 2490 SOUTH LEE
HIGHWAY, LLC
SONIC AUTOMOTIVE - 6025 INTERNATIONAL
DRIVE, LLC
SONIC - 2185 CHAPMAN ROAD,
CHATTANOOGA, LLC
SONIC - SUPERIOR OLDSMOBILE, LLC
TOWN AND COUNTRY CHRYSLER-
PLYMOUTH-JEEP, LLC
TOWN AND COUNTRY DODGE OF
CHATTANOOGA, LLC
TOWN AND COUNTRY FORD OF
CLEVELAND, LLC
TOWN AND COUNTRY JAGUAR, LLC
By: /s/ Theodore M. Wright
----------------------------------------------
Theodore M. Wright
Vice President and Treasurer
POWER OF ATTORNEY
Each of the undersigned directors and officers of the above named
Registrants, by his execution hereof, hereby constitutes and appoints B. Scott
Smith, Theodore M. Wright and Stephen K. Coss, and each of them, with full power
of substitution, as his or her true and lawful attorneys-in-fact and agents, to
do any and all acts and things for him or her, and in his or her name, place and
stead, to execute and sign any and all pre-effective and post-effective
amendments to such Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and file the
same, together with all exhibits and schedules thereto and all other documents
in connection therewith, with the Commission and with such state securities
authorities as may be appropriate, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as the undersigned might or could do in person, and
hereby ratifying and confirming all the acts of said attorneys-in-fact and
agents, or any of them, which they may lawfully do in the premises or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
--------- ----- ----
/s/ O. Bruton Smith Chief Executive Officer and December 14, 2001
- --------------------------- Director (principal executive officer)
O. Bruton Smith
/s/ Theodore M. Wright Vice President, Treasurer, and December 14, 2001
- --------------------------- Director
Theodore M. Wright
Assistant Secretary, Assistant December 14, 2001
- --------------------------- Treasurer and Director
David Plummer
II-22
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
SONIC RESOURCES, INC.
By: /s/ Theodore M. Wright
---------------------------------------
Theodore M. Wright
Vice President and Treasurer
POWER OF ATTORNEY
Each of the undersigned directors and officers of the above named
Registrants, by his execution hereof, hereby constitutes and appoints B. Scott
Smith, Theodore M. Wright and Stephen K. Coss, and each of them, with full power
of substitution, as his or her true and lawful attorneys-in-fact and agents, to
do any and all acts and things for him or her, and in his or her name, place and
stead, to execute and sign any and all pre-effective and post-effective
amendments to such Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and file the
same, together with all exhibits and schedules thereto and all other documents
in connection therewith, with the Commission and with such state securities
authorities as may be appropriate, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as the undersigned might or could do in person, and
hereby ratifying and confirming all the acts of said attorneys-in-fact and
agents, or any of them, which they may lawfully do in the premises or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
--------- ----- ----
/s/ B. Scott Smith President and Director (principal December 14, 2001
- -------------------------------- executive officer)
B. Scott Smith
/s/ Theodore M. Wright Vice President, Treasurer, and December 14, 2001
- ------------------------------- Director
Theodore M. Wright
Assistant Secretary, Assistant December 14, 2001
- ------------------------------- Treasurer and Director
David Plummer
II-23
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of North
Carolina, on December 14, 2001.
SONIC AUTOMOTIVE F&I, LLC
SONIC AUTOMOTIVE WEST, LLC
By: /s/ Theodore M. Wright
----------------------------------------
Theodore M. Wright
Vice President and Treasurer
POWER OF ATTORNEY
Each of the undersigned managers and officers of the above named
Registrants, by his execution hereof, hereby constitutes and appoints B. Scott
Smith, Theodore M. Wright and Stephen K. Coss, and each of them, with full power
of substitution, as his or her true and lawful attorneys-in-fact and agents, to
do any and all acts and things for him or her, and in his or her name, place and
stead, to execute and sign any and all pre-effective and post-effective
amendments to such Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and file the
same, together with all exhibits and schedules thereto and all other documents
in connection therewith, with the Commission and with such state securities
authorities as may be appropriate, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as the undersigned might or could do in person, and
hereby ratifying and confirming all the acts of said attorneys-in-fact and
agents, or any of them, which they may lawfully do in the premises or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
--------- ----- ----
/s/ O. Bruton Smith Chief Executive Officer (principal December 14, 2001
- ------------------------------- executive officer)
O. Bruton Smith
/s/ Theodore M. Wright Vice President, Treasurer, and December 14, 2001
- ------------------------------- Manager
Theodore M. Wright
/s/ Gail M. Syfert Assistant Secretary, Assistant December 14, 2001
- ------------------------------- Treasurer and Manager
Gail M. Syfert
Assistant Secretary, Assistant December 14, 2001
- ------------------------------- Treasurer and Manager
David Plummer
II-24
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
4.1 Specimen Certificate representing Class A Common Stock
(incorporated by reference to Exhibit 4.1 to the Registration
Statement on Form S-1 (Reg. No. 333-33295) (the "Form S-1")).
4.2 Form of 11% Senior Subordinated Note due 2008, Series B
(incorporated by reference to Exhibit 4.3 to Sonic's
Registration Statement on Form S-4 (Reg. No. 333-64397 and
333-64397-001 through 333-64397-044) (the "Form S-4")).
4.3 Indenture dated as of July 1, 1998 among Sonic, as issuer, the
subsidiaries of Sonic named therein, as guarantors, and U.S.
Bank Trust National Association, as trustee (the "Trustee"),
relating to the 11% Senior Subordinated Notes due 2008
(incorporated by reference to Exhibit 4.2 to the Form S-4).
4.4 First Supplemental Indenture dated as of December 31, 1999
among Sonic, as issuer, the subsidiaries of Sonic named
therein, as guarantors and additional guarantors, and the
Trustee, relating to the 11% Senior Subordinated Notes due
2008 (incorporated by reference to Exhibit 4.2a to the 1999
Form 10-K).
4.5 Second Supplemental Indenture dated as of September 15, 2000
among Sonic, as issuer, the subsidiaries of Sonic named
therein, as guarantors and additional guarantors, and the
Trustee, relating to the 11% Senior Subordinated Notes due
2008 (incorporated by reference to Exhibit 4.4 to Sonic's
Quarterly Report on Form 10-Q for the quarter ended September
30, 2000 (the "September 30, 2000 Form 10-Q")).
4.6 Third Supplemental Indenture dated as of March 31, 2001 among
Sonic, as issuer, the subsidiaries of Sonic named therein, as
guarantors and additional guarantors, and the Trustee,
relating to the 11% Senior Subordinated Notes due 2008
(incorporated by reference to Exhibit 4.6 to Sonic's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2001).
4.7 Fourth Supplemental Indenture dated as of November 19, 2001
among Sonic, as issuer, the subsidiaries of Sonic named
therein, as guarantors and additional guarantors, and the
Trustee, relating to the 11% Senior Subordinated Notes due
2008.
4.8 Registration Rights Agreement dated as of June 30, 1997 among
Sonic, O. Bruton Smith, Bryan Scott Smith, William S. Egan and
Sonic Financial Corporation (incorporated by reference to
Exhibit 4.2 to the Form S-1).
4.9 Form of 11% Senior Subordinated Note due 2008, Series D.
4.10 Indenture dated as of November 19, 2001 among Sonic, as
issuer, the subsidiaries of Sonic named therein, as
guarantors, and U.S. Bank Trust National Association, as
trustee (the "Trustee"), relating to the 11% Senior
Subordinated Notes due 2008.
4.11 Registration Rights Agreement dated as of November 19, 2001
among Sonic, the Guarantors named therein and Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner and Smith Incorporated and
Banc of America LLC.
4.12 Purchase Agreement dated as of November 8, 2001 between Sonic
Automotive, Inc., the Guarantors named therein and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith,
Incorporated and Banc of America Securities LLC.
4.13 Subordination Agreement dated as of November 19, 2001 between
O. Bruton Smith and U.S. Bank Trust National Association.
5.1** Opinion of Moore & Van Allen PLLC regarding the validity of
the securities being registered.
23.1 Consent of Deloitte & Touche LLP.)
23.2 Consent of Moore & Van Allen PLLC (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page hereto).
25.1 Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of U.S. Bank Trust National
Association.
99.1 Form of Letter of Transmittal.
99.2 Notice of Guaranteed Delivery.
** To be filed by amendment