AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 14, 2002
REGISTRATION NO. 333-75220
REGISTRATION NOS. 333-75220-01 THROUGH 333-75220-I2
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
AMENDMENT NO. 1
TO
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 (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification Number)
Organization)
5401 East Independence Boulevard
P.O. Box 18747
Charlotte, North Carolina 28212
Telephone: (704) 566-2400
(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) 566-2400
(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. [ ]
-------------------------------
TABLE OF ADDITIONAL REGISTRANTS
Subsidiary State of Organization IRS 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) 566-2400.
PROSPECTUS
[LOGO] SONIC
AUTOMOTIVE INC TM
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 February 18, 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 are not obligated to
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 January 15, 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 February 11, 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, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. 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 154 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 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) 566-2400.
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 May 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 1, 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 at5:00 p.m. New York City time on
February 18, 2002 unless we extend it. You must tender your
outstanding Series B or Series C notes prior to this time, if you
want to participate in the exchange offer. We may terminate
the exchange offer in the event of circumstances described on
page 33 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 or
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 required 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 or Series C notes to us or to DTC. Send these documents only
to the exchange agent.
3
Procedures for tendering
certificated Series B or Series C notes
(see page 30) ............................ If you are a holder of book-entry interests in the Series B or
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 or 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 or Series C Notes."
Procedures for tendering
Series B or Series C notes held by a
broker (see page 30) ..................... If you hold your Series B or Series C notes through a broker, do not
complete the letter of 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 or Series C notes and your
Series B or Series C notes are not immediately available or you
cannot timely deliver your Series B or 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 or
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, 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 a 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 we 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 Series D 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 purchase 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,
restrict dividends 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 25, 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 ....... 3.3x 3.4x 3.0x 3.2x 3.2x
charges (a)
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 any Series B notes for Series D 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 for Series D notes 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 B or Series C 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 B or Series C 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, application of the estimated net
proceeds of that offering and assuming that all Series B notes and Series C
notes are exchanged for Series D notes:
o we and the guarantors would have had approximately $253.6 million of
debt which is senior or secured and no 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
11
o the guarantors would also have had approximately $557.3 million of
secured floor plan indebtedness.
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. 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,
12
o was rendered insolvent by reason of the issuance of the guarantee,
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 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 Series 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:
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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 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 $129.2 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 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
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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 o 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.
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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 January 11, 2002, we owned the following number of franchises for the
following manufacturers:
Number of Number of
Manufacturer Franchises Manufacturer Franchises
Honda 14 Lexus 4
Chevrolet 13 Lincoln 4
Ford 13 Mercedes 4
BMW 10 Hyundai 3
Cadillac 10 Isuzu 3
Toyota 10 Mitsubishi 3
Nissan 9 Kia 2
Volvo 8 Audi 2
Dodge 7 Pontiac 2
Chrysler 7 Porsche 2
Jeep 6 GMC 1
Mercury 5 Infiniti 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 $129.2
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).
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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;
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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
contributed to a significant increase in the pace of new vehicle sales in the
fourth quarter 2001. In addition, we saw an increase in year over year
used vehicle sales in the fourth quarter 2001 as well as an increase in
sales of new vehicles whose manufacturers have
22
not 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 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:
o the availability of suitable acquisition candidates;
o competition with other dealer groups for suitable acquisitions;
o the negotiation of acceptable terms;
o our financial capabilities;
o our stock price;
o the availability of skilled employees to manage the acquired companies;
and
o 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
independently verified in that regard nor are likely to be so verified in the
future. Potential conflicts of interest could arise in the
23
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.
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
24
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 provides
additional guidance regarding the measurement and recognition of goodwill and
other acquired intangible assets. The
25
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 Monday, February 18, 2002. We may extend this deadline for any reason.
We refer to the last day on which tenders will be accepted, whether on February
18, 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 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
28
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 16, 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 exchange 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 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 or 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 neither we nor they are 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 notes 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:
o are not an "affiliate" of us;
o are acquiring the Series D notes in the ordinary course of your
business;
o 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
o 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 neither
we nor they are 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:
o 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;
o a governmental body passes any law, statute, rule or regulation which
prohibits or prevents the exchange offer;
o 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
o 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:
o terminate the exchange offer and as promptly as practicable return all
tendered Series B or Series C notes;
o extend the exchange offer;
o 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
o 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 25, 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 32,602 46,770 150,130 326,914 633,356 473,745 527,009
expenses
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 5,021 5,998 29,640 72,974 119,872 99,881 95,222
minority interest
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) 7.3x 4.1x 3.3x 3.4x 3.0x 3.2x 3.2x
Consolidated Balance Sheet Data:
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:
o the Series D notes have been registered under the Securities
Act and, therefore, will not bear legends restricting
transfers; and
o 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.
38
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 "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
39
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.
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."
40
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 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
41
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
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;
42
(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;
(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;
43
(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 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
44
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
(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;
45
(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 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;
46
(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
(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,
47
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 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
48
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 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)
49
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)
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;
50
(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 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."
51
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 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
52
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;
(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
53
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 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
54
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:
(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
55
(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;
(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,
56
(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 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;
57
(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
(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);
58
(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;
(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.
59
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. 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,"
60
(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
(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,
61
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;
(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
62
(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);
(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.
63
"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,
(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
64
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.
"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,
65
(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 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,
66
(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 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;"
67
(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;
(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,
68
(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."
"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
69
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.
"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.
70
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.
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
71
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
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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO] SONIC
AUTOMOTIVE INC TM
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)
January 15, 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 Sonic's
Annual Report on Form 10-K for the year ended December 31,
1999 (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).
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 Form of Notice of Guaranteed Delivery.
* Filed previously.
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 January 11, 2002.
SONIC AUTOMOTIVE, INC.
By: /s/ Stephen K. Coss
-------------------------------------
Stephen K. Coss
Vice President, General Counsel and Secretary
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
--------- ----- ----
* Chairman, Chief Executive Officer January 11, 2002
- ------------------------------------ and Director (principal executive
O. Bruton Smith officer)
* Vice Chairman and Director January 11, 2002
- ------------------------------------
Thomas A. Price
* President, Chief Operating Officer January 11, 2002
- ------------------------------------ and Director
B. Scott Smith
* Chief Financial Officer (principal January 11, 2002
- ------------------------------------ financial and accounting officer),
Theodore M. Wright Vice President, Treasurer and
Director
* Executive Vice President of Retail January 11, 2002
- ------------------------------------ Operations and Director
Jeffrey C. Rachor
* Director January 11, 2002
- ------------------------------------
William R. Brooks
* Director January 11, 2002
- ------------------------------------
William P. Benton
* Director January 11, 2002
- ------------------------------------
William I. Belk
* Director January 11, 2002
- ------------------------------------
H. Robert Heller
* Director January 11, 2002
- ------------------------------------
Maryann N. Keller
II-4
Director January 11, 2002
- ------------------------------------
Robert L. Rewey
Director January 11, 2002
- ------------------------------------
Thomas P. Capo
Stephen K. Coss, by signing his name below, signs this document on behalf
of each of the above-named persons specified with an asterisk (*), pursuant to a
power of attorney duly executed by such persons, filed with the Securities and
Exchange Commission in the Registrants' Registration Statement on Form S-4 on
December 14, 2001.
/s/ Stephen K. Coss
-----------------------------------
Attorney-in-fact
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 January 11, 2002.
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/ Stephen K. Coss
---------------------------------------
Stephen K. Coss
Secretary
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
--------- ----- ----
* President and Director (principal January 11, 2002
- ------------------------------------ executive officer)
O. Bruton Smith
* Vice President and Director January 11, 2002
- ------------------------------------
B. Scott Smith
* Vice President, Treasurer, and January 11, 2002
- ------------------------------------ Director
Theodore M. Wright
Stephen K. Coss, by signing his name below, signs this document on behalf
of each of the above-named persons specified with an asterisk (*), pursuant to a
power of attorney duly executed by such persons, filed with the Securities and
Exchange Commission in the Registrants' Registration Statement on Form S-4 on
December 14, 2001.
/s/ Stephen K. Coss
-----------------------------
Attorney-in-fact
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 January 11, 2002.
FIRSTAMERICA AUTOMOTIVE, INC.
By: /s/ Stephen K. Coss
--------------------------------------
Stephen K. Coss
Secretary
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
--------- ----- ----
* Chairman, Chief Executive Officer January 11, 2002
- ------------------------------------ and Director (principal executive
O. Bruton Smith officer)
* President and Director January 11, 2002
- ------------------------------------
B. Scott Smith
* Vice President, Treasurer, and January 11, 2002
- ------------------------------------ Director
Theodore M. Wright
Stephen K. Coss, by signing his name below, signs this document on
behalf of each of the above-named persons specified with an asterisk (*),
pursuant to a power of attorney duly executed by such persons, filed with the
Securities and Exchange Commission in the Registrants' Registration Statement on
Form S-4 on December 14, 2001.
/s/ Stephen K. Coss
-----------------------------
Attorney-in-fact
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 January 11, 2002.
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/ Stephen K. Coss
--------------------------------------------
Stephen K. Coss
Secretary
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
--------- ----- ----
* Director January 11, 2002
- ------------------------------------
O. Bruton Smith
* President and Director (principal January 11, 2002
- ------------------------------------ executive officer)
B. Scott Smith
* Vice President, Treasurer, and January 11, 2002
- ------------------------------------ Director
Theodore M. Wright
Stephen K. Coss, by signing his name below, signs this document on behalf
of each of the above-named persons specified with an asterisk (*), pursuant to a
power of attorney duly executed by such persons, filed with the Securities and
Exchange Commission in the Registrants' Registration Statement on Form S-4 on
December 14, 2001.
/s/ Stephen K. Coss
- -----------------------------
Attorney-in-fact
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 January 11, 2002.
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/ Stephen K. Coss
---------------------------------------------
Stephen K. Coss
Secretary
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
--------- ----- ----
* President and Manager (principal January 11, 2002
- ------------------------------------ executive officer)
O. Bruton Smith
* Vice President and Manager January 11, 2002
- ------------------------------------
B. Scott Smith
* Vice President, Treasurer, and January 11, 2002
- ------------------------------------ Manager
Theodore M. Wright
Stephen K. Coss, by signing his name below, signs this document on behalf
of each of the above-named persons specified with an asterisk (*), pursuant to a
power of attorney duly executed by such persons, filed with the Securities and
Exchange Commission in the Registrants' Registration Statement on Form S-4 on
December 14, 2001.
/s/ Stephen K. Coss
- -----------------------------
Attorney-in-fact
II-10
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 January 11, 2002.
SONIC AUTOMOTIVE - 1720 MASON AVE., DB, LLC
SONIC - FM AUTOMOTIVE, LLC
By: Sonic Automotive, Inc., sole member
By: /s/ Stephen K. Coss
----------------------------------------
Stephen K. Coss
Secretary
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
--------- ----- ----
* Manager January 11, 2002
- ------------------------------------
O. Bruton Smith
* President and Manager (principal January 11, 2002
- ------------------------------------ executive officer)
B. Scott Smith
* Vice President, Treasurer, and January 11, 2002
- ------------------------------------ Manager
Theodore M. Wright
Stephen K. Coss, by signing his name below, signs this document on behalf
of each of the above-named persons specified with an asterisk (*), pursuant to a
power of attorney duly executed by such persons, filed with the Securities and
Exchange Commission in the Registrants' Registration Statement on Form S-4 on
December 14, 2001.
/s/ Stephen K. Coss
- -----------------------------
Attorney-in-fact
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 January 11, 2002.
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/ Stephen K. Coss
-----------------------------------------
Stephen K. Coss
Secretary
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
--------- ----- ----
* President (principal executive January 11, 2002
- ------------------------------------ officer)
O. Bruton Smith
* Vice President and Director January 11, 2002
- ------------------------------------
B. Scott Smith
* Vice President, Treasurer, and January 11, 2002
- ------------------------------------ Director
Theodore M. Wright
Assistant Secretary, Assistant January 11, 2002
- ------------------------------------ Treasurer and Director
Peggy McFarland
Stephen K. Coss, by signing his name below, signs this document on behalf
of each of the above-named persons specified with an asterisk (*), pursuant to a
power of attorney duly executed by such persons, filed with the Securities and
Exchange Commission in the Registrants' Registration Statement on Form S-4 on
December 14, 2001.
/s/ Stephen K. Coss
- -----------------------------
Attorney-in-fact
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 January 11, 2002.
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/ Stephen K. Coss
-------------------------------------------------------
Stephen K. Coss
Secretary
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
--------- ----- ----
* President (principal executive January 11, 2002
- ------------------------------------ officer)
O. Bruton Smith
* Vice President and Director January 11, 2002
- ------------------------------------
B. Scott Smith
* Vice President, Treasurer, and January 11, 2002
- ------------------------------------ Director
Theodore M. Wright
Assistant Secretary, Assistant January 11, 2002
- ------------------------------------ Treasurer and Director
Roger A. Elswick
Stephen K. Coss, by signing his name below, signs this document on behalf
of each of the above-named persons specified with an asterisk (*), pursuant to a
power of attorney duly executed by such persons, filed with the Securities and
Exchange Commission in the Registrants' Registration Statement on Form S-4 on
December 14, 2001.
/s/ Stephen K. Coss
-----------------------------
Attorney-in-fact
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 January 11, 2002.
SONIC - VOLVO LV, LLC
On behalf of itself and the following entity as a Member
SONIC AUTOMOTIVE SERVICING
COMPANY, LLC
By: /s/ Stephen K. Coss
------------------------------
Stephen K. Coss
Secretary
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 January 11, 2002
- -------------------------- (principal executive officer)
O. Bruton Smith
* President and Manager January 11, 2002
- --------------------------
B. Scott Smith
* Vice President, Treasurer and January 11, 2002
- -------------------------- Manager
Theodore M. Wright
* Manager January 11, 2002
- --------------------------
Jeffrey C. Rachor
Stephen K. Coss, by signing his name below, signs this document on
behalf of each of the above-named persons specified with an asterisk (*),
pursuant to a power of attorney duly executed by such persons, filed with the
Securities and Exchange Commission in the Registrants' Registration Statement on
Form S-4 on December 14, 2001.
/s/ Stephen K. Coss
-----------------------------
Attorney-in-fact
II-14
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 January 11, 2002.
SONIC - INTEGRITY DODGE LV, LLC
SONIC - LAS VEGAS C EAST, LLC
SONIC - LAS VEGAS C WEST, LLC
By: /s/ Stephen K. Coss
-----------------------------
Stephen K. Coss
Secretary
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 January 11, 2002
- -------------------------- (principal executive officer)
O. Bruton Smith
* President and Manager January 11, 2002
- --------------------------
B. Scott Smith
* Vice President, Treasurer and January 11, 2002
- -------------------------- Manager
Theodore M. Wright
* Manager January 11, 2002
- --------------------------
Jeffrey C. Rachor
Stephen K. Coss, by signing his name below, signs this document on
behalf of each of the above-named persons specified with an asterisk (*),
pursuant to a power of attorney duly executed by such persons, filed with the
Securities and Exchange Commission in the Registrants' Registration Statement on
Form S-4 on December 14, 2001.
/s/ Stephen K. Coss
-----------------------------
Attorney-in-fact
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 January 11, 2002.
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/ Stephen K. Coss
-----------------------------------
Stephen K. Coss
Secretary
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
--------- ----- ----
* President, Chief Executive Officer January 11, 2002
- ------------------------------------ and Director (principal executive
B. Scott Smith officer)
* Vice President, Treasurer and January 11, 2002
- ------------------------------------ Director
Theodore M. Wright
* Director January 11, 2002
- ------------------------------------
Jeffrey C. Rachor
Stephen K. Coss, by signing his name below, signs this document on behalf
of each of the above-named persons specified with an asterisk (*), pursuant to a
power of attorney duly executed by such persons, filed with the Securities and
Exchange Commission in the Registrants' Registration Statement on Form S-4 on
December 14, 2001.
/s/ Stephen K. Coss
--------------------------------
Attorney-in-fact
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 January 11, 2002.
SONIC AUTOMOTIVE - 3741 S. NOVA RD., PO, INC.
By: /s/ Stephen K. Coss
--------------------------------------------
Stephen K. Coss
Secretary
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
--------- ----- ----
* President and Director (principal January 11, 2002
- ------------------------------------ executive officer)
B. Scott Smith
* Vice President, Treasurer and January 11, 2002
- ------------------------------------ Director
Theodore M. Wright
* Director January 11, 2002
- ------------------------------------
Jeffrey C. Rachor
Stephen K. Coss, by signing his name below, signs this document on behalf
of each of the above-named persons specified with an asterisk (*), pursuant to a
power of attorney duly executed by such persons, filed with the Securities and
Exchange Commission in the Registrants' Registration Statement on Form S-4 on
December 14, 2001.
/s/ Stephen K. Coss
------------------------------------
Attorney-in-fact
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 January 11, 2002.
FAA CAPITOL N, INC.
FAA CONCORD T, INC.
FAA POWAY T, INC.
FAA SAN BRUNO, INC.
FAA SERRAMONTE L, INC.
By: /s/ Stephen K. Coss
------------------------------------
Stephen K. Coss
Secretary
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
--------- ----- ----
* President and Director (principal January 11, 2002
- ------------------------------------ executive officer)
O. Bruton Smith
* Vice President and Director January 11, 2002
- ------------------------------------
B. Scott Smith
* Vice President, Treasurer, and January 11, 2002
- ------------------------------------ Director
Theodore M. Wright
* Vice President and Director January 11, 2002
- ------------------------------------
Thomas A. Price
Stephen K. Coss, by signing his name below, signs this document on behalf
of each of the above-named persons specified with an asterisk (*), pursuant to a
power of attorney duly executed by such persons, filed with the Securities and
Exchange Commission in the Registrants' Registration Statement on Form S-4 on
December 14, 2001.
/s/ Stephen K. Coss
-------------------------------------
Attorney-in-fact
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 January 11, 2002.
FAA LAS VEGAS H, INC.
By: /s/ Stephen K. Coss
-----------------------------------
Stephen K. Coss
Secretary
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
--------- ----- ----
* Chairman, Chief Executive Officer January 11, 2002
- ------------------------------------ and Director (principal executive
O. Bruton Smith officer)
* Vice President, Treasurer, and January 11, 2002
- ------------------------------------ Director
Theodore M. Wright
Assistant Secretary, Assistant January 11, 2002
- ------------------------------------ Treasurer and Director
David Plummer
Stephen K. Coss, by signing his name below, signs this document on behalf
of each of the above-named persons specified with an asterisk (*), pursuant to a
power of attorney duly executed by such persons, filed with the Securities and
Exchange Commission in the Registrants' Registration Statement on Form S-4 on
December 14, 2001.
/s/ Stephen K. Coss
------------------------------------
Attorney-in-fact
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 January 11, 2002.
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/ Stephen K. Coss
-----------------------------------------------
Stephen K. Coss
Secretary
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 and Director January 11, 2002
- ------------------------------------ (principal executive officer)
O. Bruton Smith
* Vice President, Treasurer, and January 11, 2002
- ------------------------------------ Director
Theodore M. Wright
Assistant Secretary, Assistant January 11, 2002
- ------------------------------------ Treasurer and Director
David Plummer
Stephen K. Coss, by signing his name below, signs this document on behalf
of each of the above-named persons specified with an asterisk (*), pursuant to a
power of attorney duly executed by such persons, filed with the Securities and
Exchange Commission in the Registrants' Registration Statement on Form S-4 on
December 14, 2001.
/s/ Stephen K. Coss
---------------------------------------
Attorney-in-fact
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 January 11, 2002.
SONIC RESOURCES, INC.
By: /s/ Stephen K. Coss
-----------------------------
Stephen K. Coss
Secretary
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
--------- ----- ----
* President and Director January 11, 2002
- -------------------------- (principal executive officer)
B. Scott Smith
* Vice President, Treasurer and January 11, 2002
- -------------------------- Manager
Theodore M. Wright
Assistant Secretary, Assistant January 11, 2002
- -------------------------- Treasurer and Director
David Plummer
Stephen K. Coss, by signing his name below, signs this document on
behalf of each of the above-named persons specified with an asterisk (*),
pursuant to a power of attorney duly executed by such persons, filed with the
Securities and Exchange Commission in the Registrants' Registration Statement on
Form S-4 on December 14, 2001.
/s/ Stephen K. Coss
-----------------------------
Attorney-in-fact
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 January 11, 2002.
SONIC AUTOMOTIVE F&I, LLC
SONIC AUTOMOTIVE WEST, LLC
By: /s/ Stephen K. Coss
-----------------------------------------
Stephen K. Coss
Secretary
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 January 11, 2002
- ------------------------------------ executive officer)
O. Bruton Smith
* Vice President, Treasurer, and January 11, 2002
- ------------------------------------ Manager
Theodore M. Wright
* Assistant Secretary, Assistant January 11, 2002
- ------------------------------------ Treasurer and Manager
Gail M. Syfert
Assistant Secretary, Assistant January 11, 2002
- ------------------------------------ Treasurer and Manager
David Plummer
Stephen K. Coss, by signing his name below, signs this document on behalf
of each of the above-named persons specified with an asterisk (*), pursuant to a
power of attorney duly executed by such persons, filed with the Securities and
Exchange Commission in the Registrants' Registration Statement on Form S-4 on
December 14, 2001.
/s/ Stephen K. Coss
-------------------------------------
Attorney-in-fact
II-22
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 Sonic's
Annual Report on Form 10-K for the year ended December 31,
1999 (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).
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 Form of Notice of Guaranteed Delivery.
* Filed previously.