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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------- -------------
Commission File Number 333-06585
CROSS-CONTINENT AUTO RETAILERS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2653095
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1201 S. TAYLOR
AMARILLO, TEXAS 79101
(Address of principal executive offices) (Zip Code)
(806) 374-8653
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes . No X .
--- ---
Number of shares outstanding of each of the issuer's classes of common stock, as
of November 13, 1996.
Class Shares Outstanding
--------------------- ------------------------------
$.01 Par Value 13,800,000
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CROSS-CONTINENT AUTO RETAILERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ---------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Vehicle sales $ 66,987 $ 57,537 $192,888 $159,001
Other operating revenue 9,595 6,281 24,936 16,843
-------- -------- -------- --------
Total revenues 76,582 63,818 217,824 175,844
-------- -------- -------- --------
Cost and expenses:
Cost of sales 64,528 53,374 184,449 147,845
Selling, general and administrative 8,315 6,685 24,010 18,323
Depreciation and amortization 272 240 821 712
Management fees paid to related party - 1,393 - 3,548
Employee stock compensation - - 1,099 -
-------- -------- -------- --------
Total cost and expenses 73,115 61,692 210,379 170,428
-------- -------- -------- --------
3,467 2,126 7,445 5,416
Other income (expense):
Interest income 197 206 724 612
Interest expense (1,068) (955) (3,318) (2,888)
-------- -------- -------- --------
Income before income taxes 2,596 1,377 4,851 3,140
Income tax provision 961 515 2,186 1,174
-------- -------- -------- --------
Net income $ 1,635 $ 862 $ 2,665 $ 1,966
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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CROSS-CONTINENT AUTO RETAILERS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
ASSETS
SEPTEMBER 30, 1996 DECEMBER 31,1995
------------------ ----------------
Current assets:
Cash and cash equivalents $ 53,482 $ 8,362
Accounts receivable 10,758 9,383
Inventories 39,825 43,731
--------- -------
Total current assets 104,065 61,476
Property and equipment, at cost, less
accumulated depreciation 12,209 12,107
Goodwill, net 7,286 7,385
Other assets 2,833 2,439
--------- -------
Total assets $ 126,393 $83,407
--------- -------
--------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Floor plan notes payable $ 35,530 $ 39,088
Current maturities of long-term debt 1,345 1,525
Accounts payable 3,982 4,846
Due to affiliates 4,746 5,954
Accrued expenses and other liabilities 8,081 7,495
Deferred income taxes 2,032 2,032
--------- -------
Total current liabilities 55,716 60,940
Long-term debt 10,730 11,859
Deferred warranty revenue - long-term portion 3,264 3,507
--------- -------
Total long-term liabilities 13,994 15,366
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000
shares authorized, none issued - -
Common stock, $.01 par value, 100,000,000
shares authorized, 13,800,000 issued and
outstanding 138 -
Paid-in capital 47,843 1,064
Retained earnings 8,702 6,037
--------- -------
Total stockholders' equity 56,683 7,101
--------- -------
Commitments and contingencies
Total liabilities and stockholders'
equity $ 126,393 $83,407
--------- -------
--------- -------
The accompanying notes are an integral part of these financial statements.
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CROSS-CONTINENT AUTO RETAILERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1995
------- ------
Cash flows from operating activities:
Net income $ 2,665 $ 1,966
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 821 712
Proceeds from extended warranty sales 1,683 2,492
Amortization of deferred warranty revenue (1,819) (1,592)
Employee stock compensation 1,099 -
(Increase) decrease in:
Accounts receivable (1,375) (2,508)
Inventory 3,906 (3,217)
Other assets (394) (382)
Increase (decrease) in:
Accounts payable - trade (864) 1,577
Accrued expenses and other liabilities 479 3,035
-------- -------
Net cash provided by operating activities 6,201 2,083
Cash flows from investing activities:
Acquisition of property and equipment (824) (239)
-------- -------
Net cash used by investing activities (824) (239)
Cash flows from financing activities:
Change in floor plan notes payable (3,558) 1,945
Due to affiliates (1,208) 1,742
Long-term debt repayments (1,309) (1,243)
Proceeds from common stock issuance 45,818 -
-------- -------
Net cash provided by financing activities 39,743 2,444
Increase in cash and cash equivalents 45,120 4,288
Cash and cash equivalents at beginning of period 8,362 5,001
-------- -------
Cash and cash equivalents at end of period $53,482 $ 9,289
-------- -------
-------- -------
The accompanying notes are an integral part of these financial statements.
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CROSS-CONTINENT AUTO RETAILERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1996
NOTE 1. UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine months ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1996. This interim report should be read in conjunction with the
consolidated financial statements and notes related thereto, included in
Cross-Continent Auto Retailer, Inc.'s ("C-CAR" or the "Company") Form S-1
(registration no. 333-06585) filed with the Securities and Exchange
Commission (the "Commission") on August 30, 1996, as supplemented by the
prospectus dated September 23, 1996, filed with the Commission pursuant to
Rule 424(b) under the Securities Act of 1933, as amended.
NOTE 2. INITIAL PUBLIC OFFERING
In September 1996, the Company sold 3,675,000 shares of its common stock
in an initial public offering for $14.00 per share (the "Offering"). Net
proceeds from the Offering, after considering underwriting commissions,
printing costs, professional fees, and other direct expenses, were $45.6
million.
NOTE 3. NET INCOME PER COMMON SHARE
Earnings per share data are not presented because the historical capital
structure prior to the Company's Offering is not comparable to the capital
structure existing after the Offering. Giving effect to the Offering as if
it had been consummated on January 1, 1996 and January 1, 1995, respectively,
the pro forma earnings per share would have been $.13 and $.14 for the three
months ended September 30, 1996 and 1995, respectively, and $.22 and $.34 for
the nine months ended September 30, 1996 and 1995, respectively. The
adjustments to arrive at pro forma net income include estimated additional
administrative expense which would have been incurred by the Company as a
stand-alone publicly owned company, the elimination of the management fees
paid in 1995 and reduced interest expense due to the use of proceeds to
retire floor plan debt, net of applicable income tax benefit. Pro forma
earnings per share are based on the assumption that 13,800,000 shares are
outstanding for each period.
NOTE 4. ACQUISITION OF LYNN HICKEY DODGE
Effective October 1, 1996, the Company acquired the automobile dealership
assets of Lynn Hickey Dodge, Inc. in Oklahoma City, Oklahoma. The dealership
is engaged in the retail sales of new and used vehicles, retail and wholesale
of replacement parts, and vehicle servicing. The dealership will continue
to operate under the name of Lynn Hickey Dodge ("Hickey Dodge"). The
purchase price of approximately $14 million was funded with cash proceeds
from the Offering. The acquisition will be accounted for under the purchase
method and the operating results of Hickey Dodge will be included in the
Company's consolidated statement of operations beginning October 1, 1996.
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The Company's consolidated revenues and net income for the nine months
ended September 30, 1996 are presented below on a pro forma basis as though
Hickey Dodge had been acquired and the Offering had occurred (see note 3) as
of January 1, 1996 (in thousands, except per share data):
Total revenue $318,071
Net income $ 5,400
Net income per share $ .39
These pro forma amounts are not necessarily indicative of the operating
results that would have occurred had the acquisition been consummated as of
the beginning of 1996, nor are they necessarily indicative of future results.
The estimated pro forma impact on the balance sheet would be to increase
inventory and floor plan by $13.7 million and $8.4 million, respectively,
property and equipment by $.4 million and goodwill by $13.2 million.
NOTE 5. RELATED PARTY TRANSACTIONS
The Company received services provided by Gilliland Group Family
Partnership ("GGFP") which included treasury, risk management, tax
compliance, employee benefits administration and other miscellaneous
services. GGFP is controlled by Bill A. Gilliland and Robert W. Hall,
Chairman and Senior Vice Chairman, respectively. During the unaudited nine
months ended September 30, 1996 and 1995, allocated expenses to the Company
approximated $615,000 and $638,000, respectively. These allocations are
classified as selling, general and administrative expense in the accompanying
consolidated statement of operations.
In connection with its business travel, the Company from time to time
uses an airplane that is owned and operated by Plains Air, Inc. Plains Air,
Inc. is owned by Bill A. Gilliland and Robert W. Hall, Chairman and Senior
Vice Chairman, respectively. Currently, the Company pays Plains Air, Inc.
$13,050 per month plus a fee of approximately $488 per hour for use of the
airplane. During the nine months ended September 30, 1996 and 1995 the
Company paid Plains Air, Inc. an aggregate of $112,000 and $86,000,
respectively, for the use of the airplane.
In addition to the above corporate allocations, the Company previously
paid a management fee for executive management services. This fee was
generally based upon the profits earned and the level of executive management
services rendered. These fees are shown separately on the face of the
accompanying statement of operations. Commencing in 1996, the Company ceased
to pay management fees. Effective July 1, 1996, the senior management group
consisting of the Chairman, Senior Vice Chairman, Vice Chairman, and Senior
Vice President and Chief Operating Officer, will receive annual base salaries
approximating $1,020,000 in the aggregate, may receive restricted stock if
certain performance objectives are met and may also receive grants of stock
options. In conjunction with the reorganization, the Company agreed to pay
one of its executive officers a bonus of $600,000. This bonus has been
expensed in the first nine months of 1996.
In general, the Company is required to pay for all vehicles purchased
from the automakers upon delivery of the vehicles to the Company. General
Motors Acceptance Corporation ("GMAC") provides financing for all new
vehicles and used vehicles that are less than five years old and have been
driven less than 70,000 miles. This type of financing is known as "floor
plan financing" or "flooring." Under this arrangement with GMAC, the Company
may deposit funds with GMAC in an amount up to 75% of the amount of the
floor plan financing. Such funds earn interest at the same rate charged by
GMAC to the Company for its flooring. From time to time, the control group
and other affiliates will advance funds to the Company primarily for the
purpose of investing their excess cash with GMAC. The Company acts only as
an intermediary in this process. At
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September 30, 1996, funds advanced and outstanding from affiliates
approximated $4,384,000. Such amounts outstanding pursuant to these
arrangements are included in Due to Affiliates in the accompanying balance
sheet. The amount of interest accrued pursuant to these arrangements during
the nine months ended September 30, 1996 and 1995 approximated $276,000 and
$160,000, respectively.
During 1994, GGFP advanced the Company $1.05 million to fund the relocation
of one of its dealerships. During 1995, GGFP advanced funds aggregating $2.6
million to the Company for working capital purposes at the dealerships acquired
in 1995. At September 30, 1996, the amount outstanding pursuant to these
advances approximated $362,000.
GGFP was the contracting agent for the construction of certain facilities
for the Company during 1995. The total cost of the facilities approximated
$570,000 which included approximately $52,000 as payment to GGFP for
architectural and construction management fees. During 1996, GGFP will act
as the contracting agent for the construction and renovation of certain
facilities. The total cost of the facilities will approximate $800,000.
The Company leases its corporate offices from GGFP under a five-year
lease extending through June 2001, for an annual rent of approximately
$64,800.
GGFP also subleases to the Company the real estate on which the Company's
Performance Nissan dealership is located. Annual rent under the sublease if
$228,000, which is the same amount payable to GGFP under the principal lease
for the property.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Cross-Continent Auto Retailers, Inc. owns and operates a group of seven
franchised automobile dealerships (including Hickey Dodge) in the Amarillo,
Texas and Oklahoma City, Oklahoma markets. The financial condition and
results of operations reported herein are based solely upon the results of
the six dealerships owned by C-CAR at September 30, 1996. The Company
generates its revenues from sales of new and used vehicles, fees for repair
and maintenance services, sales of replacement parts, sales of extended
warranties on vehicles, and fees and commissions from arranging financing and
credit insurance in connection with vehicle sales.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Certain matters discussed herein are forward-looking statements about the
business, financial condition and prospects of the Company. The actual
results could differ materially from those indicated by such forward-looking
statements because of various risks and uncertainties. Such risks and
uncertainties may include, but are not limited to, regional and national
economic conditions, changes in consumer demand for products offered by the
Company, employee strikes and other matters that may adversely affect the
availability of products and pricing, state and federal regulatory
environment, and other risks indicated in the Company's previous filings with
the Commission. The Company cannot control these risks and uncertainties
and, in many cases, cannot predict the risks and uncertainties that could
cause its actual results to differ materially from those indicated by the
forward-looking statements.
RESULTS OF OPERATIONS
REVENUES
Revenues grew in each of the Company's primary revenue areas for the
third quarter period ended September 30, 1996 compared to the third quarter
period ended September 30, 1995, causing total revenue to increase
approximately 20% to $76.6 million. The Company's total revenue increased
approximately 24% to $217.8 million for the nine month period ended September
30, 1996 as compared with total revenue of $175.8 million in the nine month
period ended September 30, 1995.
New vehicle sales revenue increased approximately 3% for the quarter to
$32.6 million, compared with $31.5 million in the third quarter of 1995. New
vehicle sales revenue increased approximately 16% to $98.8 million in the
first nine months of 1996, compared with $85.2 million for the same period of
1995. Substantially all of this increase was attributable to the Company's
acquisition of its Performance Dodge dealership in Oklahoma City, Oklahoma,
which it acquired on December 4, 1995, which was partially offset by lower
demand for new vehicles in Amarillo.
Used vehicle sales revenue increased approximately 32% in the third
quarter of 1996 to $34.4 million, compared with $26.0 million in the third
quarter of 1995. Used vehicle sales revenue increased approximately 28% to
$94.1 million in the first nine months of 1996, compared to $73.9 million in
the first nine months of 1995. The Company has a policy of maintaining a
39-day supply of used vehicles. If a used vehicle remains in inventory for
60 days, the Company disposes of the vehicle by selling it to another dealer
or wholesaler. An increase in sales of used vehicles to wholesalers and
other dealers in accordance with the Company's inventory management
guidelines
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accounted for approximately one-half of the increase for the three month and
nine month periods. The remainder of the increase was attributable to the
Company's acquisition of its Performance Dodge dealership in Oklahoma City,
Oklahoma which it acquired on December 4, 1995, and an overall increase in
the average selling price per retail unit.
The Company's other operating revenue, the components of which include
fees for repair and maintenance services, sales of replacement parts, sales
of extended warranties on vehicles, and fees and commissions from arranging
financing and credit insurance in connection with vehicle sales, increased
approximately 53% to $9.6 million in the third quarter of 1996, compared to
$6.3 million in the third quarter of 1995. Other operating revenue increased
approximately 48% to $24.9 million in first nine months of 1996 compared to
$16.8 million in same period of 1995. The increase is primarily attributable
to the inclusion of the Company's Performance Dodge dealership, which it
acquired on December 4, 1995. The remaining increase in other operating
revenue can be attributed to the Company exclusively selling warranties of
third party vendors at its dealerships. Historically, the Company sold its
own in-house extended warranty at its dealerships and thus recognized the
resulting revenue attributable to sale of its in-house warranties over the
term of the warranties, although it received payment in full at the time of
the sale. In contrast, when the Company sells warranties of third party
vendors the Company receives and immediately recognizes commission income at
the time of sale since the Company has no further obligation pursuant to the
extended warranty contracts. Net commissions received by the Company from
the sale of warranties of third party vendors for the third quarter of 1996
approximated $1.2 million.
GROSS PROFIT
Gross profit increased approximately 16% in the third quarter of 1996 to
$12.1 million, compared with $10.4 million in the third quarter of 1995.
Gross profit increased approximately 19% in the first nine months of 1996 to
$33.4 million, compared with $28.0 million for the first nine months of 1995
primarily because of the acquisition of the Company's Performance Dodge
dealership. Gross profit as a percentage of sales decreased to 15.7% in the
third quarter of 1996 from 16.4% in third quarter of 1995. Gross profit as a
percentage of sales decreased to 15.3% in the first nine months of 1996 from
15.9% for the same period in 1995. The decrease in gross profit as a
percentage of sales was caused by reduced margins on new and used vehicles,
which was partially offset by higher margins on other operating revenue.
The reduction in gross margin on new vehicles was primarily attributable
to increased vehicle costs resulting from the Company's efforts to minimize
the effect of inventory shortfalls caused by GM's parts plant strike in March
1996 by purchasing supplemental inventory from other dealers.
The reduction in gross margin on used vehicles was primarily attributable
to increased vehicle purchase and reconditioning costs as well as greater
volume of sales of used vehicles to other dealers and wholesalers (which
sales are frequently at or slightly below cost) to avoid carrying charges
associated with used vehicle inventory. In the third quarter of 1996,
approximately 29% of the Company's used vehicle sales were to other dealers
and wholesalers as compared to approximately 22% in the third quarter of
1995. In the nine month period of 1996 approximately 29% of the Company's
used vehicle sales were to other dealers and wholesalers, compared to
approximately 23% for the same period of 1995.
The increase in gross margin from other operating revenue was primarily
attributable to an increase in gross profit from finance, insurance and extended
warranty sales. Beginning in the third quarter of 1996 the Company began selling
warranties of third party vendors at all of its
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dealerships. Net commissions received by the Company from the sale of
warranties of third party vendors for the third quarter of 1996 approximated
$1.2 million.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES; MANAGEMENT FEES; EMPLOYEE STOCK
COMPENSATION
The Company's selling, general and administrative expenses increased to
$8.3 million in the third quarter of 1996 compared to $6.7 million in the
third quarter of 1995, and increased as a percentage of revenue to 10.9% from
10.5%. The Company's selling, general and administrative expenses increased
to $24.0 million in the nine month period of 1996, compared to $18.3 million
in the nine month period of 1995, and increased as a percentage of revenue to
11.0% from 10.4%.
Substantially all of the increase is attributable to the acquisition of
the Company's Performance Dodge dealership. The remaining portion of the
increase is attributable to an increase in the Company's corporate expense
resulting from the conversion from a private company to a public company. As
of January 1, 1996, the Company ceased paying management fees to GGFP, and
the Company began providing corporate oversight previously provided by GGFP.
Such oversight costs were previously reflected in the management fee.
In the first nine months of 1996, the Oklahoma City dealerships' selling,
general and administrative expenses were higher as a percentage of their
total revenues compared with the Company's Amarillo dealerships. This was
due to certain expenses incurred by the Oklahoma City dealerships in
integrating the Company's systems into their operations and implementing the
Company's strategies.
In conjunction with the Company's reorganization, the Company recorded a
non-continuing executive bonus of $600,000, which was expensed in its
entirety in the first nine months of 1996.
Prior to the Company's Offering the Company recorded a non-cash charge
relating to employee stock compensation of approximately $1.1 million, which
was expensed in its entirety in the first nine months of 1996.
INTEREST EXPENSE
The Company's interest expense increased approximately 12% to $1.1
million for the third quarter of 1996 compared to $1.0 million for the third
quarter of 1995, and increased approximately 14% to $3.3 million from $2.9
million in the nine month period. The increase is primarily attributable to
the inclusion of the Company's Performance Dodge dealership, which was
partially offset by a reduction in interest expense at the Company's Amarillo
dealerships. Additionally, the Company recorded interest income approximating
$40,000 from the investment of Offering proceeds for the 4 day period of
September 27, 1996 through September 30, 1996.
NET INCOME
The Company's net income increased approximately 89% to $1.635 million in
the third quarter of 1996 compared to $ .862 million in the third quarter of
1995. The Company's net income increased approximately 36% to $2.665 million
in the first nine months of 1996, compared to $1.966 million in the first
nine months of 1995. The increase was primarily attributable to the
elimination of the management fees paid to GGFP, and the commencement of
selling third party extended warranty contracts on an exclusive basis, which
was partially offset by an increase in selling, general and administrative
expenses. Excluding the non-continuing portion of the management fees, net
income increased approximately 3% to $1.635 million in the third quarter
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of 1996 compared to $1.579 million in the third quarter of 1995. Excluding
the non-continuing portion of the management fees, executive bonus and
employee stock compensation expense, net income would have increased
approximately 11% to $4.126 million in the first nine months of 1996,
compared to $3.719 million in the first nine months of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires cash primarily for financing its inventory of new
and used vehicles and replacement parts, acquisitions of additional
dealerships, capital expenditures and transition expenses in connection with
its acquisitions. Historically, the Company has met these liquidity
requirements primarily through cash flow generated from operating activities,
floor plan financing and borrowings under credit agreements with GMAC and
commercial banks. Floor plan financing from GMAC represents the primary
source of financing for vehicle inventories.
The Company finances its purchases of new vehicle inventory (including
its Dodge and Nissan vehicles) with GMAC. The Company also maintains a line
of credit with GMAC for the financing of used vehicles, pursuant to which
GMAC provides financing for up to 80% of the cost of used vehicles that are
less than five years old and that have been driven fewer than 70,000 miles.
GMAC receives a security interest in all inventory it finances. The Company
makes monthly interest payments on the amount financed by GMAC. The Company
must repay the principal amount of indebtedness with respect to any vehicle
within two days of the sale of such vehicle by the Company. The Company
periodically renegotiates the terms of its financing with GMAC, including the
interest rate. As of September 30, 1996, the Company had outstanding floor
plan debt of $35.5 million and paid an average annual interest rate of 8.0%.
From time to time the Company also finances its purchases of new and used
vehicles, replacement parts and short-term receivables through borrowings
from commercial banks at various rates. As a result of the Hickey Dodge
acquisition, the Company has arranged a floor plan line for new and used
vehicles with Chrysler Financial Corporation. At September 30, 1996, there
was no such indebtedness outstanding.
During the first nine months of 1996, the Company generated net cash of
$6.2 million from operating activities, compared to $2.1 million for the
nine months ended September 30, 1995. The increase is primarily attributable
to decreased inventory levels, partially offset by increased sales of
Company warranties and increased accounts payable.
Cash used in investing activities of $824,000 during the first nine
months of 1996 were primarily capital expenditures. In October 1996, the
Company acquired Hickey Dodge for approximately $14 million in cash. Capital
expenditures for the fourth quarter are expected to approximate $500,000
relating primarily to capital improvements to the service department at one
of the Company's dealerships, which will be funded with cash from operations.
The Company currently anticipates that any future acquisitions will be
financed with proceeds from the Offering, issuance of stock or debt or a
combination of cash, stock and debt.
Cash provided by financing activities amounted to $39.7 million for the
nine months ended September 30, 1996 and was primarily attributable to
proceeds of the Offering in the amount of $45.8 million. The cash provided
by the Offering proceeds was partially offset by a reduction in floor plan
debt and amounts due to affiliates. In 1995 cash provided by financing
activities reflected an increase in inventory financing and loans from
affiliates.
The Company believes that its existing capital resources, including the
remaining proceeds of the Offering after considering the acquisition of
Hickey Dodge, will be sufficient to run the
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Company's operations in the ordinary course and fund its debt service
requirements. The Company estimates that it will incur a tax liability of
approximately $4 million in connection with the change in its tax basis of
accounting for inventory from LIFO to FIFO. The Company believes that it
will be required to pay this liability in three to six equal annual
installments, beginning in March 1997, and believes that it will be able to
pay such obligation with cash provided by operations.
SEASONALITY
The Company generally experiences a higher volume of new and used vehicle
sales in the second and third quarters of each year. If the Company acquires
dealerships in other markets, it may be affected by other seasonal or
consumer buying trends.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is named in claims involving the
manufacture of automobiles, contractual disputes and other matters arising in
the ordinary course of the Company's business. Currently, no legal
proceedings are pending against or involve the Company that, in the opinion
of management, could be expected to have a material adverse effect on the
business, financial condition or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 22, 1996 and September 4, 1996 the Company's stockholders, acting
by unanimous written consent, approved the Company's Amended and Restated
Certificate of Incorporation and Bylaws, the Company's 1996 Stock Option Plan
and the Rights Agreement between the Company and The Bank of New York.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------
2.1 Asset Purchase Agreement, dated as of June 17, 1996,
among Lynn Hickey Dodge, Inc., Lynn Hickey and
Cross-Country Dodge, Inc. incorporated by reference
to Exhibit 2.1 of the Company's Registration Statement
on Form S-1 (Registration No. 333-06585),
as amended (the "Registration Statement")
3.1 Amended and Restated Certificate of Incorporation
of Cross-Continent Auto Retailers, Inc.
3.2 Amended and Restated Bylaws of Cross-Continent Auto
Retailers, Inc.
4.1 Specimen Common Stock Certificate (incorporated by
reference to Exhibit 4.1 of the Registration Statement)
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4.2 Rights Agreement, dated as of September 20, 1996,
between Cross-Continent Auto Retailers, Inc. and
The Bank of New York, as rights agent
4.3 Amended and Restated 1996 Stock Option Plan of
Cross-Continent Auto Retailers, Inc.
10.1 Dealers Sales and Service Agreement, dated November 1,
1995, between the Chevrolet Division of General Motors
Corporation and Plains Chevrolet, Inc., as amended by
Supplemental Agreement, dated as of July 29, 1996
(incorporated by reference to Exhibit 10.1 of the
Registration Statement)
10.2 Dealer Sales and Service Agreement, dated September 23,
1996, between the Nissan Division of Nissan Motor Corporation
in U.S.A., Performance Nissan, Inc. and Cross-Continent Auto
Retailers, Inc.
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CROSS-CONTINENT AUTO RETAILERS, INC.
Date: November 14, 1996 By: /s/ CHARLES D. WINTON
-------------------------------------------------
Charles D. Winton, Vice President, Secretary
and Chief Accounting Officer
Date: November 14, 1996 By: /s/ JOHN W. GAINES
-------------------------------------------------
John W. Gaines, Vice President of Finance
14
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- -------------------------------------------------------------------------------
2.1 Asset Purchase Agreement, dated as of June 17, 1996,
among Lynn Hickey Dodge, Inc., Lynn Hickey and
Cross-Country Dodge, Inc. incorporated by reference
to Exhibit 2.1 of the Company's Registration Statement
on Form S-1 (Registration No. 333-06585),
as amended (the "Registration Statement")
3.1 Amended and Restated Certificate of Incorporation
of Cross-Continent Auto Retailers, Inc.
3.2 Amended and Restated Bylaws of Cross-Continent Auto
Retailers, Inc.
4.1 Specimen Common Stock Certificate (incorporated by
reference to Exhibit 4.1 of the Registration Statement)
4.2 Rights Agreement, dated as of September 20, 1996,
between Cross-Continent Auto Retailers, Inc. and
The Bank of New York, as rights agent
4.3 Amended and Restated 1996 Stock Option Plan of
Cross-Continent Auto Retailers, Inc.
10.1 Dealers Sales and Service Agreement, dated November 1,
1995, between the Chevrolet Division of General Motors
Corporation and Plains Chevrolet, Inc., as amended by
Supplemental Agreement, dated as of July 29, 1996
(incorporated by reference to Exhibit 10.1 of the
Registration Statement)
10.2 Dealer Sales and Service Agreement, dated September 23,
1996, between the Nissan Division of Nissan Motor Corporation
in U.S.A., Performance Nissan, Inc. and Cross-Continent Auto
Retailers, Inc.
27.1 Financial Data Schedule
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CROSS-CONTINENT AUTO RETAILERS, INC.
1. The name of the Corporation is Cross-Continent Auto Retailers, Inc.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. (a) The total number of shares of stock which the Corporation shall
have the authority to issue is 110,000,000 shares of capital stock, classified
as 100,000,000 shares of common stock, par value $.01 per share, and 10,000,000
shares of preferred stock, par value $.01 per share.
(b) PREFERRED STOCK.
(i) The Preferred Stock may be issued from time to time in one
or more classes or series, the shares of each class or series to have
such designations and powers, preferences and rights, and qualifications,
limitations and restrictions thereof, as are stated and expressed
herein and in the resolution or resolutions providing for the issue of
such class or series adopted by the board of directors of the
Corporation as hereafter prescribed.
(ii) Authority is hereby expressly granted to and vested in
the board of directors of the Corporation to authorize the issuance of
the Preferred Stock from time to time in one or more classes or series
and, with respect to each class or series of the Preferred Stock, to
fix and state, by the resolution or resolutions from time to time
adopted providing for the issuance thereof, the following:
(A) whether or not the class or series is to have voting
rights, full, special, or limited, or is to be without voting rights,
and whether or not such class or series is to be entitled to vote as a
separate class either alone or together with the holders of one or more
other classes or series of stock;
(B) the number of shares to constitute the class or series
and the designations thereof;
<PAGE>
(C) the preferences, and relative participating, optional,
or other special rights, if any, and the qualifications, limitations, or
restrictions thereof, if any, with respect to any class or series;
(D) whether or not the shares of any class or series shall
be redeemable at the option of the Corporation or the holders thereof or
upon the happening of any specified event, and, if redeemable, the
redemption price or prices (which may be payable in the form of cash,
notes, securities, or other property), and the time or times at which, and
the terms and conditions upon which, such shares shall be redeemable and
the manner of redemption;
(E) whether or not the shares of a class or series shall be
subject to the operation of retirement or sinking funds to be applied to
the purchase or redemption of such shares for retirement, and, if such
retirement or sinking fund or funds are to be established, the annual
amount thereof, and the terms and provisions relative to the operation
thereof;
(F) the dividend rate, whether dividends are payable in
cash, stock of the Corporation, or other property, the conditions upon
which and the times when such dividends are payable, the preference to or
the relation to the payment of dividends payable on any other class or
classes or series of stock, whether or not such dividends shall be
cumulative or noncumulative, and if cumulative, the date or dates from
which such dividends shall accumulate;
(G) the preferences, if any, and the amounts thereof which
the holders of any class or series thereof shall be entitled to receive
upon the voluntary or involuntary liquidation, dissolution, or winding-up
of, or upon any distribution of the assets of, the Corporation;
(H) whether or not the shares of any class or series, at
the option of the Corporation or the holder thereof or upon the happening
of any specified event, shall be convertible into or exchangeable for, the
shares of any other class or classes or of any other series of the same or
any other class or classes of stock, securities, or other property of the
Corporation and the conversion price or prices or ratio or ratios or the
rate or rates at which such exchange may be made, with such adjustments, if
any, as shall be stated and expressed or provided for in such resolution or
resolutions; and
(I) such other special rights and protective provisions
with respect to any class or series as may to the board of directors of the
Corporation seem advisable.
(iii) The shares of each class or series of the Preferred Stock
may vary from the shares of any other class or series thereof in any or
all of the foregoing
-2-
<PAGE>
respects. The board of directors of the Corporation may increase the
number of shares of the Preferred Stock designated for any existing
class or series by a resolution adding to such class or series
authorized and unissued shares of the Preferred Stock not designated
for any other class or series. The board of directors of the
Corporation may decrease the number of shares of the Preferred Stock
designated for any existing class or series by a resolution subtracting
from such class or series authorized and unissued shares of the
Preferred Stock designated for such existing class or series, and the
shares so subtracted shall become authorized, unissued, and
undesignated shares of the Preferred Stock.
5. (a) The directors, other than those who may be elected by the
holders of any class or series of Preferred Stock, shall be divided into
three classes, as nearly equal in number as possible. One class of directors
shall be initially elected for a term expiring at the annual meeting of
stockholders to be held in 1997, another class shall be initially elected for
a term expiring at the annual meeting of stockholders to be held in 1998, and
another class shall be initially elected for a term expiring at the annual
meeting of stockholders to be held in 1999. Members of each class shall hold
office until the earliest of (i) their successors being elected and
qualified, (ii) their resignation or removal or (iii) if such directors are,
or simultaneously become, employees of the Corporation or any subsidiary
thereof at the time they are elected and qualified as directors of the
Corporation, then until the termination (for any reason) of such employment.
At each succeeding annual meeting of the stockholders of the Corporation, the
successors of the class of directors whose term expires at that meeting shall
be elected by a majority of all votes cast at such meeting to hold office for
a term expiring at the annual meeting of stockholders held in the third year
following the year of their election. Election of directors need not be by
written ballot.
(b) Any director or the entire Board of Directors may be removed,
but only for cause, and only by the affirmative vote of the holders of at
least a majority of the shares then entitled to vote at an election of
directors (the "Voting Shares"), voting together as a single class.
(c) The affirmative vote of the holders of at least two-thirds of
the Voting Shares, voting together as a single class, shall be required to
amend or repeal this Section 5 or adopt any provision inconsistent herewith.
6. The Board of Directors is authorized to make, alter or repeal the
by-laws of the Corporation.
7. Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a
summary way of the Corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for the Corporation
under the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in
-3-
<PAGE>
dissolution or of any receiver or receivers appointed for the Corporation
under the provisions of Section 279 of Title 8 of the Delaware Code order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, to be summoned
in such manner as the said court directs. If a majority in number
representing three fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as
the case may be, agree to any compromise or arrangement and to any
reorganization of the Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been
made, be binding on all the creditors or class of creditors, and/or on all
the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
8. No director shall have any personal liability to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director. However, this provision does not eliminate or limit the liability
of a director (a) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (c)
under Section 174 of the General Corporation Law of Delaware or (d) for any
transaction from which the director derived an improper personal benefit. If
the General Corporation Law of Delaware is amended after the effective date
of this Certificate of Incorporation to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director of this Corporation shall be eliminated or limited to
the fullest extent permitted by the General Corporation Law of Delaware, as
so amended. Any repeal or modification of this Section either (i) by the
stockholders of this Corporation or (ii) by an amendment to the General
Corporation Law of Delaware (unless such statutory amendment specifically
provides to the contrary) shall not adversely affect any right or protection,
existing at the time of such repeal or modification with respect to any acts
or omissions occurring either before or after such repeal or modification, of
a person serving as a director at the time of such repeal or modification.
9. No action required or permitted to be taken at any meeting of the
holders of the common stock of the Corporation may be taken without such
meeting, the giving of prior notice or the taking of a vote. The power of
the holders of the common stock of the Corporation to consent, in writing or
otherwise, to the taking of any action without such meeting, notice and vote
is specifically denied.
-4-
<PAGE>
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
CROSS-CONTINENT AUTO RETAILERS, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
_______________________________________
Cross-Continent Auto Retailers, Inc., Inc., a corporation organized
and existing under the General Corporation Law of the State of Delaware
(hereinafter called the "Corporation"), hereby certifies that the following
resolution was adopted by the Board of Directors of the Corporation as
required by Section 151 of the General Corporation Law by unanimous written
consent on September 3, 1996:
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the
Certificate of Incorporation, the Board of Directors hereby creates a series
of Preferred Stock, par value $.01 per share (the "Preferred Stock"), of the
Corporation and hereby states the designation and number of shares, and fixes
the relative rights, preferences, and limitations thereof as follows:
Series A Junior Participating Preferred Stock:
Section 1. DESIGNATION AND AMOUNT. The shares of such series
shall be designated as "Series A Junior Participating Preferred Stock" (the
"Series A Preferred Stock") and the number of shares constituting the Series
A Preferred Stock shall be 250,000. Such number of shares may be increased
or decreased by resolution of the Board of Directors; provided, that no
decrease shall reduce the number of shares of Series A Preferred Stock to a
number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights
or warrants or upon the conversion of any outstanding securities issued by
the Corporation convertible into Series A Preferred Stock.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior to
the Series A Preferred Stock with respect to dividends, the holders of
shares of Series A Preferred Stock, in preference to the holders of
Common Stock, par value $ .01 per share (the "Common Stock"), of the
Corporation, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of
funds legally
<PAGE>
available for the purpose, quarterly dividends payable in cash on the
first day of March, June, September and December in each year (each
such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A
Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Preferred Stock. In
the event the Corporation shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on
the Series A Preferred Stock as provided in paragraph (A) of this
Section immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock);
provided that, if no dividend or distribution shall have been declared
on the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $1 per share on the Series A Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares, unless the date
of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events
such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred
Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on
a share-by-share basis among all such shares at the
2
<PAGE>
time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series A Preferred Stock entitled
to receive payment of a dividend or distribution declared thereon,
which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the stockholders of
the Corporation. If the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the
number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other Certificate
of Designations creating a series of Preferred Stock or any similar
stock, or by law, the holders of shares of Series A Preferred Stock and
the holders of shares of Common Stock and any other capital stock of
the Corporation having general voting rights shall vote together as one
class on all matters submitted to a vote of stockholders of the
Corporation.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A
Preferred Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on parity (either as to dividends or
upon
3
<PAGE>
liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such junior stock in
exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock
ranking on a parity with the Series A Preferred Stock, except in
accordance with a purchase offer made in writing or by publication
(as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new
series of Preferred Stock subject to the conditions and restrictions on
issuance set forth herein, in the Certificate of Incorporation, or in any
other Certificate of Designations creating a series of Preferred Stock or any
similar stock or as otherwise required by law.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (A) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal
to 100 times the aggregate amount to be distributed per share to holders of
shares of Common Stock, or (B) to the holders of shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding
up) with the Series A Preferred Stock,
4
<PAGE>
except distributions made ratably on the Series A Preferred Stock and all
such parity stock in proportion to the total amounts to which the holders of
all such shares are entitled upon such liquidation, dissolution or winding
up. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the aggregate amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such
event under the proviso in clause (A) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction
in which the shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case
each share of Series A Preferred Stock shall at the same time be similarly
exchanged or changed into an amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. If the Corporation shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 8. NO REDEMPTION. The shares of Series A Preferred Stock
shall not be redeemable.
Section 9. RANK. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior to
all series of any other class of the Corporation's Preferred Stock.
Section 10. AMENDMENT. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter
or change the powers, preferences or special rights of the Series A Preferred
Stock so as to affect them adversely without the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Series A
Preferred Stock, voting together as a single class.
5
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its Chairman of the Board and attested by its
Secretary this 24th day of September, 1996.
/S/ Bill A. Gilliland
----------------------------
Chairman of the Board
Attest:
/s/ Charles D. Wintion
- ---------------------------
Secretary
6
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
CROSS-CONTINENT AUTO RETAILERS, INC.
ARTICLE I
STOCKHOLDERS
Section 1.1. ANNUAL MEETINGS. An annual meeting of stockholders
shall be held for the election of directors at such date, time and place
either within or without the State of Delaware as may be designated by the
Board of Directors from time to time. Any other proper business may be
transacted at the annual meeting.
Section 1.2. SPECIAL MEETINGS. Special meetings of stockholders
may be called at any time by the Chairman of the Board, if any, a Vice
Chairman of the Board, if any, the President or the Board of Directors, to be
held at such date, time and place either within or without the State of
Delaware as may be stated in the notice of the meeting.
Section 1.3. NOTICE OF MEETINGS. Whenever stockholders are
required or permitted to take any action at a meeting, a written notice of
the meeting shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, the written
notice of any meeting shall be given not less than ten nor more than sixty
days before the date of the meeting to each stockholder entitled to vote at
such meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
Corporation.
Section 1.4. ADJOURNMENTS. Any meeting of stockholders, annual or
special, may be adjourned from time to time, to reconvene at the same or some
other place, and notice need not be given of any such adjourned meeting if
the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Corporation may transact
any business which might have been transacted at the original meeting. If
the adjournment is for more than thirty days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 1.5. QUORUM. At each meeting of stockholders, except where
otherwise provided by law or the certificate of incorporation or these
by-laws, the holders of a majority of the outstanding shares of stock
entitled to vote on a matter at the meeting, present in person or represented
by proxy, shall constitute a quorum. For purposes of the foregoing, where a
separate vote by class or classes is required for any matter, the holders of
<PAGE>
a majority of the outstanding shares of such class or classes, present in
person or represented by proxy, shall constitute a quorum to take action with
respect to that vote on that matter. Two or more classes or series of stock
shall be considered a single class if the holders thereof are entitled to
vote together as a single class at the meeting. In the absence of a quorum
of the holders of any class of stock entitled to vote on a matter, the
holders of such class so present or represented may, by majority vote,
adjourn the meeting of such class from time to time in the manner provided by
Section 1.4 of these by-laws until a quorum of such class shall be so present
or represented. Shares of its own capital stock belonging on the record date
for the meeting to the Corporation or to another corporation, if a majority
of the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the Corporation, shall
neither be entitled to vote nor be counted for quorum purposes; PROVIDED,
that the foregoing shall not limit the right of the Corporation to vote
stock, including but not limited to its own stock, held by it in a fiduciary
capacity.
Section 1.6. ORGANIZATION. Meetings of stockholders shall be
presided over by the Chairman of the Board if any, or in the absence of the
Chairman of the Board by a Vice Chairman of the Board, if any, or in the
absence of a Vice Chairman of the Board by the President, or in the absence
of the President by a Vice President, or in the absence of the foregoing
persons by a chairman designated by the Board of Directors, or in the absence
of such designation by a chairman chosen at the meeting. The Secretary, or
in the absence of the Secretary an Assistant Secretary, shall act as
secretary of the meeting, but in the absence of the Secretary and any
Assistant Secretary the chairman of the meeting may appoint any person to act
as secretary of the meeting.
Section 1.7. VOTING; PROXIES. Unless otherwise provided in the
certificate of incorporation, each stockholder entitled to vote at any
meeting of stockholders shall be entitled to one vote for each share of stock
held by such stockholder which has voting power upon the matter in question.
If the certificate of incorporation provides for more or less than one vote
for any share on any matter, every reference in these by-laws to a majority
or other proportion of stock shall refer to such majority or other proportion
of the votes of such stock.
Each stockholder entitled to vote at a meeting of stockholders or
to express consent or dissent to corporate action in writing without a
meeting may authorize another person or persons to act for such stockholder
by proxy, but no such proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and
if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power, regardless of whether the interest with which
it is coupled is an interest in the stock itself or an interest in the
Corporation generally. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing with
the Secretary of the Corporation an instrument in writing revoking the proxy
or another duly executed proxy bearing a later date.
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Voting at meetings of stockholders need not be by written ballot
and need not be conducted by inspectors unless the holders of a majority of
the outstanding shares of all classes of stock entitled to vote thereon
present in person or represented by proxy at such meeting shall so determine.
Except as provided in Section 2.2 of these by-laws, directors shall be
elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors. In all other matters, unless otherwise provided by law or by the
certificate of incorporation or these by-laws, the affirmative vote of the
holders of a majority of the shares present in person or represented by proxy
at the meeting and entitled to vote on the subject matter shall be the act of
the stockholders. Where a separate vote by class or classes is required, the
affirmative vote of the holders of a majority of the shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class, except as otherwise provided by law or by the certificate
of incorporation or these by-laws.
Section 1.8. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF
RECORD. In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more
than sixty nor less than ten days before the date of such meeting. If no
record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
PROVIDED, that the Board of Directors may fix a new record date for the
adjourned meeting.
In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or
allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted, and which record date shall be not more than
sixty days prior to such action. If no record date is fixed, the record date
for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
Section 1.9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary
shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days
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prior to the meeting, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during
the whole time thereof and may be inspected by any stockholder who is present.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. POWERS; NUMBER; QUALIFICATIONS. The business and
affairs of the Corporation shall be managed by or under the direction of the
Board of Directors, except as may be otherwise provided by law or in the
certificate of incorporation. The Board of Directors shall consist of three
or more members, the number thereof to be determined from time to time by the
Board. Directors need not be stockholders.
Section 2.2. ELECTION; TERM OF OFFICE; VACANCIES. Each director
shall hold office until the earliest of (i) his or her successor being
elected and qualified, (ii) his or her resignation or removal or (iii) if
such director is, or simultaneously becomes, an employee of the Corporation
or any subsidiary thereof at the time he or she is elected and qualified as a
director of the Corporation, then until the termination (for any reason) of
such employment. Unless otherwise provided in the certificate of
incorporation or these by-laws, vacancies and newly created directorships
resulting from any increase in the authorized number of directors or from any
other cause may be filled by a majority of the directors then in office,
although less than a quorum, or by the sole remaining director. Whenever the
holders of any class or classes of stock or series thereof are entitled to
elect one or more directors by the certificate of incorporation, vacancies
and newly created directorships of such class or classes or series may be
filled by a majority of the directors elected by such class or classes or
series thereof then in office, or by the sole remaining director so elected.
Section 2.3. RESIGNATION; REMOVAL. Any director may resign at any
time upon written notice to the Board of Directors or to the President or the
Secretary of the Corporation. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein no acceptance of
such resignation shall be necessary to make it effective. Any director or
the entire Board of Directors may be removed from office at any time, but
only for cause, by the holders of a majority of the shares then entitled to
vote at an election of directors. Whenever the holders of any class or
series of stock are entitled to elect one or more directors by the
certificate of incorporation, such director or directors may be removed with
or without cause by the holders of a majority of the outstanding shares of
that class or series, without respect to any vote of the outstanding shares
as a whole.
Section 2.4. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware
and at such times as the
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Board may from time to time determine, and if so determined notice thereof
need not be given.
Section 2.5. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, if any, by a Vice
Chairman of the Board, if any, by the President or by any two directors.
Reasonable notice thereof shall be given by the person or persons calling the
meeting.
Section 2.6. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE
PERMITTED. Unless otherwise restricted by the certificate of incorporation
or these by-laws, members of the Board of Directors, or any committee
designated by the Board, may participate in a meeting of the Board or of such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
by-law shall constitute presence in person at such meeting.
Section 2.7. QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of
the Board of Directors a majority of the entire Board shall constitute a
quorum for the transaction of business. The vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act
of the Board unless the certificate of incorporation or these by-laws shall
require a vote of a greater number. In case at any meeting of the Board a
quorum shall not be present, the members of the Board present may adjourn the
meeting until a quorum shall be present.
Section 2.8. ORGANIZATION. Meetings of the Board of Directors
shall be presided over by the Chairman of the Board, if any, or in the
absence of the Chairman of the Board by a Vice Chairman of the Board, if any,
or in the absence of a Vice Chairman of the Board by the President, or in
their absence by a chairman chosen at the meeting. The Secretary, or in the
absence of the Secretary an Assistant Secretary, shall act as secretary of
the meeting, but in the absence of the Secretary and any Assistant Secretary
the chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 2.9. ACTION BY DIRECTORS WITHOUT A MEETING. Unless
otherwise restricted by the certificate of incorporation or these by-laws,
any action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board or of such committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
Section 2.10. COMPENSATION OF DIRECTORS. Unless otherwise
restricted by the certificate of incorporation or these by-laws, the Board of
Directors shall have the authority to fix the compensation of directors.
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ARTICLE III
COMMITTEES
Section 3.1. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation,
except that the Board of Directors may not form an executive committee
without the unanimous consent of the Board of Directors, which consent shall
specify the members of the proposed executive committee and limitations, if
any, over the authority of the executive committee. The Board may designate
one or more directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the committee. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or
not such member or members constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided in
the resolution of the Board of Directors or in these by-laws, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority to (1) amend the
certificate of incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of
shares of stock adopted by the Board of Directors, fix the designations and
any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the Corporation or the
conversion into, or the exchange of such shares for, shares of any other
class or classes or any other series of the same or any other class or
classes of stock of the Corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series),
(2) adopt an agreement of merger or consolidation, (3) recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, (4) recommend to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, removing or
indemnifying directors or amending these by-laws or (5) unless the
resolution, these by-laws or the certificate of incorporation expressly so
provides, declare a dividend, to authorize the issuance of stock or to adopt
a certificate of ownership and merger.
Section 3.2. COMMITTEE RULES. Unless the Board of Directors
otherwise provides, each committee designated by the Board may adopt, amend
and repeal rules for the conduct of its business. In the absence of a
provision by the Board or a provision in the rules of such committee to the
contrary, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, the vote
of a majority of the members present at a meeting at the time of such vote if
a quorum is then present shall be the act of such committee, and in other
respects each committee shall conduct its business in the same manner as the
Board conducts its business pursuant to Article II of these bylaws.
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ARTICLE IV
OFFICERS
Section 4.1. OFFICERS; ELECTION. As soon as practicable after the
annual meeting of stockholders in each year, the Board of Directors shall
elect a President and a Secretary, and it may, if it so determines, elect
from among its members a Chairman of the Board and one or more Vice Chairmen
of the Board. The Board may also elect one or more Vice Presidents, one or
more Assistant Vice Presidents, one or more Assistant Secretaries, a
Treasurer and one or more Assistant Treasurers and such other officers as the
Board may deem desirable or appropriate and may give any of them such further
designations or alternate titles as it considers desirable. Any number of
offices may be held by the same person unless the certificate of
incorporation or these bylaws otherwise provide.
Section 4.2. TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES.
Unless otherwise provided in the resolution of the Board of Directors
electing any officer, each officer shall hold office until his or her
successor is elected and qualified or until his or her earlier resignation or
removal. Any officer may resign at any time upon written notice to the Board
or to the President or the Secretary of the Corporation. Such resignation
shall take effect at the time specified therein, and unless otherwise
specified therein no acceptance of such resignation shall be necessary to
make it effective. The Board may remove any officer with or without cause at
any time. Any such removal shall be without prejudice to the contractual
rights of such officer, if any, with the Corporation, but the election of an
officer shall not of itself create contractual rights. Any vacancy occurring
in any office of the Corporation by death, resignation, removal or otherwise
may be filled by the Board at any regular or special meeting.
Section 4.3. POWERS AND DUTIES. The officers of the Corporation
shall have such powers and duties in the management of the Corporation as
shall be stated in these by-laws or in a resolution of the Board of Directors
which is not inconsistent with these by-laws and, to the extent not so
stated, as generally pertain to their respective offices, subject to the
control of the Board.
Section 4.4. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
any, shall preside at all meetings of the Board of Directors and of the
stockholders at which he or she shall be present and shall have and may
exercise such powers as may, from time to time, be assigned to him or her by
the Board or as may be provided by law.
Section 4.5. VICE CHAIRMEN OF THE BOARD. In the absence of the
Chairman of the Board, a Vice Chairman of the Board shall preside at all
meetings of the Board of Directors and of the stockholders at which he or she
shall be present. If there be more than one Vice Chairman, the Board of
Directors may determine which one of the Vice Chairmen
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shall so preside, or, if such determination is not made by the Board, any of
the Vice Chairmen may preside. The Vice Chairman or Vice Chairmen shall
exercise such powers as may, from time to time, be assigned to him or her by
the Board or as may be provided by law.
Section 4.6. PRESIDENT. In the absence of the Chairman of the
Board and a Vice Chairman of the Board, the President shall preside at all
meetings of the Board of Directors and of the stockholders at which he or she
shall be present. The President shall be the chief executive officer and
shall have general charge and supervision of the business of the Corporation
and, in general, shall perform all duties incident to the office of president
of a corporation and such other duties as may, from time to time, be assigned
to him or her by the Board or as may be provided by law.
Section 4.7. VICE PRESIDENTS. The Vice President or Vice
Presidents, at the request or in the absence of the President or during the
President's inability to act, shall perform the duties of the President, and
when so acting shall have the powers of the President. If there be more than
one Vice President, the Board of Directors may determine which one or more of
the Vice Presidents shall perform any of such duties; or if such
determination is not made by the Board, the President may make such
determination; otherwise any of the Vice Presidents may perform any of such
duties. The Vice President or Vice Presidents shall have such other powers
and shall perform such other duties as may, from time to time, be assigned to
him or her or them by the Board or the President or as may be provided by law.
Section 4.8. SECRETARY. The Secretary shall have the duty to
record the proceedings of the meetings of the stockholders, the Board of
Directors and any committees in a book to be kept for that purpose, shall see
that all notices are duly given in accordance with the provisions of these
by-laws or as required by law, shall be custodian of the records of the
Corporation, may affix the corporate seal to any document the execution of
which, on behalf of the Corporation, is duly authorized, and when so affixed
may attest the same, and, in general, shall perform all duties incident to
the office of secretary of a corporation and such other duties as may, from
time to time, be assigned to him or her by the Board or the President or as
may be provided by law.
Section 4.9. TREASURER. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust
companies or other depositories as shall, from time to time, be selected by
or under authority of the Board of Directors. If required by the Board, the
Treasurer shall give a bond for the faithful discharge of his or her duties,
with such surety or sureties as the Board may determine. The Treasurer shall
keep or cause to be kept full and accurate records of all receipts and
disbursements in books of the Corporation, shall render to the President and
to the Board, whenever requested, an account of the financial condition of
the Corporation, and, in general, shall perform all the duties incident to
the office of treasurer of
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a corporation and such other duties as may, from time to time, be assigned to
him or her by the Board or the President or as may be provided by law.
Section 4.10. OTHER OFFICERS. The other officers, if any, of the
Corporation shall have such powers and duties in the management of the
Corporation as shall be stated in a resolution of the Board of Directors
which is not inconsistent with these by-laws and, to the extent not so
stated, as generally pertain to their respective offices, subject to the
control of the Board. The Board may require any officer, agent or employee
to give security for the faithful performance of his or her duties.
Section 4.11. FIDELITY BONDS. If required by the Board of
Directors, any officer shall give the Corporation a bond in a sum and with
one or more sureties satisfactory to the Board, for the faithful performance
of the duties of his or her office, and for the restoration to the
Corporation, in case of his or her death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his or her possession or under his or her control belonging
to the Corporation.
ARTICLE V
STOCK
Section 5.1. CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in the name
of the Corporation by the Chairman or a Vice Chairman of the Board of
Directors, if any, or the President or a Vice President, and by the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the
Corporation, representing the number of shares of stock in the Corporation
owned by such holder. If such certificate is manually signed by one officer
or manually countersigned by a transfer agent or by a registrar, any other
signature on the certificate may be facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if such person were such officer,
transfer agent or registrar at the date of issue.
Each certificate representing shares shall state upon the face
thereof that the Corporation is formed under the laws of the State of
Delaware, the name of the person or persons to whom such shares have been
issued and the number and class of such shares, and the designation of the
class or series, if any, which such certificate represents.
If the Corporation is authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications or restrictions
of such preferences and/or rights shall be set forth in full or summarized on
the face or back of the certificate which the Corporation shall issue to
represent such class or
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series of stock; PROVIDED, that, except as otherwise provided by law, in lieu
of the foregoing requirements, there may be set forth on the face or back of
the certificate which the Corporation shall issue to represent such class or
series of stock a statement that the Corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions
of such preferences and/or rights.
Section 5.2. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE
OF NEW CERTIFICATES. The Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it, alleged to have been
lost, stolen or destroyed, and the Corporation may require the owner of the
lost, stolen or destroyed certificate, or such owner's legal representative,
to give the Corporation a bond sufficient to indemnify it against any claim
that may be made against it on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
Section 5.3. TRANSFERS OF STOCK. Transfers of stock shall be made
on the books of the Corporation only by the person named in the certificate
or by his attorney, lawfully constituted in writing, and upon surrender of
the certificate therefor, together with such evidence of the payment of
transfer taxes and compliance with other provisions of law as the Corporation
or its transfer agent may require.
Section 5.4. REGISTERED STOCKHOLDERS. The Corporation may treat
the holder of record of any share or shares of stock as the holder thereof,
and shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it
shall have express or other notice thereof, save as expressly provided by the
laws of Delaware.
ARTICLE VI
MISCELLANEOUS
Section 6.1. FISCAL YEAR. The fiscal year of the Corporation shall
be determined by the Board of Directors.
Section 6.2. SEAL. The Corporation may have a corporate seal which
shall have the name of the Corporation inscribed thereon and shall be in such
form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
Section 6.3. WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS,
DIRECTORS AND COMMITTEES. Whenever notice is required to be given by law or
under any provision of the certificate of incorporation or these by-laws, a
written waiver thereof, signed by the person
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entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the stockholders, directors
or members of a committee of directors need be specified in any written
waiver of notice unless so required by the certificate of incorporation or
these by-laws.
Section 6.4. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES.
The Corporation shall indemnify to the full extent permitted by law any
person made or threatened to be made a party to any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person or such person's testator or intestate is
or was a director, officer or employee of the Corporation or serves or served
at the request of the Corporation any other enterprise as a director, officer
or employee. Expenses incurred by any such person in defending any such
action, suit or proceeding shall be paid or reimbursed by the Corporation
promptly upon receipt by it of an undertaking of such person to repay such
expenses if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation. The rights provided to any
person by this by-law shall be enforceable against the Corporation by such
person who shall be presumed to have relied upon it in serving or continuing
to serve as a director, officer or employee as provided above. No amendment
of this by-law shall impair the rights of any person arising at any time with
respect to events occurring prior to such amendment. For purposes of this
by-law, the term "Corporation" shall include any predecessor of the
Corporation and any constituent corporation (including any constituent of a
constituent) absorbed by the Corporation in a consolidation or merger; the
term "other enterprise" shall include any corporation, partnership, joint
venture, trust or employee benefit plan; service "at the request of the
Corporation" shall include service as a director, officer or employee of the
Corporation which imposes duties on, or involves services by, such director,
officer or employee with respect to an employee benefit plan, its
participants or beneficiaries; any excise taxes assessed on a person with
respect to an employee benefit plan shall be deemed to be indemnifiable
expenses; and action by a person with respect to an employee benefit plan
which such person reasonably believes to be in the interest of the
participants and beneficiaries of such plan shall be deemed to be action not
opposed to the best interests of the Corporation.
Section 6.5. INTERESTED DIRECTORS; QUORUM. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be
void or voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the Board of
Directors or committee thereof which authorizes the contract or transaction,
or solely because his or her or their votes are counted for such purpose, if:
(1) the material facts as to his or her relationship or interest and as to
the
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contract or transaction are disclosed or are known to the Board or the
committee, and the Board or committee in good faith authorizes the contract
or transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(2) the material facts as to his or her relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (3) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified by the Board, a committee thereof or the stockholders.
Common or interested directors may be counted in determining the presence of
a quorum at a meeting of the Board of Directors or of a committee that
authorizes the contract or transaction.
Section 6.6. FORM OF RECORDS. Any records maintained by the
Corporation in the regular course of its business, including its stock
ledger, books of account and minute books, may be kept on, or be in the form
of, punch cards, magnetic tape, photographs, microphotographs or any other
information storage device, provided that the records so kept can be
converted into clearly legible form within a reasonable time. The
Corporation shall so convert any records so kept upon the request of any
person entitled to inspect the same.
Section 6.7. AMENDMENT OF BY-LAWS. These by-laws may be amended or
repealed, and new by-laws adopted, by the Board of Directors, but the
stockholders entitled to vote may adopt additional by-laws and may amend or
repeal any by-law whether or not adopted by them.
ARTICLE VII
OFFICES
Section 7.1. REGISTERED OFFICE. The registered office of the
Corporation in the State of Delaware shall be at 1209 Orange Street, City of
Wilmington, County of New Castle, and the registered agent in charge thereof
shall be The Corporation Trust Company.
Section 7.2. OTHER OFFICES. The Corporation may also have an
office or offices at other places within or without the State of Delaware.
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RIGHTS AGREEMENT
between
CROSS-CONTINENT AUTO RETAILERS, INC.
and
THE BANK OF NEW YORK, as Rights Agent
Dated as of September 20, 1996
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<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. Certain Definitions and Rules of Interpretation.......... 1
Section 2. Appointment of Rights Agent.............................. 4
Section 3. Issue of Right Certificates.............................. 4
Section 4. Form of Right Certificates............................... 5
Section 5. Countersignature and Registration........................ 6
Section 6. Transfer, Split Up, Combination and Exchange of
Right Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates.............................. 6
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights.............................................. 6
Section 8. Cancellation of Right Certificates....................... 7
Section 9. Availability of Preferred Shares......................... 7
Section 10. Preferred Shares Record Date............................. 8
Section 11. Adjustment of Purchase Price, Number of Shares or Number
of Rights.............................................. 8
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares................................................. 12
Section 13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power....................................... 13
Section 14. Fractional Rights and Fractional Shares.................. 13
Section 15. Rights of Action......................................... 13
Section 16. Agreement of Right Holders............................... 14
Section 17. Right Certificate Holder Not Deemed a Stockholder........ 15
Section 18. Concerning the Rights Agent.............................. 15
Section 19. Merger or Consolidation or Change of Name of
Rights Agent........................................... 15
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Section 20. Duties of Rights Agent................................... 15
Section 21. Change of Rights Agent................................... 17
Section 22. Issuance of New Right Certificates....................... 18
Section 23. Redemption............................................... 18
Section 24. Exchange................................................. 19
Section 25. Notice of Certain Events................................. 20
Section 26. Notices.................................................. 20
Section 27. Supplements and Amendments............................... 21
Section 28. Successors............................................... 21
Section 29. Benefits of this Agreement............................... 21
Section 30. Severability............................................. 21
Section 31. Governing Law............................................ 21
Section 32. Counterparts............................................. 22
Section 33. Descriptive Heading...................................... 22
Signatures............................................................ 23
Exhibit A - Form of Certificate of Designations
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred Shares
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Rights Agreement, dated as of September 20, 1996, between
Cross-Continent Auto Retailers, Inc., a Delaware corporation (the "Company"),
and The Bank of New York, a New York banking corporation, as rights agent
(the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one Right (as hereinafter defined) for each Common Share (as
hereinafter defined) of the Company outstanding on September 20, 1996, and
has further authorized and directed the issuance of one Right with respect to
each Common Share that shall become outstanding between the Record Date and
the earliest of the Distribution Date, the Redemption Date and the Final
Expiration Date (as such terms are hereinafter defined).
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. DEFINITIONS AND RULES OF INTERPRETATION. (a) For purposes
of this Agreement, the following terms have the meanings indicated:
"Acquiring Person" means any Person who or which, together with all
Affiliates and Associates of such Person, shall be the Beneficial Owner of
19.9% or more of the Common Shares of the Company then outstanding, but shall
not include the Company or any Company Entity. Notwithstanding the foregoing,
no Person shall become an "Acquiring Person" as the result of an acquisition
of Common Shares by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially owned
by such Person to 19.9% or more of the Common Shares of the Company then
outstanding; PROVIDED, that if a Person shall become the Beneficial Owner of
19.9% or more of the Common Shares of the Company then outstanding by reason
of share purchases by the Company and shall, after such share purchases by
the Company, become the Beneficial Owner of any additional Common Shares of
the Company, then such Person shall be deemed to be an "Acquiring Person."
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this paragraph,
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person would no
longer be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph, then such Person shall not be deemed to be an
"Acquiring Person" for any purposes of this Agreement.
"Affiliate" has the meaning ascribed thereto in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the
date of this Agreement.
"Associate" has the meaning ascribed thereto in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the
date of this Agreement.
A Person shall be deemed the "Beneficial Owner" of, to have
"Beneficial Ownership" of and to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and
between underwriters and selling group members with respect to a bona fide
public offering of securities), or upon the exercise of conversion rights,
exchange rights, rights (other than these Rights), warrants or options, or
otherwise; PROVIDED, that a Person shall not be deemed the Beneficial Owner
of, or to beneficially own, securities tendered pursuant to a tender or
exchange offer made by or on behalf
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of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange; or (B) the right
to vote pursuant to any agreement, arrangement or understanding; PROVIDED,
that a Person shall not be deemed the Beneficial Owner of, or to beneficially
own, any security if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given to such
Person in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations promulgated
under the Exchange Act and (2) is not also then reportable on Schedule 13D
under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities) for the purpose of
acquiring, holding, voting (except to the extent contemplated by the
immediately preceding proviso) or disposing of any securities of the Company.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, a Sunday, or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"close of business" on any given date means 5:00 p.m., New York City
time, on such date; PROVIDED, that if such date is not a Business Day it
shall mean 5:00 p.m., New York City time, on the next succeeding Business Day.
"Closing Price" for any day for any security means the last sale
price, regular way, for such security on such day or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if such security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
security is listed or admitted to trading or, if such security is not listed
or admitted to trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by Nasdaq or such other system
then in use, or, if on any such date such security is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by
a professional market maker making a market in such security selected by the
Board of Directors. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as determined
in good faith by the Board of Directors shall be used.
"Common Shares," when used with reference to the Company, means the
shares of common stock, par value $.01 per share, of the Company. "Common
Shares," when used with reference to any Person other than the Company, means
the capital stock (or equity interest) with the greatest voting power of such
other Person or, if such other Person is a Subsidiary of another Person, the
Person or Persons which ultimately control such first-mentioned Person.
"Company Entity" means (i) any Subsidiary of the Company, (ii) any
employee benefit plan of the Company or any Subsidiary of the Company, (iii)
any entity holding Common Shares for or pursuant to the terms of any such
plan or (iv) any person or group of persons who, immediately prior to the
Record Date, beneficially owned 19.9% or more of the Common Shares then
outstanding.
"Current Per Share Market Price" of any security on any date means the
average of the daily Closing Prices per share of such security for the 30
consecutive Trading Days immediately prior
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to such date; PROVIDED, that (i) in the case of the Preferred Shares, if the
Preferred Shares are not publicly traded, the "Current Per Share Market
Price" of the Preferred Shares shall be conclusively deemed to be the Current
Per Share Market Price of the Common Shares (appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring
after the date of this Agreement), multiplied by 100, (ii) in the case of the
Common Shares, if the Common Shares are not publicly held or so listed or
traded, the "Current Per Share Market Price" of the Common Shares means the
fair value per share as determined in good faith by the Board of Directors,
whose determination shall be described in a statement filed with the Rights
Agent, and (iii) if the Current Per Share Market Price of the security is
determined during a period following the announcement by the issuer of such
security of (A) a dividend or distribution on such security payable in shares
of such security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such security and prior to
the expiration of 30 Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Current Per
Share Market Price of such security shall be appropriately adjusted to
reflect the current market price per share equivalent of such security.
"Distribution Date" means the earlier of (i) the tenth day after the
Shares Acquisition Date or (ii) the tenth Business Day (or such later date as
may be determined by action of the Board of Directors prior to such time as
any Person becomes an Acquiring Person) after the date of the commencement by
any Person (other than the Company or any Subsidiary of the Company, any
employee benefit plan of the Company or any Subsidiary of the Company or any
entity holding Common Shares for or pursuant to the terms of any such plan)
of, or of the first public announcement of the intention of any Person (other
than the Company or any Subsidiary of the Company, any employee benefit plan
of the Company or any Subsidiary of the Company or any entity holding Common
Shares for or pursuant to the terms of any such plan) to commence, a tender
or exchange offer, the consummation of which would result in any Person
becoming the Beneficial Owner of Common Shares aggregating 19.9% or more of
the then outstanding Common Shares.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Final Expiration Date" has the meaning set forth in Section 7.
"Nasdaq" means the National Association of Securities Dealers, Inc.
Automated Quotations System.
"Person" means any individual, firm, corporation or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"Preferred Shares" means shares of Series A Junior Participating
Preferred Stock, par value $.01 per share, of the Company having the rights
and preferences set forth in the Form of Certificate of Designations attached
to this Agreement as Exhibit A.
"Purchase Price" has the meaning set forth in Section 7(b).
"Record Date" means September 20, 1996.
"Redemption Date" has the meaning set forth in Section 7(a).
""Right" means a preferred share purchase right representing the right
to purchase (subject to adjustment pursuant to Section 11) one one-hundredth
of a Preferred Share upon the terms and subject to the conditions set forth
in this Agreement.
"Right Certificate" means a certificate substantially in the form of
Exhibit B.
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"Shares Acquisition Date" means the first date of public announcement
by the Company or an Acquiring Person that an Acquiring Person has become
such.
"Subsidiary" of any Person means any corporation or other entity of
which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
"then outstanding," when used with reference to a Person's Beneficial
Ownership of securities of the Company, means the number of such securities
then issued and outstanding together with the number of such securities not
then actually issued and outstanding which such Person would be deemed to own
beneficially hereunder.
"Trading Day" means, with respect to any security, a day on which the
principal national securities exchange on which such security is listed or
admitted to trading is open for the transaction of business or, if such
security is not listed or admitted to trading on any national securities
exchange, a Business Day.
(b) Except as otherwise expressly provided in this Agreement, the
following rules of interpretation apply to this Agreement: (i) the singular
includes the plural and the plural includes the singular; (ii) "or" and "any"
are not exclusive and "include" and "including" are not limiting; (iii) a
reference to any agreement or other contract includes permitted supplements
and amendments; (iv) a reference to a law includes any amendment or
modification to such law and any rules or regulations issued thereunder; (v)
a reference to a person includes its permitted successors and assigns; and
(vi) a reference in this Agreement to a Section, Exhibit or paragraph is to
the Section, Exhibit of paragraph of this Agreement.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the
Rights in accordance with the terms and conditions hereof, and the Rights
Agent hereby accepts such appointment. The Company may from time to time
appoint such co-Rights Agents as it may deem necessary or desirable upon 10
days' prior written notice to the Rights Agent. The Rights Agent shall have
no duty to supervise, and shall in no event be liable for, the acts or
omissions of any such co-Rights Agent.
Section 3. ISSUE OF RIGHT CERTIFICATES. (a) Until the Distribution
Date, (i) the Rights will be evidenced by the certificates for Common Shares
registered in the names of the holders thereof (which certificates shall also
be deemed to be Right Certificates) and not by separate Right Certificates,
and (ii) the right to receive Right Certificates will be transferable only in
connection with the transfer of Common Shares. The Company shall give the
Rights Agent prompt written notice of the Distribution Date. Subject to
Section 11(a)(iii), as soon as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will countersign, and the
Company will send or cause to be sent (and the Rights Agent will, if
requested, send, at the Company's expense) by first-class, postage-prepaid
mail, to each record holder of Common Shares as of the close of business on
the Distribution Date, at the address of such holder shown on the records of
the Company, a Right Certificate evidencing one Right for each Common Share
so held. As of the Distribution Date, the Rights will be evidenced solely by
such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights, in substantially the form of
Exhibit C ( the "Summary of Rights"), by first-class, postage-prepaid mail,
to each record holder of Common Shares as of the close of business on the
Record Date, at the address of such holder shown on the records of the
Company. With respect to certificates of Common Shares outstanding as of the
Record Date, until the Distribution Date, the Rights will be evidenced by
such certificates registered in the names of the holders thereof together
with a copy of the Summary of Rights attached thereto. Until the earliest of
the Distribution Date, Redemption Date or Final Expiration Date, the
surrender for transfer of any certificate for Common
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Shares outstanding on the Record Date, with or without a copy of the Summary
of Rights attached thereto, shall also constitute the transfer of the Rights
associated with the Common Shares represented thereby.
(c) Certificates for Common Shares outstanding that become
outstanding (including, without limitation, reacquired Common Shares referred
to in the last sentence of this paragraph (b)) after the Record Date but
prior to the earliest of the Distribution Date, the Redemption Date or the
Final Expiration Date shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder
hereof to certain rights as set forth in a Rights
Agreement between Cross-Continent Auto Retailers, Inc.
and The Bank of New York, dated as of September 20,
1996 (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of
Cross-Continent Auto Retailers, Inc. Under certain
circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates
and will no longer be evidenced by this certificate.
Cross-Continent Auto Retailers, Inc. will mail to the
holder of this certificate a copy of the Rights
Agreement without charge after receipt of a written
request therefor. Under certain circumstances, as set
forth in the Rights Agreement, Rights issued to any
Person who becomes an Acquiring Person (as defined in
the Rights Agreement) may become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented
by such certificates shall be evidenced only by such certificates, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
In the event that the Company purchases or acquires any Common Shares after
the Record Date but prior to the Distribution Date, any Rights associated
with such Common Shares shall be deemed cancelled and retired so that the
Company shall not be entitled to exercise any Rights associated with the
Common Shares which are no longer outstanding.
Section 4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and
the forms of election to purchase Preferred Shares and of assignment to be
printed on the reverse thereof) shall be substantially the same as Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law or with
any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Rights may from time to time be listed, or
to conform to usage. The Rights Certificates shall be in a machine printable
format and, if not substantially in the form of Exhibit B hereto, in such
other form reasonably satisfactory to the Rights Agent. Subject to the
provisions of Section 22, the Right Certificates shall entitle the holders
thereof to purchase such number of one one-hundredths of a Preferred Share as
shall be set forth therein at the price per one one-hundredth of a Preferred
Share set forth therein (the "Purchase Price"), but the number of such one
one-hundredths of a Preferred Share and the Purchase Price shall be subject
to adjustment as provided herein.
Section 5. COUNTERSIGNATURE AND REGISTRATION. (a) The Right
Certificates shall be executed on behalf of the Company by its Chairman of
the Board, any Vice Chairman, its Chief Executive Officer, its President, any
of its Vice Presidents, or its Treasurer, either manually or by facsimile
signature, shall have affixed thereto the Company's seal or a facsimile
thereof, and shall be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature. The Right
Certificates shall be manually countersigned by the Rights Agent and shall
not be
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valid for any purpose unless countersigned. In case any officer of the
Company who shall have signed any of the Right Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates, nevertheless,
may be countersigned by the Rights Agent and issued and delivered by the
Company with the same force and effect as though the person who signed such
Right Certificates had not ceased to be such officer of the Company; and any
Right Certificate may be signed on behalf of the Company by any person who,
at the actual date of the execution of such Right Certificate, shall be a
proper officer of the Company to sign such Right Certificate, although at the
date of the execution of this Agreement such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its designated office, books for registration and
transfer of the Right Certificates issued hereunder. Such books shall show
the names and addresses of the respective holders of the Right Certificates,
the number of Rights evidenced on the face of each Right Certificate and the
date of each Right Certificate.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. (a)
Subject to the provisions of Section 14, at any time after the close of
business on the Distribution Date, and at or prior to the close of business
on the earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) or that have been
exchanged pursuant to Section 24) may be transferred, split up, combined or
exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of one one-hundredths of a
Preferred Share as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the designated office of the
Rights Agent. Thereupon the Rights Agent shall countersign and deliver to
the person entitled thereto a Right Certificate or Right Certificates, as the
case may be, as so requested. The Company may require payment by the holder
of a Rights Certificate of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Right Certificates.
(b) Upon (i) receipt by the Company and the Rights Agent of (A)
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Right Certificate, (b) in case of loss, theft or destruction
of a Right Certificate, of indemnity or security reasonably satisfactory to
them, and (C) at the Company's request, reimbursement to the Company and the
Rights Agent of all reasonable expenses incidental thereto, and (ii) upon
surrender to the Rights Agent and cancellation of the Right Certificate, if
mutilated, the Company will make and deliver a new Right Certificate of like
tenor to the Rights Agent for delivery to the registered holder in lieu of
the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS. (a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date and before the earliest of (i)
the close of business on the tenth annual anniversary of the Record Date (the
"Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 (the "Redemption Date") or (iii) the time at which
such Rights are exchanged as provided in Section 24. The Rights shall be
exercised by and upon surrender of the Right Certificate evidencing such
Rights, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the designated office of the Rights
Agent, together with payment of the Purchase Price for each one one-hundredth
of a Preferred Share as to which the Rights are exercised.
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(b) The purchase price for each one one-hundredth of a Preferred
Share purchasable pursuant to the exercise of a Right shall initially be
$100.00, and shall be subject to adjustment from time to time as provided in
Section 11 or 13 hereof (such initial price, as the same may be adjusted,
being referred to as the "Purchase Price"). The Purchase Price shall be
payable in lawful money of the United States of America by certified check,
cashier's check or money order payable to the order of the Company.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased in accordance
with Section 7(b) and an amount equal to any applicable transfer tax required
to be paid by the holder of such Right Certificate in accordance with Section
9 hereof, the Rights Agent shall thereupon promptly (i) (A) requisition from
any transfer agent of the Preferred Shares certificates for the number of
Preferred Shares to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests or (B)
requisition from the depositary agent depositary receipts representing such
number of one one-hundredths of a Preferred Share as are to be purchased (in
which case certificates for the Preferred Shares represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company hereby directs the depositary agent to comply with such request, (ii)
when appropriate, requisition from the Company the amount of cash to be paid
in lieu of issuance of fractional shares in accordance with Section 14 and,
after receipt, deliver such cash to or upon the order of the registered
holder of such Right Certificate and (iii) after receipt of such certificates
or depositary receipts referred to in clauses (i) and (ii) above, cause the
same to be delivered to or upon the order of the registered holder of such
Right Certificate, registered in such name or names as may be designated by
such holder.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent to the registered holder of such Right Certificate
or to his duly authorized assigns, subject to the provisions of Section 14.
Section 8. CANCELLATION OF RIGHT CERTIFICATES. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and
no Right Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Right Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Right Certificates to the Company.
Section 9. AVAILABILITY OF PREFERRED SHARES. (a) The Company
covenants and agrees that it will cause to be reserved and kept available out
of its authorized and unissued Preferred Shares or any Preferred Shares held
in its treasury, the number of Preferred Shares that will be sufficient to
permit the exercise in full of all outstanding Rights in accordance with
Section 7. The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares delivered upon
exercise of Rights shall, at the time of delivery of the certificates for
such Preferred Shares (subject to payment of the Purchase Price), be duly and
validly authorized and issued and fully paid and nonassessable shares.
(b) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Right
Certificates or of any Preferred Shares upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Right Certificates to a
person other than, or the issuance or delivery of certificates or depositary
receipts for the Preferred Shares in a name other than that of, the
registered holder of the Right Certificate evidencing Rights surrendered for
exercise or to issue or to deliver any
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certificates or depositary receipts for Preferred Shares upon the exercise of
any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to the Company's reasonable satisfaction that
no such tax is due.
Section 10. PREFERRED SHARES RECORD DATE. Each person in whose name
any certificate for Preferred Shares is issued upon the exercise of Rights
shall, for all purposes, be deemed to have become the holder of record of the
Preferred Shares represented thereby on, and such certificate shall be dated,
the date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; PROVIDED, that if the date of such surrender and payment is
a date upon which the Preferred Shares transfer books of the Company are
closed, such person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding Business
Day on which the Preferred Shares transfer books of the Company are open.
Prior to the exercise of the Rights evidenced thereby, the holder of a Right
Certificate shall not be entitled to any rights of a holder of Preferred
Shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or
to exercise any preemptive rights, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER
OF RIGHTS. The Purchase Price, the number of Preferred Shares covered by each
Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) If the Company shall at any time after the Record Date (A)
declare a dividend on the Preferred Shares payable in Preferred Shares, (B)
subdivide the outstanding Preferred Shares, (C) combine the outstanding
Preferred Shares into a smaller number of Preferred Shares or (D) issue any
shares of its capital stock in a reclassification of the Preferred Shares
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a), the Purchase Price in
effect at the time of the record date for such dividend or of the effective
date of such subdivision, combination or reclassification, and the number and
kind of shares of capital stock issuable upon exercise of the Rights after
such date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the aggregate number
and kind of shares of capital stock which, if such Right had been exercised
immediately prior to such date and at a time when the Preferred Shares
transfer books of the Company were open, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification; PROVIDED, that in no event
shall the consideration to be paid upon the exercise of any Right be less
than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of such Right.
(ii) Subject to Section 24 of this Agreement, if any Person becomes an
Acquiring Person, each holder of a Right shall thereafter have a right to
receive, upon exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of Common Shares of
the Company as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable and dividing that product by (y)
50% of the then Current Per Share Market Price of the Common Shares on the
date of the occurrence of such event.
(iii) If any Person shall become an Acquiring Person and the Rights
shall then be outstanding, the Company shall not take any action which would
eliminate or diminish the benefits intended to be afforded by the Rights.
Notwithstanding anything to the contrary set forth in this Agreement, from
and after the occurrence of such event, any Rights that are or were acquired
or beneficially owned by any Acquiring Person (or any Associate or Affiliate
of such Acquiring Person) shall be void and any holder of such Rights shall
thereafter have no right to exercise such Rights under
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any provision of this Agreement. No Right Certificate shall be issued
pursuant to Section 3 that represents Rights beneficially owned by an
Acquiring Person whose Rights would be void pursuant to the preceding
sentence or any Associate or Affiliate thereof. No Right Certificate shall
be issued at any time upon the transfer of any Rights to an Acquiring Person
whose Rights would be void pursuant to the preceding sentence or any
Associate or Affiliate thereof or to any nominee of such Acquiring Person,
Associate or Affiliate. Any Right Certificate delivered to the Rights Agent
for transfer to an Acquiring Person whose Rights would be void pursuant to
the preceding sentence or any Associate or Affiliate thereof or to any
nominee of such Acquiring Person, Associate or Affiliate shall be cancelled.
(iv) If there shall not be sufficient Common Shares issued but not
outstanding or authorized but unissued to permit the exercise in full of the
Rights in accordance with subparagraph (ii) of this Section 11(a), the
Company shall take all such action as may be necessary to authorize
additional Common Shares for issuance upon exercise of the Rights. In the
event the Company shall, after good faith effort, be unable to authorize such
additional Common Shares, the Company shall substitute, for each Common Share
that would otherwise be issuable upon exercise of a Right, a number of
Preferred Shares or fraction thereof such that the Current Per Share Market
Price of one Preferred Share multiplied by such number or fraction is equal
to the Current Per Share Market Price of one Common Share as of the date of
issuance of such Preferred Shares or fraction thereof.
(b) If the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("equivalent preferred
shares")) or securities convertible into Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then Current
Per Share Market Price of the Preferred Shares on such record date, the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the number of Preferred
Shares outstanding on such record date plus the number of Preferred Shares
that the aggregate offering price of the total number of Preferred Shares
and/or equivalent preferred shares so to be offered (and or the aggregate
initial conversion price of the convertible securities so to be offered)
would purchase at such current market price and the denominator of which
shall be the number of Preferred Shares outstanding on such record date plus
the number of additional Preferred Shares and/or equivalent preferred shares
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); PROVIDED, that in no
event shall the consideration to be paid upon the exercise of any Right be
less than the aggregate par value of the shares of capital stock of the
Company issuable upon exercise of such Right. In case such subscription
price may be paid in a consideration part or all of which shall be in a form
other than cash, the value of such consideration shall be as determined in
good faith by the Board of Directors, whose determination shall be described
in a statement filed with the Rights Agent. Preferred Shares owned by or
held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that such rights,
options or warrants are not so issued, the Purchase Price shall be adjusted
to be the Purchase Price which would then be in effect if such record date
had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Preferred Shares) or subscription rights or warrants
(excluding those referred to in Section 11(b)), the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the then Current Per Share Market Price of the
Preferred Shares on such record date, less the fair market
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value (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one
Preferred Share and the denominator of which shall be such Current Per Share
Market Price of the Preferred Shares; PROVIDED, that in no event shall the
consideration to be paid upon the exercise of any Right be less than the
aggregate par value of the shares of capital stock of the Company to be
issued upon exercise of such Right. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
(d) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1.0% in the
Purchase Price; PROVIDED, that any adjustments which by reason of this
Section 11(d) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest one
one-millionth of a Preferred Share or one ten-thousandth of any other share
or security as the case may be. Notwithstanding the first sentence of this
Section 11(d), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three years from the date of the transaction
which requires such adjustment or (ii) the date of the expiration of the
right to exercise any Rights.
(e) If, as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred
Shares, thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Preferred Shares contained in paragraphs (a) through (c),
inclusive, of Section 11, and the provisions of Sections 7, 9, 10 and 13 with
respect to the Preferred Shares shall apply on like terms to any such other
shares.
(f) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of
a Preferred Share purchasable from time to time hereunder upon exercise of
the Rights, all subject to further adjustment as provided herein.
(g) Unless the Company shall have exercised its election as provided
in Section 11(h), upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and 11(c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence
the right to purchase, at the adjusted Purchase Price, that number of one
one-hundredths of a Preferred Share (calculated to the nearest one
one-millionth of a Preferred Share) obtained by (i) multiplying (x) the
number of one one-hundredths of a Preferred Share covered by a Right
immediately prior to such adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after
such adjustment of the Purchase Price.
(h) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share
purchasable upon the exercise of a Right. Each of the Rights outstanding
after such adjustment of the number of Rights shall be exercisable for the
number of one one-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one ten-thousandth) obtained by dividing
the Purchase Price in effect immediately prior to adjustment of the Purchase
Price by the Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall make a public announcement, with
substantially contemporaneous written notice to the Rights Agent, of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount
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of the adjustment to be made. This record date may be the date on which the
Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date
of the public announcement. If Right Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(h), the
Company shall, as promptly as practicable, cause to be distributed to holders
of record of Right Certificates on such record date Right Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option
of the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by
the Company, new Right Certificates evidencing all the Rights to which such
holders shall be entitled after such adjustment. Right Certificates so to be
distributed shall be issued, executed and countersigned in the manner
provided for herein and shall be registered in the names of the holders of
record of Right Certificates on the record date specified in the public
announcement.
(i) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Purchase Price and the number of one
one-hundredths of a Preferred Share which were expressed in the initial Right
Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment reducing
the Purchase Price below one one-hundredth of the then par value, if any, of
the Preferred Shares issuable upon exercise of the Rights, the Company shall
take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid
and nonassessable Preferred Shares at such adjusted Purchase Price.
(k) If an adjustment in the Purchase Price would be required to be
made effective as of a record date for a specified event in accordance with
this Section 11, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
of the Preferred Shares and other capital stock or securities of the Company,
if any, issuable upon such exercise over and above the Preferred Shares and
other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such
adjustment; PROVIDED, that the Company shall deliver to such holder a due
bill or other appropriate instrument evidencing such holder's right to
receive such additional shares upon the occurrence of the event requiring
such adjustment,
(l) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and
to the extent that it in its sole discretion shall determine to be advisable
in order that any consolidation or subdivision of the Preferred Shares,
issuance wholly for cash of any Preferred Shares at less than the Current Per
Share Market Price thereof, issuance wholly for cash of Preferred Shares or
securities which by their terms are convertible into or exchangeable for
Preferred Shares, dividends on Preferred Shares payable in Preferred Shares
or issuance of rights, options or warrants referred to in Section 11(b)
hereafter made by the Company to holders of its Preferred Shares shall not be
taxable to such stockholders.
(m) If at any time after the date of this Agreement and prior to the
Distribution Date, the Company shall (i) declare or pay any dividend on the
Common Shares payable in Common Shares or (ii) effect a subdivision,
combination or consolidation of the Common Shares (by reclassification or
otherwise than by payment of dividends in Common Shares) into a greater or
lesser number of Common Shares, then in any such case (A) the number of one
one-hundredths of a Preferred Share purchasable after such event upon proper
exercise of each Right shall be determined by multiplying the number of one
one-hundredths of a Preferred Share so purchasable immediately prior to such
event by a fraction, the numerator of which is the number of Common Shares
outstanding
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immediately before such event and the denominator of which is the number of
Common Shares outstanding immediately after such event, and (B) each Common
Share outstanding immediately after such event shall have issued with respect
to it that number of Rights which each Common Share outstanding immediately
prior to such event had issued with respect to it. The adjustments provided
for in this Section 11(m) shall be made successively whenever such a dividend
is declared or paid or such a subdivision, combination or consolidation is
effected.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Section 11 or 13
hereof, the Company shall promptly (a) prepare a certificate setting forth
such adjustment, and a brief statement of the facts accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for
the Common Shares or the Preferred Shares a copy of such certificate and (c)
mail a brief summary thereof to each holder of a Right Certificate in
accordance with Section 25 hereof. The Rights Agent shall be fully protected
in relying on any such certificate and on any adjustment therein contained
and shall not be deemed to have knowledge of such adjustment unless and until
it shall have received such certificate.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER. In the event, directly or indirectly, at any time after a
Person has become an Acquiring Person, (a) the Company shall consolidate
with, or merge with and into, any other Person, (b) any Person shall
consolidate with the Company, or merge with and into the Company and the
Company shall be the continuing or surviving corporation of such merger and,
in connection with such merger, all or part of the Common Shares shall be
changed into or exchanged for stock or other securities of any other Person
(or the Company) or cash or any other property, or (c) the Company shall sell
or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one or more transactions, assets or earning power
aggregating 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person other than the Company or
one or more of its wholly owned Subsidiaries, then, and in each such case,
proper provision shall be made so that (i) each holder of a Right (except as
otherwise provided herein) shall thereafter have the right to receive, upon
the exercise thereof at a price equal to the then current Purchase Price
multiplied by the number of one one-hundredths of a Preferred Share for which
a Right is then exercisable, in accordance with the terms of this Agreement
and in lieu of Preferred Shares, such number of Common Shares of such other
Person (including the Company as successor thereto or as the surviving
corporation) as shall equal the result obtained by (A) multiplying the then
current Purchase Price by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable and dividing that product by (B)
50% of the then Current Per Share Market Price of the Common Shares of such
other Person on the date of consummation of such consolidation, merger, sale
or transfer; (ii) the issuer of such Common Shares shall thereafter be liable
for, and shall assume, by virtue of such consolidation, merger, sale or
transfer, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" shall thereafter be deemed to refer to
such issuer; and (iv) such issuer shall take such steps (including the
reservation of a sufficient number of its Common Shares in accordance with
Section 9 hereof) in connection with such consummation as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly
as reasonably may be, in relation to the Common Shares thereafter deliverable
upon the exercise of the Rights. The Company shall not consummate any such
consolidation, merger, sale or transfer unless prior thereto the Company and
such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement so providing. Notwithstanding anything in this
Agreement to the contrary, the prior written consent of the Rights Agent must
be obtained in connection with any supplemental agreement that alters the
rights or duties of the Rights Agent, except that the substitution of another
party in place of the Company under this Agreement or the lowering of the
thresholds set forth in the definitions of "Acquiring Person" and
"Distribution Date" in accordance with Section 27 shall not be deemed to
alter the rights or duties of the Rights Agent hereunder. The Company shall
not enter into any transaction of the kind referred to in this Section 13 if
at the time of such transaction there are any rights, warrants, instruments
or securities outstanding or any agreements or arrangements which, as a
result of the consummation of such transaction, would
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eliminate or substantially diminish the benefits intended to be afforded by
the Rights. The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Company
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the Closing Price of the Rights for
the Trading Day immediately prior to the date on which such fractional Rights
would have been otherwise issuable.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other
than fractions which are integral multiples of one one-hundredth of a
Preferred Share). Fractions of Preferred Shares in integral multiples of one
one-hundredth of a Preferred Share may, at the election of the Company, be
evidenced by depositary receipts, pursuant to an appropriate agreement
between the Company and a depositary selected by it; PROVIDED, that such
agreement shall provide that the holders of such depositary receipts shall
have all the rights, privileges and preferences to which they are entitled as
beneficial owners of the Preferred Shares represented by such depositary
receipts. In lieu of fractional Preferred Shares that are not integral
multiples of one one-hundredth of a Preferred Share, the Company shall pay to
the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of
the current market value of one Preferred Share. For the purposes of this
Section 14(b), the current market value of a Preferred Share shall be the
Closing Price of a Preferred Share for the Trading Day immediately prior to
the date of such exercise.
(c) The holder of a Right by the acceptance thereof expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided in Section 14(b)).
Section 15. RIGHTS OF ACTION. All rights of action in respect of
this Agreement, excepting the rights of action given to the Rights Agent
under Section 18, are vested in the respective registered holders of the
Right Certificates and, prior to the Distribution Date, the registered
holders of the Common Shares. Any registered holder of any Right Certificate
(or, prior to the Distribution Date, of the Common Shares), without the
consent of the Rights Agent or of the holder of any other Right Certificate
(or, prior to the Distribution Date, of the Common Shares), may, in his own
behalf and for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act
in respect of, his right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations
of any Person subject to, this Agreement.
Section 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
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(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the
designated office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common
Shares certificate made by anyone other than the Company or the Rights Agent)
for all purposes whatsoever, and neither the Company nor the Rights Agent
shall be affected by any notice to the contrary; and
(d) notwithstanding anything to the contrary contained in this Agreement,
neither the Company nor the Rights Agent shall have any liability to any
holder of a Right or other Person as a result of the Company's or the Rights
Agent's inability to perform any of its obligations under this Agreement by
reason of any preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority prohibiting or otherwise restraining performance of such
obligation; provided that the Company shall use its reasonable efforts to
have any such order, decree or ruling lifted or otherwise overturned as soon
as possible.
Section 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or
any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder of
any Right Certificate, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 25), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT. (a) The Company agrees to pay
to the Rights Agent such compensation as shall be agreed in writing between
the Company and the Rights Agent for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify
the Rights Agent for, and to hold it harmless against, any and all loss,
liability, damage, claim or expense incurred without gross negligence, bad
faith or willful misconduct on the part of the Rights Agent, for anything
done or omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises. The provisions of
this Section 18(a) shall survive the expiration of the Rights and the
termination of this Agreement.
(b) The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection
with, its administration of this Agreement in reliance upon any Right
Certificate or certificate for the Preferred Shares or Common Shares or for
other securities of the Company, instrument of assignment or transfer, power
of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be
genuine and to be signed and executed by the proper Person or Persons, or
otherwise upon the advice of counsel as set forth in Section 20 hereof.
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<PAGE>
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to all
or substantially all the stock transfer or corporate trust powers of the
Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties hereto; PROVIDED,
that such corporation would be eligible for appointment as a successor Rights
Agent under the provisions of Section 21 hereof. In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall
not have been countersigned, any successor Rights Agent may countersign such
Right Certificates either in the name of the predecessor Rights Agent or in
the name of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Right Certificates so countersigned; and in case at
that time any of the Right Certificates shall not have been countersigned,
the Rights Agent may countersign such Right Certificates either in its prior
name or in its changed name; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes only the
duties and obligations expressly imposed by this Agreement and no implied
duties or obligations shall be read into this Agreement against the Rights
Agent upon the following terms and conditions, by all of which the Company
and the holders of Rights, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel of its choosing (who
may be legal counsel for the Company), and the opinion of such counsel shall
be full and complete authorization and protection to the Rights Agent as to
any action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board,
any Vice Chairman, the Chief Executive Officer, the President, any Vice
President, the Treasurer or the Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own gross negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify
the same, and all such statements and recitals are and shall be deemed to
have been made by the Company only.
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(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity
or execution of any Right Certificate (except its countersignature thereof);
nor shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall
it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 11(a)(iii)) or any
adjustment in the terms of the Rights (including the manner, method or amount
thereof) provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of
the existence of facts that would require any such change or adjustment
(except with respect to the exercise of Rights evidenced by Right
Certificates after the Rights Agent's actual notice that such change or
adjustment is required); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any
Preferred Shares to be issued pursuant to this Agreement or any Right
Certificate or as to whether any Preferred Shares will, when issued, be
validly authorized and issued, fully paid and nonassessable, nor shall the
Rights Agent be responsible for the legality of the terms hereof in its
capacity as an administrative agent.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, any Vice Chairman, the Chief Executive
Officer, the President, any Vice President, the Treasurer or the Secretary of
the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken
or suffered by it in good faith in accordance with instructions of any such
officer or for any delay in acting while waiting for those instructions. Any
application by the Rights Agent for written instructions from the Company
may, at the option of the Rights Agent, set forth in writing any action
proposed to be taken or omitted by the Rights Agent under this Agreement and
the date on or after which such action shall be taken or such omission shall
be effective. The Rights Agent shall not be liable for any action taken by,
or omission of, the Rights Agent in accordance with a proposal included in
such application on or after the date specified in such application (which
date shall not be less than three Business Days after the date any officer of
the Company actually receives such application, unless such officer shall
have consented in writing to any earlier date) unless prior to taking any
such action (or the effective date in the case of an omission), the Rights
Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction
in which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights
Agent under this Agreement. Nothing herein shall preclude the Rights Agent
from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was exercised
in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties
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hereunder or in the exercise of its rights if there shall be reasonable
grounds for believing that repayment of such funds or adequate
indemnification against such risk or liability is not reasonably assured to
it.
(k) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase (as the case may be) has not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the Company.
(l) In addition to the foregoing, the Rights Agent shall be protected and
shall incur no liability for, or in respect of, any action taken or omitted
by it in connection with its administration of this Agreement if such acts or
omissions are in reliance upon (i) the proper execution of the certification
concerning beneficial ownership appended to the form of assignment and the
form of election to purchase attached hereto unless the Rights Agent shall
have actual knowledge that, as executed, such certification is untrue, or
(ii) the non-execution of such certification including, without limitation,
any refusal to honor any otherwise permissible assignment or election by
reason of such non-execution.
(m) The Company agrees to give the Rights Agent prompt written notice of
any event or ownership of which the Company has knowledge that would prohibit
the exercise or transfer of the Right Certificates.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares or Preferred Shares by registered or
certified mail. The Company may remove the Rights Agent or any successor
Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Shares or Preferred Shares by registered or certified mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable
of acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of 30 days after
giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent
or by the holder of a Right Certificate (who shall, with such notice, submit
his Right Certificate for inspection by the Company), then the Rights Agent
or the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the
United States or of the State of New York (or of any other state of the
United States so long as such corporation is authorized to do business as a
banking institution in the State of New York, in good standing, having an
office in the State of New York, which is authorized under such laws to
exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose.
Not later than the effective date of any such appointment the Company shall
file notice thereof in writing with the predecessor Rights Agent and each
transfer agent of the Common Shares or Preferred Shares, and mail a notice
thereof in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation
or removal of the Rights Agent or the appointment of the successor Rights
Agent, as the case may be.
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Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by the Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement.
Section 23. REDEMPTION. (a) The Board of Directors may, at its option,
at any time prior to such time as any Person becomes an Acquiring Person,
redeem all but not less than all of the then outstanding Rights at a
redemption price of $.01 per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the
"Redemption Price"). The redemption of the Rights by the Board of Directors
may be made effective at such time, on such basis and with such conditions as
the Board of Directors in its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors ordering the
redemption of the Rights pursuant to Section 23(a), and without any further
action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price. The Company shall promptly give public notice,
with substantially contemporaneous written notice to the Rights Agent, of any
such redemption; PROVIDED, that the failure to give, or any defect in, any
such notice shall not affect the validity of such redemption. Within 10 days
after such action of the Board of Directors ordering the redemption of the
Rights, the Company shall mail a notice of redemption to all the holders of
the then outstanding Rights at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares. Any notice which
is mailed in the manner herein provided shall be deemed given, whether or not
the holder receives the notice. Each such notice of redemption will state
the method by which the payment of the Redemption Price will be made.
Neither the Company nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time in any manner other than
that specifically set forth in this Section 23 or in Section 24, and other
than in connection with the purchase of Common Shares prior to the
Distribution Date.
Section 24. EXCHANGE. (a) The Board of Directors may, at its option, at
any time after any Person becomes an Acquiring Person, exchange all or part
of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 11(a)(ii)
hereof) for Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Company or any Company
Entity), together with all Affiliates and Associates of such Person, becomes
the Beneficial Owner of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors ordering the
exchange of any Rights pursuant to Section 24(a) and without any further
action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be
to receive that number of Common Shares equal to the number of such Rights
held by such holder multiplied by the Exchange Ratio. The Company shall
promptly give public notice, with substantially contemporaneous written
notice to the Rights Agent, of any such exchange; PROVIDED, that the failure
to give, or any defect in, such notice shall not affect the validity of such
exchange. The Company promptly shall mail a notice of any such exchange to
all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by
which the exchange of the Common Shares for Rights
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<PAGE>
will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro
rata based on the number of Rights (other than Rights which have become void
pursuant to the provisions of Section 11(a)(iii)) held by each holder of
Rights.
(c) If there shall not be sufficient Common Shares issued but not
outstanding or authorized but unissued to permit any exchange of Rights as
contemplated in accordance with this Section 24, the Company shall take all
such action as may be necessary to authorize additional Common Shares for
issuance upon exchange of the Rights. If the Company shall, after good faith
effort, be unable to authorize such additional Common Shares, the Company
shall substitute, for each Common Share that would otherwise be issuable upon
exchange of a Right, a number of Preferred Shares or fraction thereof such
that the Current Per Share Market Price of one Preferred Share multiplied by
such number or fraction is equal to the Current Per Share Market Price of one
Common Share as of the date of issuance of such Preferred Shares or fraction
thereof.
(d) The Company shall not be required to issue fractions of Common Shares
or to distribute certificates which evidence fractional Common Shares. In
lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash equal
to the same fraction of the current market value of a whole Common Share.
For the purposes of this paragraph (d), the current market value of a whole
Common Share shall be the Closing Price of a Common Share for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24.
Section 25. NOTICE OF CERTAIN EVENTS. (a) In case the Company shall
propose (i) to pay any dividend payable in stock of any class to the holders
of its Preferred Shares or to make any other distribution to the holders of
its Preferred Shares (other than a regular quarterly cash dividend), (ii) to
offer to the holders of its Preferred Shares rights or warrants to subscribe
for or to purchase any additional Preferred Shares or shares of stock of any
class or any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Shares (other than a reclassification
involving only the subdivision of outstanding Preferred Shares), (iv) to
effect any consolidation or merger into or with, or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one or more transactions, of 50% or more of the
assets or earning power of the Company and its Subsidiaries (taken as a
whole) to, any other Person, (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to declare or pay any dividend on the
Common Shares payable in Common Shares or to effect a subdivision,
combination or consolidation of the Common Shares (by reclassification or
otherwise than by payment of dividends in Common Shares), then, in each such
case, the Company shall give to the Rights Agent and each holder of a Right
Certificate, in accordance with Section 26, a notice of such proposed action.
Such notice shall specify the record date for the purposes of such stock
dividend or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, if any
such date is to be fixed. Such notice shall be so given, in the case of any
action covered by clause (i) or (ii) above, at least 10 days prior to the
record date for determining holders of the Preferred Shares for purposes of
such action and, in the case of any such other action, at least 10 days prior
to the earlier of the taking of such proposed action or the date of
participation therein by the holders of the Common Shares or Preferred
Shares, as the case may be.
(b) If the event set forth in Section 11(a)(ii) shall occur, then the
Company shall as soon as practicable thereafter give to the Rights Agent and
each holder of a Right Certificate, in accordance with Section 26, a notice
of the occurrence of such event, which notice shall describe such event and
the consequences of such event to holders of Rights under Section 11(a)(ii).
Section 26. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be
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sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Rights Agent)
as follows:
Cross-Continent Auto Retailers, Inc.
1201 South Taylor Street
Amarillo, Texas 79101
Telecopy: (806) 374-3818
Attention: Robert W. Hall
Subject to the provisions of Section 21 hereof, the designated office of the
Rights Agent shall be, and any notice or demand authorized by this Agreement
to be given or made by the Company or by the holder of any Right Certificate
to or on the Rights Agent shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed, (until another address is filed
in writing with the Company) as follows:
The Bank of New York
101 Barclay Street, Floor 12W
New York, New York 10286
Telecopy: (212) 815-3201
Attention: Stock Transfer Administration
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the
registry books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. The Company may from time to
time supplement or amend this Agreement without the approval of any holders
of Right Certificates in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, or to make any other
provisions with respect to the Rights which the Company may deem necessary or
desirable, any such supplement or amendment to be evidenced by a writing
signed by the Company and the Rights Agent; PROVIDED, that from and after
such time as any Person becomes an Acquiring Person, this Agreement shall not
be amended in any manner which would adversely affect the interests of the
holders of Rights. Without limiting the foregoing, the Company may at any
time prior to such time as any Person becomes an Acquiring Person amend this
Agreement to lower the thresholds set forth in the definitions of "Acquiring
Person" and "Distribution Date" in Section 1(a) to not less than the greater
of (i) the sum of .001% and the largest percentage of the outstanding Common
Shares then known by the Company to be beneficially owned by any Person
(other than the Company or any Company Entity) and (ii) 10%. Notwithstanding
any other provision hereof, the Rights Agent's consent must be obtained
regarding any amendment or supplement pursuant to this Section 27 which
alters the Rights Agent's rights or duties, except that the substituting of
another party in place of the Company under this Agreement or the lowering of
the thresholds as aforesaid shall not be deemed to alter the rights or duties
of the Rights Agent hereunder.
Section 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns
hereunder. Upon the delivery of a certificate from an executive officer or
the secretary of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section, the Rights Agent
shall execute such supplement or amendment.
Section 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Rights Agent and the registered
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<PAGE>
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares) any legal or equitable right, remedy or claim under this
Agreement. This Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares).
Section 30. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
SECTION 31. GOVERNING LAW THIS AGREEMENT AND EACH RIGHT CERTIFICATE
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS TO BE MADE AND
PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 32. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 33. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
CROSS-CONTINENT AUTO RETAILERS, INC.
By
---------------------------------
Name:
Title:
THE BANK OF NEW YORK, as Rights Agent
By
---------------------------------
Name:
Title:
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<PAGE>
EXHIBIT A
FORM
of
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
CROSS-CONTINENT AUTO RETAILERS, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
-----------------
Cross-Continent Auto Retailers, Inc., Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware
(hereinafter called the "Corporation"), hereby certifies that the following
resolution was adopted by the Board of Directors of the Corporation as
required by Section 151 of the General Corporation Law by unanimous written
consent on September 3, 1996:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the
Certificate of Incorporation, the Board of Directors hereby creates a series
of Preferred Stock, par value $ .01 per share (the "Preferred Stock"), of the
Corporation and hereby states the designation and number of shares, and fixes
the relative rights, preferences, and limitations thereof as follows:
Series A Junior Participating Preferred Stock:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A
Preferred Stock shall be 250,000. Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series A Preferred Stock to a number
less than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series A Preferred Stock.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of Common Stock, par
value $ .01 per share (the "Common Stock"), of the Corporation, and of any
other junior stock, shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the purpose,
quarterly dividends
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<PAGE>
payable in cash on the first day of March, June, September and December in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the
greater of (a) $1 or (b) subject to the provision for adjustment hereinafter
set forth, 100 times the aggregate per share amount of all cash dividends,
and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since
the immediately preceding Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case
the amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock);
provided that, if no dividend or distribution shall have been declared
on the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $1 per share on the Series A Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the
date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the
payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the
Corporation. If the Corporation shall at any time declare or
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<PAGE>
pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of shares
of Common Stock, then in each such case the number of votes per share to
which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the Corporation having
general voting rights shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law, holders
of Series A Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A
Preferred Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock
ranking on a parity with the Series A Preferred Stock, except in
accordance with a purchase offer made in writing or by publication
(as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
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<PAGE>
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could,
under paragraph (A) of this Section 4, purchase or otherwise
acquire such shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock subject to the conditions and restrictions on issuance set
forth herein, in the Certificate of Incorporation, or in any other
Certificate of Designations creating a series of Preferred Stock or any
similar stock or as otherwise required by law.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made
(A) to the holders of shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A Preferred
Stock unless, prior thereto, the holders of shares of Series A Preferred
Stock shall have received $100 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the
date of such payment, provided that the holders of shares of Series A
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of shares
of Common Stock, or (B) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, except distributions made ratably on the Series
A Preferred Stock and all such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall
at any time declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or consolidation of
the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount
to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (A) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case
each share of Series A Preferred Stock shall at the same time be similarly
exchanged or changed into an amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. If the Corporation shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator
A-4
<PAGE>
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
Section 8. NO REDEMPTION. The shares of Series A Preferred Stock shall
not be redeemable.
Section 9. RANK. The Series A Preferred Stock shall rank, with respect
to the payment of dividends and the distribution of assets, junior to all
series of any other class of the Corporation's Preferred Stock.
Section 10. AMENDMENT. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter
or change the powers, preferences or special rights of the Series A Preferred
Stock so as to affect them adversely without the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Series A
Preferred Stock, voting together as a single class.
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Corporation by its Chairman of the Board and attested by its Secretary
this [___] day of September, 1996.
-------------------------------------
Chairman of the Board
Attest:
- -------------------------------------
Secretary
A-5
<PAGE>
EXHIBIT B
Form of Right Certificate
Certificate No. R- ______________ Rights
NOT EXERCISABLE AFTER SEPTEMBER 20, 2006 OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT
AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
Right Certificate
CROSS-CONTINENT AUTO RETAILERS, INC.
This certifies that ____________________ or registered assigns, is the
registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions
of the Rights Agreement, dated as of September 20, 1996 (the "Rights
Agreement"), between Cross-Continent Auto Retailers, Inc., a Delaware
corporation (the "Company"), and The Bank of New York, as rights agent (the
"Rights Agent"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and prior
to 5:00 p.m.., (New York City time), on September 20, 2006 at the designated
office of the Rights Agent, or at the office of its successor as Rights
Agent, one one-hundredth of a fully paid non-assessable share of Series A
Junior Participating Preferred Stock, par value $ .01 per share (the
"Preferred Shares"), of the Company, at a purchase price of $100.00 per one
one-hundredth of a Preferred Share (the "Purchase Price"), upon presentation
and surrender of this Right Certificate with the Form of Election to Purchase
duly executed. The number of Rights evidenced by this Right Certificate (and
the number of one one-hundredths of a Preferred Share which may be purchased
upon exercise hereof) set forth above, and the Purchase Price set forth
above, are the number and Purchase Price as of September 20, 1996, based on
the Preferred Shares as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number of one one-hundredths of a
Preferred Share which may be purchased upon the exercise of the Rights
evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to
which Rights Agreement reference is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Right Certificates.
Copies of the Rights Agreement are on file at the principal executive offices
of the Company and the above-mentioned offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the designated office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If
this Right Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.
B-1
<PAGE>
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (i) may be redeemed by the Company at a redemption price
of $.01 per Right or (ii) may be exchanged in whole or in part for Preferred
Shares or shares of the Company's Common Stock, par value $.01 per share.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or
of any other securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of _______________.
ATTEST: CROSS-CONTINENT AUTO RETAILERS, INC.
By
- ------------------------------------ --------------------------------
Countersigned:
THE BANK OF NEW YORK, as Rights Agent
By
---------------------------------
Authorized Signatory
Date of authorization:
-------------
B-2
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ___________________________________________ hereby
sells, assigns and transfers unto _____________________________________________
_______________________________________________________________________________
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ________________________
Attorney, to transfer the within Right Certificate on the books of the within-
named Company, with full power of substitution.
Dated:
------------------------------
---------------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Rights Agent, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Rights Agent in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act
of 1934, as amended.
- -------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement).
---------------------------------------
Signature
- -------------------------------------------------------------------------------
B-3
<PAGE>
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: CROSS-CONTINENT AUTO RETAILERS, INC.
The undersigned hereby irrevocably elects to exercise _____________________
Rights represented by this Right Certificate to purchase the Preferred Shares
issuable upon the exercise of such Rights and requests that certificates for
such Preferred Shares be issued in the name of:
Please insert social security
or other taxpayer identifying number
- -------------------------------------------------------------------------------
(Please print name and address),
- -------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other taxpayer identifying number
- -------------------------------------------------------------------------------
(Please print name and address),
- -------------------------------------------------------------------------------
Dated:
-----------------------, ------
---------------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Rights Agent, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Rights Agent in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act
of 1934, as amended.
B-4
<PAGE>
Form of Reverse Side of Right Certificate -- continued
- --------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement).
--------------------------------------
Signature
- -------------------------------------------------------------------------------
NOTICE
The signature in the Form of Assignment or Form of Election to Purchase,
as the case may be, must conform to the name as written upon the face of this
Right Certificate in every particular, without alteration or enlargement or
any change whatsoever.
If the certification set forth above in the Form of Assignment or the
Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement) and such Assignment
or Election to Purchase will not be honored.
B-5
<PAGE>
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On September 3, 1996, the Board of Directors of Cross-Continent Auto
Retailers, Inc. (the "Company") declared a dividend of one preferred share
purchase right (a "Right") for each outstanding share of common stock, par
value $.01 per share (the "Common Shares"), of the Company. The dividend is
payable on September 20, 1996 (the "Record Date") to the stockholders of
record on that date. Each Right entitles the registered holder to purchase
from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock, par value $.01 per share (the "Preferred
Shares"), of the Company at a price of $100 per one one-hundredth of a
Preferred Share (the "Purchase Price"), subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and The Bank of New York as rights
agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") have acquired beneficial ownership of 19.9% or more of
the outstanding Common Shares or (ii) 10 business days (or such later date as
may be determined by action of the Board of Directors prior to such time as
any person or group of affiliated persons becomes an Acquiring Person)
following the commencement of, or announcement of an intention to make, a
tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 19.9% or more of the outstanding
Common Shares (the earlier of such dates being called the "Distribution
Date"), the Rights will be evidenced, with respect to any of the Common Share
certificates outstanding as of the Record Date, by such Common Share
certificate with a copy of this Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be
transferred with and only with the Common Shares. Until the Distribution
Date (or earlier redemption or expiration of the Rights), new Common Share
certificates issued after the Record Date upon transfer or new issuance of
Common Shares will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration
of the Rights), the surrender for transfer of any certificates for Common
Shares outstanding as of the Record Date, even without such notation or a
copy of this Summary of Rights being attached thereto, will also constitute
the transfer of the Rights associated with the Common Shares represented by
such certificate. As soon as practicable following the Distribution Date,
separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the Common Shares as of the close of business
on the Distribution Date and such separate Right Certificates alone will
evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on September 20, 2006 (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the Rights are earlier redeemed
or exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion
price, less than the then-current market price of the Preferred Shares or
(iii) upon the distribution to holders of the Preferred Shares of evidences
of indebtedness or assets (excluding regular
C-1
<PAGE>
periodic cash dividends paid out of earnings or retained earnings or
dividends payable in Preferred Shares) or of subscription rights or warrants
(other than those referred to above).
The number of outstanding Rights and the number of one one-hundredths of
a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such
case, prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an
aggregate dividend of 100 times the dividend declared per Common Share. In
the event of liquidation, the holders of the Preferred Shares will be
entitled to a minimum preferential liquidation payment of $100 per share but
will be entitled to an aggregate payment of 100 times the payment made per
Common Share. Each Preferred Share will have 100 votes, voting together with
the Common Shares. Finally, it the event of any merger, consolidation or
other transaction in which Common Shares are exchanged, each Preferred Share
will be entitled to receive 100 times the amount received per Common Share.
These rights are protected by customary antidilution provisions.
Because of the nature of the Preferred Shares, dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a Preferred
Share purchasable upon exercise of each Right should approximate the value of
one Common Share.
If the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are
sold after a person or group has become an Acquiring Person, proper provision
will be made so that each holder of a Right will thereafter have the right to
receive, upon the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock of the acquiring company which
at the time of such transaction will have a market value of two times the
exercise price of the Right. If any person or group of affiliated or
associated persons becomes an Acquiring Person, proper provision shall be
made so that each holder of a Right, other than Rights beneficially owned by
the Acquiring Person (which will thereafter be void), will thereafter have
the right to receive upon exercise that number of Common Shares having a
market value of two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and
prior to the acquisition by such person or group of 50% or more of the
outstanding Common Shares, the Board of Directors of the Company may exchange
the Rights (other than Rights owned by such person or group, which will have
become void), in whole or in part, at an exchange ratio of one Common Share,
or one one-hundredth of a Preferred Share (or of a share of a class or series
of the Company's preferred stock having equivalent rights, preferences and
privileges), per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1.0%
in such Purchase Price.
No fractional Preferred Shares will be issued (other than fractions
which are integral multiples of one one-hundredth of a Preferred Share, which
may, at the election of the Company, be evidenced by depositary receipts) and
in lieu thereof, an adjustment in cash will be made based on the market price
of the Preferred Shares on the last trading day prior to the date of exercise.
At any time prior to the acquisition by a person or group
of affiliated or associated persons of beneficial ownership of 19.9% or more
of the outstanding Common Shares, the Board of Directors of the Company may
redeem the Rights in whole, but not in part, at a price of $.01 per Right
(the "Redemption Price"). The redemption of the Rights may be made effective
at such time on such
C-2
<PAGE>
basis with such conditions as the Board of Directors in
its sole discretion may establish. Immediately upon any redemption of the
Rights, the right to exercise the Rights will terminate and the only right of
the holders of Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an
amendment to lower certain thresholds described above to not less than the
greater of (i) the sum of .001% and the largest percentage of the outstanding
Common Shares then known to the Company to be beneficially owned by any
person or group of affiliated or associated persons and (ii) 10%, except that
from and after such time as any person or group of affiliated or associated
persons becomes an Acquiring Person no such amendment may adversely affect
the interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends. A copy of the Rights Agreement has
been filed with the Securities and Exchange Commission as an Exhibit to a
Registration Statement on S-1, No. 333-06585.
A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights
Agreement, which is hereby incorporated herein by reference.
C-3
<PAGE>
CROSS-CONTINENT AUTO RETAILERS, INC.
AMENDED AND RESTATED 1996 STOCK OPTION PLAN
1. PURPOSE; TYPES OF AWARDS; CONSTRUCTION.
The purpose of the Amended and Restated 1996 Stock Option Plan (the
"Plan") of Cross-Continent Auto Retailers, Inc., a Delaware corporation (the
"Company"), is to attract and retain employees (including officers),
directors and independent contractors of the Company, or any Subsidiary or
Affiliate which now exists or hereafter is organized or acquired, and to
furnish additional incentives to such persons by encouraging them to acquire
a proprietary interest in the Company. Pursuant to Section 6 of the Plan,
there may be granted Options, including "incentive stock options" and
"nonqualified stock options". The Plan is intended to satisfy the
requirements of Rule 16b-3 promulgated under Section 16 of the Exchange Act
and shall be interpreted in a manner consistent with the requirements thereof.
2. DEFINITIONS.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Administrator" means the Board or, if and so long as a Committee
has been established and is in existence, the Committee.
(b) "Affiliate" means any entity if, at the time of granting of an
Option, (i) the Company, directly, owns at least 20% of the combined voting
power of all classes of stock of such entity or at least 20% of the ownership
interests in such entity or (ii) such entity, directly or indirectly, owns at
least 20% of the combined voting power of all classes of stock of the Company.
(c) "Beneficiary" means the person, persons, trust or trusts which
have been designated by an Optionee in his or her most recent written
beneficiary designation filed with the Company to receive the benefits specified
under the Plan upon his or her death, or, if there is no designated Beneficiary
or surviving designated Beneficiary, then the person, persons, trust or trusts
entitled by will or the applicable laws of descent and distribution to receive
such benefits.
(d) "Board" means the Board of Directors of the Company.
(e) "Change in Control" means a change in control of the Company
which will be deemed to have occurred if:
(i) any "person," as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than an
Exempt Person), is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding voting
securities; PROVIDED that no Change of Control shall be deemed to
have occurred as the result of an acquisition by the Company of
any of its then outstanding voting securities which, by reducing
the number of shares outstanding, increases the proportionate
number of shares of voting securities beneficially owned by any
person to 50% or more of the combined voting power of the
Company's then outstanding voting securities; PROVIDED FURTHER,
that if a person shall become the beneficial owner of 50% or more
of the combined voting power of the Company's then outstanding
voting securities by reason of share purchases by the Company and
shall, after such share purchases by the Company, become the
beneficial
<PAGE>
owner of any additional voting securities of the Company, then a
Change of Control shall be deemed to have occurred; and PROVIDED
FURTHER, that, notwithstanding anything to the contrary contained
in the Plan, if the Board of Directors of the Company determines
in good faith that a person who would otherwise be a beneficial
owner as defined pursuant to the foregoing provisions of this
paragraph has become such inadvertently, in a manner that
otherwise would cause a Change of Control, and such person
divests as promptly as practicable a sufficient number of voting
securities so that such person would no longer be a beneficial
owner, then a Change of Control shall be deemed to not have
occurred for any purposes of this Plan;
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board, and any new director (other than a director designated by
a person who has entered into an agreement with the Company to
effect a transaction described in clause (i), (iii), or (iv) of
this Section 2(e)) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of
at least a majority of the directors then still in office who
either were directors at the beginning of the period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof;
(iii) the stockholders of the Company approve
a merger or consolidation of the Company with any other
corporation, other than (A) a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving or parent entity) 50% or more of the
combined voting power of the voting securities of the Company or
such surviving or parent entity outstanding immediately after
such merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinbefore
defined), other than an Exempt Person, acquired 50% or more of
the combined voting power of the Company's then outstanding
securities; or
(iv) the stockholders of the Company approve of a
plan of complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or substantially
all of the Company's assets (or any transaction having a similar
effect).
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(g) "Committee" means the committee, consisting exclusively of two or
more Non-Employee Directors (as defined in Rule 16b-3), if and as the same may
be established by the Board to administer the Plan; PROVIDED, HOWEVER, that to
the extent required for the Plan to comply with the applicable provisions of
Section 162(m) of the Code, "Committee" means either such committee or a
subcommittee of that committee, as the case may be, which shall be constituted
to comply with the applicable requirements of Section 162(m) of the Code and the
regulations promulgated thereunder.
(h) "Company" means Cross-Continent Auto Retailers, Inc., a
corporation organized under the laws of the State of Delaware, or any successor
corporation.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and as now or hereafter construed, interpreted and
applied by regulations, rulings and
2
<PAGE>
cases.
(j) "Exempt Person" means (1) the Company, (2) any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, (3)
any corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of Stock, or
(4) any person or group of persons who, immediately prior to the adoption of
this Plan, owned more than 50% of the combined voting power of the Company's
then outstanding voting securities.
(k) "Fair Market Value" means, with respect to Stock or other
property, the fair market value of such Stock or other property determined by
such methods or procedures as shall be established from time to time by the
Administrator. Notwithstanding the foregoing, the per share Fair Market Value
of Stock as of a particular date shall mean (i) if the shares of Stock are then
listed on a national securities exchange, the closing sales price per share of
Stock on the national securities exchange on which the stock is principally
traded, for the last preceding date on which there was a sale of such Stock on
such exchange, or (ii) if the shares of Stock are then traded on the National
Market System of the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), the reported per share closing price of the Stock
on the day prior to such date or, if there was no such price reported for such
date, on the next preceding date for which such a price was reported, or (iii)
if the shares of Stock are then traded in an over-the-counter market other than
on the NASDAQ National Market System, the average of the closing bid and asked
prices for the shares of Stock in such over-the-counter market for the last
preceding date on which there was a sale of such Stock in such market, or (iv)
if the shares of Stock are not then listed on a national securities exchange or
traded in an over-the-counter market, such value as the Administrator, in its
sole discretion, shall determine in good faith.
(l) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code provided
that the Plan has been approved by the stockholders of the Company no later than
twelve months after the date of adoption of the Plan by the Board.
(m) "NQSO" means any Option not designated as an ISO.
(n) "Option" means a right, granted to an Optionee under Section 6(b)
of the Plan, to purchase shares of Stock. An Option may be either an ISO or an
NQSO, provided that ISOs may be granted only to employees of the Company or a
Subsidiary.
(o) "Optionee" means a person who, as an employee, director or
independent contractor of the Company, a Subsidiary or an Affiliate, has been
granted an Option.
(p) "Plan" means this Cross-Continent Auto Retailers, Inc. 1996 Stock
Option Plan, as amended from time to time.
(q) "Rule 16b-3" means Rule 16b-3, as from time to time in effect,
promulgated by the Securities and Exchange Commission under Section 16 of the
Exchange Act, including any successor to such Rule.
(r) "Stock" means the common stock, par value $.01 per share, of the
Company.
(s) "Stock Option Agreement" means any written agreement, contract,
or other instrument or document evidencing an Option.
(t) "Subsidiary" means any corporation in which the Company, directly
or
3
<PAGE>
indirectly, owns stock possessing 50% or more of the total combined voting
power of all classes of stock of such corporation.
3. ADMINISTRATION.
The Plan shall be administered by the Administrator. The Administrator
shall have the authority in its discretion, subject to and not inconsistent with
the express provisions of the Plan, to administer the Plan and to exercise all
the powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Options; to determine the persons to whom and
the time or times at which Options shall be granted; to determine the type and
number of Options to be granted, the number of shares of Stock to which Options
may relate and the terms, conditions, restrictions and performance criteria
relating to any Options; to determine whether, to what extent, and under what
circumstances Options may be settled, canceled, forfeited, exchanged, or
surrendered; to make adjustments in the terms and conditions of, and the
criteria and performance objectives included in, Options in recognition of
unusual or non-recurring events affecting the Company or any Subsidiary or
Affiliate or the financial statements of the Company or any Subsidiary or
Affiliate, or in response to changes in applicable laws, regulations, or
accounting principles; to designate Affiliates; to construe and interpret the
Plan and any Options; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the Stock Option
Agreements (which need not be identical for each Optionee); and to make all
other determinations deemed necessary or advisable for the administration of the
Plan.
The Administrator may appoint a chairperson and a secretary and may make
such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Administrator shall be made by a majority of its members either present in
person or participating by conference telephone at a meeting or by written
consent. The Administrator may delegate to one or more of its members or to one
or more agents such administrative duties as it may deem advisable, and the
Administrator or any person to whom it has delegated duties as aforesaid may
employ one or more persons to render advice with respect to any responsibility
the Administrator or such person may have under the Plan. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all persons, including the Company, and any Subsidiary, Affiliate or
Optionee (or any person claiming any rights under the Plan from or through any
Optionee) and any stockholder.
No member of the Board or Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Option granted
hereunder.
4. ELIGIBILITY.
Options may be granted to employees (including officers), directors and
independent contractors of the Company and its present or future Subsidiaries
and Affiliates, in the discretion of the Administrator. In determining the
person to whom Options shall be granted and the type of Options granted
(including the number of shares to be covered by such Options), the
Administrator shall take into account such factors as the Administrator shall
deem relevant in connection with accomplishing the purposes of the Plan.
5. STOCK SUBJECT TO THE PLAN.
The maximum number of shares of Stock reserved for the grant of Options
under the Plan shall be 1,380,000 shares of Stock, subject to adjustment as
provided herein. Such shares may, in whole or in part, be authorized but
unissued shares or shares that shall have been or may be reacquired by the
Company in the open market, in private transactions or otherwise. The number of
shares of Stock
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available for issuance under the Plan shall be reduced by the number of
shares of Stock subject to outstanding Options. If any shares subject to an
Option are forfeited, canceled, exchanged or surrendered or if an Option
otherwise terminates or expires without a distribution of shares to the
Optionee, the shares of Stock with respect to such Option shall, to the
extent of any such forfeiture, cancellation, exchange, surrender, termination
or expiration, again be available for Options under the Plan.
In the event that the Administrator shall determine that any dividend or
other distribution (whether in the form of cash, Stock, or other property),
recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of an Optionee under the Plan, then the Administrator shall make such
equitable changes or adjustments as it deems necessary or appropriate to any or
all of (i) the number and kind of shares of Stock which may thereafter be issued
in connection with Options, (ii) the number and kind of shares of Stock issued
or issuable in respect of outstanding Options, and (iii) the exercise price,
grant price, or purchase price relating to any Option; PROVIDED THAT, with
respect to ISOs, such adjustment shall be made in accordance with Section 424(h)
of the Code.
6. SPECIFIC TERMS OF OPTIONS.
(a) GENERAL. The term of each Option shall be for such period as may
be determined by the Administrator. The Administrator may make rules relating
to Options, and may impose on any Option or the exercise thereof, at the date of
grant or thereafter, such additional terms and conditions, not inconsistent with
the provisions of the Plan, as the Administrator shall determine.
(b) OPTIONS. The Administrator is authorized to grant Options to
Optionees on the following terms and conditions:
(i) TYPE OF OPTION. The Stock Option Agreement
evidencing the grant of an Option under the Plan shall designate
the Option as an ISO (in the event its terms, and the individual
to whom it is granted, satisfy the requirements for ISOs under
the Code), or an NQSO.
(ii) EXERCISE PRICE. The exercise price per share
of Stock purchasable under an Option shall be determined by the
Administrator; provided that, except as may otherwise be required
by the Code, in the case of an ISO, such exercise price shall be
not less than the Fair Market Value of a share of Stock on the
date of grant of such Option and, in the case of an ISO granted
to the holder of more than 10% of the Stock outstanding at the
date of grant of such Option, such exercise price shall be not
less than 110% of the Fair Market Value on such date of grant.
In no event shall the exercise price for the purchase of shares
of Stock be less than par value. The exercise price for Stock
subject to an Option may be paid in cash or by an exchange of
Stock previously owned by the Optionee, or a combination of both,
in an amount having a combined value equal to such exercise
price. Any shares of Stock exchanged upon the exercise of any
Option shall be valued at the Fair Market Value on the date on
which such shares are exchanged. An Optionee also may elect to
pay all or a portion of the aggregate exercise price by having
shares of Stock with a Fair Market Value on the date of exercise
equal to the aggregate exercise price withheld by the Company or
sold by a broker-dealer in accordance with applicable law.
(iii) TERM AND EXERCISABILITY OF OPTIONS. The
date on which the Administrator adopts a resolution expressly
granting an Option shall be considered the
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day on which such Option is granted. Options shall be
exercisable over the exercise period (which shall not exceed ten
years from the date of grant or five years from the date of grant
in the case of an ISO granted to a holder of more than 10% of
Stock outstanding as of such date), at such times and upon such
conditions as the Administrator may determine, as reflected in
the Stock Option Agreement. An Option may be exercised to the
extent of any or all full shares of Stock as to which the Option
has become exercisable, by giving written notice of such exercise
to the Company's Secretary and paying the exercise price as
described in Section 6(b)(ii).
(iv) TERMINATION OF EMPLOYMENT, ETC. An Option
may not be exercised unless the Optionee is then in the employ
of, is then a director of, or then maintains an independent
contractor relationship with, the Company or any Subsidiary or
Affiliate (or a company or a parent or subsidiary company of such
company issuing or assuming the Option in a transaction to which
Section 424(a) of the Code applies), and unless the Optionee has
continuously maintained any of such relationships, since the date
of grant of the Option; PROVIDED THAT, the Stock Option Agreement
may contain provisions extending the exercisability of Options,
in the event of specified terminations, to a date not later than
the expiration date of such Option. The Administrator may
establish a period during which the Beneficiaries of an Optionee
who died while an employee, director or independent contractor of
the Company or any Subsidiary or Affiliate or during any extended
period referred to in the immediately preceding proviso may
exercise those Options which were exercisable on the date of the
Optionee's death; provided that no Option shall be exercisable
after its expiration date.
(v) NONTRANSFERABILITY. Options shall not be
transferable by an Optionee except by will or the laws of descent
and distribution and shall be exercisable during the lifetime of
an Optionee only by such Optionee or his guardian or legal
representative.
(vi) OTHER PROVISIONS. Options may be subject to
such other conditions as the Administrator may prescribe in its
discretion.
7. CHANGE IN CONTROL PROVISIONS.
In the event of a Change in Control, any and all Options then outstanding
shall become fully exercisable and vested, whether or not theretofore vested and
exercisable.
8. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LEGAL AND EXCHANGE REQUIREMENTS. The Plan, the
granting and exercising of Options thereunder, and the other obligations of the
Company under the Plan and any Stock Option Agreement, shall be subject to all
applicable federal and state laws, rules and regulations, and to such approvals
by any regulatory or governmental agency as may be required. The Company, in
its discretion, may postpone the issuance or delivery of Stock under any Option
until completion of such stock exchange listing or registration or qualification
of such Stock or other required action under any state, federal or foreign law,
rule or regulation as the Company may consider appropriate, and may require any
Optionee to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of Stock in
compliance with applicable laws, rules and regulations.
(b) NO RIGHT TO CONTINUED EMPLOYMENT, ETC. Nothing in the Plan or in
any Option granted or Stock Option Agreement entered into pursuant to the Plan
shall confer upon any Optionee
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the right to continue in the employ of, or to continue as a director of or an
independent contractor to, the Company, any Subsidiary or any Affiliate, as
the case may be, or to be entitled to any remuneration or benefits not set
forth in the Plan or such Stock Option Agreement or to interfere with or
limit in any way the right of the Company or any such Subsidiary or Affiliate
to terminate such Optionee's employment, directorship or independent
contractor relationship.
(c) TAXES. The Company or any Subsidiary or Affiliate is authorized
to withhold from any Option granted, any payment relating to an Option under the
Plan (including from a distribution of Stock), or any other payment to an
Optionee, amounts of withholding and other taxes due in connection with any
transaction involving an Option, and to take such other action as the
Administrator may deem advisable to enable the Company and an Optionee to
satisfy obligations for the payment of withholding taxes and other tax
obligations relating to any Option. This authority shall include authority to
withhold or receive Stock or other property and to make cash payments in respect
thereof in satisfaction of an Optionee's tax obligations.
(d) AMENDMENT AND TERMINATION OF THE PLAN. The Board may at any time
and from time to time alter, amend, suspend, or terminate the Plan in whole or
in part. Notwithstanding the foregoing, no amendment shall affect adversely any
of the rights of any Optionee, without such Optionee's consent, under any Option
theretofore granted under the Plan.
(e) NO RIGHTS TO OPTIONS; NO STOCKHOLDER RIGHTS. No Optionee shall
have any claim to be granted any Option under the Plan, and there is no
obligation for uniformity of treatment of Optionees. Except as provided
specifically herein, an Optionee or a transferee of an Option shall have no
rights as a stockholder with respect to any shares covered by the Option until
the date of the issuance of a stock certificate to such Optionee for such
shares.
(f) UNFUNDED STATUS OF OPTIONS. The Plan is intended to constitute
an "unfunded" plan for incentive and deferred compensation. Nothing contained
in the Plan or any Option shall give any such Optionee any rights that are
greater than those of a general creditor of the Company.
(g) NO FRACTIONAL SHARES. No fractional shares of Stock shall be
issued or delivered pursuant to the Plan or any Option. The Administrator shall
determine whether cash, other Options, or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(h) GOVERNING LAW. The Plan and all determinations made and actions
taken pursuant hereto shall be governed by the laws of the State of Delaware
without giving effect to the conflict of laws principles thereof.
(i) EFFECTIVE DATE. The Plan shall take effect upon its adoption by
the Board.
(j) PLAN TERMINATION. The Board may terminate the Plan at any time
with respect to any shares of Stock that are not subject to Options. Unless
terminated earlier by the Board, the Plan shall terminate ten years after the
effective date and no Options shall be granted under the Plan after such date.
Termination of the Plan under this Section 8(j) will not affect the rights and
obligations of any Optionee with respect to options granted prior to
termination.
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NISSAN
DEALER TERM SALES AND SERVICE AGREEMENT
THIS AGREEMENT is entered into effective the day last set forth below by and
between the Nissan Division of NISSAN MOTOR CORPORATION IN U.S.A., a
California corporation, hereinafter called "Seller," and the natural persons
and entities identified in the Final Article of this Agreement.
INTRODUCTION
The purpose of this Agreement is to establish Dealer as an authorized dealer
of Nissan Products and to provide for the sale and servicing of Nissan
Products in a manner that will best serve owners, potential owners and
purchasers of Nissan Products as well as the interests of Seller, Dealer and
other Authorized Nissan Dealers. This Agreement sets forth: the rights which
Dealer will enjoy as an Authorized Nissan Dealer; the responsibilities which
Dealer assumes in consideration of its receipt of these rights; and the
respective conditions, rights and obligations of Seller and Dealer that apply
to Seller's grant to Dealer of such rights and Dealer's assumption of such
responsibilities. It is understood that Dealer wishes an opportunity to
qualify for a regular Nissan Dealer Sales and Service Agreement for Nissan
Products and understands that for that purpose Dealer first must fulfill all
of Dealer's undertakings hereinafter described.
This is a personal services Agreement In entering into this Agreement and
appointing Dealer as provided below, Seller is relying, among other things,
upon the personal qualifications, expertise, reputation, integrity,
experience, ability and representations of the individuals named in the Final
Article of this Agreement as Dealer Principal (the "Dealer Principal") and
the individual named in the Final Article of this Agreement as Executive
Manager and the representations of Cross-Continent Auto Retailers, Inc
("CCAR") and the Dealer. In addition to Dealer, Seller intends to look to
CCAR, and the Dealer Principal and the Executive Manager for the performance
of Dealer's obligations hereunder.
Nissan Products are intended for discriminate owners with the expectation
that such owners will be loyal and proud, but also demanding toward Seller
and Dealer with respect to Nissan Products and the manner in which they are
sold and serviced. Owners, potential owners and purchasers of Nissan Products
are expected to want, and are entitled to do business with, dealers who enjoy
the highest reputation in their communities and have well located, attractive
and efficient places of business, courteous personnel and outstanding service
and parts facilities. Nissan Products must be sold by enthusiastic dealers
who are not interested in short term results only but are willing to look
toward long term goals and who are devoted to creating and maintaining a
positive total ownership experience for owners of Nissan Products. Seller's
standard of excellence for Nissan Products must be matched by the dealers who
sell them to the public and who service them during their operative lives.
Achievement of the purposes of this Agreement is premised upon mutual
understanding and cooperation between Seller and Dealer. Dealer has entered
into this Agreement in reliance upon Seller's integrity and expressed
intention to deal fairly with Dealer and the consuming public. Seller has
entered into this Agreement in reliance upon the integrity and ability of the
Dealer Principal and Executive Manager and their expressed intention to deal
fairly with the consuming public and Seller.
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It is the responsibility of Seller to market Nissan Products throughout the
Territory. it is the responsibility of Dealer to actively promote the retail
sale of Nissan Products and to provide courteous and efficient service of
Nissan Products. The success of both Seller and Dealer will depend on how
well they each fulfill their respective responsibilities under this
Agreement. It is recognized that: Seller will endeavor to provide motor
vehicles of excellent quality and workmanship and to establish a network of
Authorized Nissan Dealers that can provide an outstanding sales and service
effort at the retail level; and Dealer will endeavor to fulfill its
responsibilities through aggressive, sound, ethical selling practices and
through conscientious regard for customer service in all aspects of its
Nissan Dealership Operations.
Seller and Dealer shall refrain from engaging in conduct or activities which
might be detrimental to or reflect adversely upon the reputation of Seller,
Dealer or Nissan Products and shall engage in no discourteous, deceptive,
misleading or unethical practices or activities.
For consistency and clarity, terms which are used frequently in this
Agreement have been deemed in Section l of the Standard Provisions. All terms
used herein which are deemed in the Standard Provisions shall have the
meaning stated in said Standard Provisions. These definitions should be read
carefully for a proper understanding of the provisions in which they appear.
To achieve the purposes referred to above, Seller, CCAR, Gilliland, Dealer,
Dealer Principal and the Executive Manager agree as follows:
ARTICLE FIRST: Appointment of Dealer
Subject to the conditions and provisions of this Agreement, Seller:
(a) appoints Dealer as an Authorized Nissan Dealer and grants Dealer
the non-exclusive right to buy from Seller those Nissan Products specified in
Dealer's current Product Addendum hereto, for resale, rental or lease at or
from the Dealership Locations established and described in accordance with
Section 2 of the Standard Provisions; and
(b) grants Dealer a non-exclusive right, subject to and in accordance
with Section 6.K of the Standard Provisions, to identify itself as an
Authorized Nissan Dealer, to display the Nissan Marks in the conduct of its
Dealership Operations and to use the Nissan Marks in the advertising,
promotion and sale of Nissan Products in the manner provided in this
Agreement.
ARTICLE SECOND: Assumption of Responsibilities by Dealer
Dealer hereby accepts from Seller its appointment as an Authorized
Nissan Dealer and, in consideration of its appointment and subject to the
other conditions and provisions of this Agreement, hereby assumes the
responsibility for:
(a) establishing and maintaining at the Dealership Location the
Dealership Facilities in accordance with Section 2 of the Standard Provisions;
(b) actively and effectively promoting the sale at retail (and, if
Dealer elects, the leasing and rental) of Nissan Vehicles within Dealer's
Primary Market Area in accordance with Section 3 of the Standard Provisions;
(c) servicing Nissan Vehicles and for selling and servicing Nissan Parts
and
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Accessories in accordance with Section 5 of the Standard Provisions;
(d) biding and maintaining consumer confidence in Dealer and in Nissan
Products in accordance with Section 5 of the Standard Provisions; and
(e) performance of the additional responsibilities set forth in this
Agreement, including those specified in Section 6 of the Standard Provisions.
ARTICLE THIRD: Ownership
(a) OWNERS. This Agreement has been entered into by Seller in reliance
upon, and in consideration of, among other things, the personal
qualifications, expertise, reputation, integrity, experience, ability and
representations with respect thereto of the Dealer Principal and Executive
Manager named in the Final Article of this Agreement, and in reliance upon
the representations and agreements of Dealer and CCAR as follows:
(i) CCAR will at all times own 100% of the capital stock of Dealer and
Dealer will at all times be maintained as a separate corporate entity.
(ii) The Executive Committee of Dealer shall consist of Bill A.
Gilliland ("Gilliland") and Emmett M. Rice, Jr. ("Rice").
(iii) The officers of Dealer are as follows:
Emmett M. Rice, Jr. President
Michael Robbins Vice-President
(iv) Dealer is a wholly-owned subsidiary of CCAR, which is a public
corporation involved in an initial public offering ("IPO"), the ownership of
which, prior to the PO, is set forth in Exhibit "A".
(b) CHANGES IN OWNERSHIP. In view of the fact that this is a personal
services agreement with the Dealer Principal and Executive Manager and in
view of its objectives and purposes, this Agreement and the rights and
privileges conferred on Dealer hereunder are not assignable, transferable or
salable by CCAR, and no property right or interest is or shall be deemed to
be sold, conveyed or transferred to Dealer or CCAR under this Agreement
Dealer, CCAR, the Dealer Principal and the Executive Manager agree that any
change in the ownership of Dealer, or CCAR specified herein requires the
prior written consent of Seller IF DEALER DESIRES TO REMAIN AN AUTHORIZED
NISSAN DEALER and that without the prior written consent of Seller:
(i) no sale, pledge, hypothecation or other transfer of any of the
currently outstanding capital stock of Dealer will be made and no additional
shares of capital stock, or securities convertible into shares of capital
stock, of Dealer will be issued or sold.
(ii) no ownership interest is acquired in CCAR by a person or entity
which notifies CCAR via Schedule 13D filed with the Securities and Exchange
Commission,(Dealer shall advise Seller in writing, and attached a copy of
that Schedule), that results in a person or entity acquiring an ownership
interest in or controlling a twenty percent (20%) of CCAR that intends to or
may intend to engage in activities, including acquisitions, mergers,
reorganizations, liquidation, sale or transfer of assets, changes in
management of CCAR and material changes in
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business or corporate structure, which Seller reasonably concludes are not
compatible with the interests of Seller, or is not otherwise qualified to
have an ownership interest in a Nissan dealership. In the event of the
foregoing, Dealer and CCAR agree that within 90 days of receipt of written
notice from Seller of this fact, they will voluntarily terminate this
Agreement. Nothing in this Agreement, however, is intended to prevent CCAR
from reapplying for a Nissan dealership , notwithstanding the new ownership
structure. (iii) neither Dealer or CCAR will be merged with or into, or
consolidate with, any other entity and none of the principal assets necessary
for the performance of Dealer's obligations under this Agreement will be
sold, transferred or assigned.
(iv) CCAR will not enter into any transaction, including, without
limitation, any sale, pledge, hypothecation or other transfer of any of the
currently outstanding capital stock of CCAR, the issuance or sale of
additional shares of capital stock or securities convertible into shares of
capital stock of CCAR, or the merger of CCAR with or into, or the
consolidation of CCAR, with any other entity, if as a result of such
transaction, the CCAR will cease to own at least 100% of the capital stock of
Dealer. Furthermore, Gilliland agrees that any transfer of his ownership
interest in CCAR, or other action (such as dilution due to an acquisition),
which would decrease his overall ownership in CCAR to less than 20%, also
requires the prior written consent from Seller, which will not be
unreasonably withheld.
Any transaction involving the capital stock of CCAR which does not
violate subparagraph (ii). (iii) and (iv) above may be effected without
obtaining the prior written consent of Seller and without triggering a
termination event under Section 12.A.(2) of the Standard Provisions.
Dealer shall give Seller prior notice of any proposed change in said
ownership requiring the consent of Seller and immediate notice of the death
or incapacity of any Dealer Principal or Executive Manager. No such change,
and no assignment of this Agreement or of any right or interest herein, shall
be effective against Seller unless and until embodied in an appropriate
amendment to or assignment of this Agreement, as the case may be, duly
executed and delivered by Seller and by Dealer. Seller shall not, however,
unreasonably withhold its consent to any such change, subject to Seller's
rights of First refusal set forth in Article Tenth of this Agreement.
Seller shall have no obligation to transact business with any person who
is not named either as a Dealer Principal or Executive Manager of Dealer
hereunder or otherwise to give effect to any proposed sale or transfer of the
ownership of Dealer or CCAR or management of Dealer or CCAR (other than
changes in the ownership of CCAR which are permitted by this Article Third)
prior to having concluded the evaluation of such a proposal as provided in
Section 15 of the Standard Provisions. Dealer acknowledges Seller's right to
require consent to any change in the ownership of Dealer and agrees that any
change or transfer without such consent from Seller is void, and of no force
and effect, and grounds for termination. Dealer and CCAR further agree that
either will not challenge, contest, dispute, or litigate:
(i) any action taken by Seller (including, without limitation,
termination of this Agreement) in response to an attempt to transfer
ownership of Dealer or CCAR ( which is expressly not permitted by this
Article Third) without Seller's consent; or
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(ii) any decisions by Seller to withhold consent to a proposed change in
ownership of Dealer or CCAR (which is expressly not permitted by this Article
Third).
The stock certificates representing the stock of Dealer will have
legends which notify a potential purchaser of such stock of the limitations
on transfer set forth in this Article Third. Dealer and CCAR represent and
agree that none of Dealer will register their capital stock, or securities
convertible into their capital stock for sale or resale to the public under
any state or federal securities laws. CCAR agrees that no capital stock, or
securities convertible into capital stock, of Dealer will be issued, sold or
otherwise transferred by Dealer or CCAR, directly or indirectly, to any
automobile manufacturer or distributor or any affiliate thereof or to any
person who has an interest, direct or indirect, in any automobile
manufacturer, distributor or dealership or anyone who could reasonably be
considered a competitor or potential competitor of Seller.
ARTICLE FOURTH: Management
(a) This Agreement has been entered into by Seller in reliance upon,
and in consideration of, among other things, the personal qualifications,
expertise, reputation, integrity, experience, ability and representations
with respect thereto of the person named as Dealer Principal in the Final
Article of this Agreement and in reliance on the following representations
and agreements of Dealer and CCAR that:
(i) Rice and the officers listed herein will, subject to any other
obligations set forth in this Agreement, devote 100% of their time to the
business and day-to-day operations of the entity for which they are
responsible.
(ii) Robbins will devote 100% of his time to the affairs of Dealer.
(b) DEALER. Seller and Dealer agree that the retention by Dealer of
qualified management is of critical importance to the successful operation of
Dealer and to the achievement of the purposes and objectives of this
Agreement. This Agreement has been entered into by Seller in reliance upon,
and in consideration of, among other things, the personal qualifications,
expertise, reputation, integrity, experience, ability and representations
with respect thereto of the persons named as Dealer Principal and Executive
Manager in the Final Article of this Agreement and in reliance on the
following representations and agreements of Dealer, and CCAR that:
(i) Robbins is currently employed as the Executive Manager of Dealer.
As long as Rice is employed by CCAR and Robbins is employed by Dealer, they
will have full and complete control over the Dealership Operations, subject
only to the powers of the Board of Directors of Dealer to manage the business
and affairs of Dealer, and they will at all times be members of the Board of
Directors of Dealer. In addition, any replacements for Rice and Robbins will,
so long as such replacements are employed by CCAR and Dealer, have full and
complete control over the Dealership Operations, subject only to the powers
of the Board of Directors of Dealer to manage the business and affairs of
Dealer, and such replacements will at all times be members of the Board of
Directors of Dealer.
(ii) the Board of Directors of Dealer shall delegate the management of
the Dealership Operations to Rice and Robbins and Dealer will not amend its
Certificate of Incorporation or By-laws to provide that its Board of
Directors is entitled to exercise any extraordinary powers or interfere
unduly in the Dealership Operations.
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(iii) Robbins will, subject to any other obligations set forth in this
Agreement, continually provide his personal services in operating the
dealership and will be physically present at the Dealership Facilities on a
full-time basis.
(c) CHANGES IN MANAGEMENT. In view of the fact that this is a personal
services Agreement with the Dealer Principal and Executive Manager and in
view of its objectives and purposes, Dealer and CCAR agree that any change in
the Dealer Principal or Executive Manager from that specified in the Final
Article of this Agreement requires the prior written consent of Seller. In
addition, CCAR agrees that no chief executive officer, or person performing
services and having responsibilities similar to a chief executive officer, of
CCAR will be appointed, directly or indirectly, without the prior written
consent of Seller. Dealer shall give Seller prior notice of any proposed
change in Dealer Principal or Executive Manager or the appointment of any
chief executive or similar officer of CCAR and immediate notice of the death
or incapacity of any Dealer Principal or Executive Manager. No change in
Dealer Principal or Executive Manager and no appointment of a chief executive
or similar officer of CCAR shall be effective unless and until embodied in an
appropriate amendment to this Agreement duly executed and delivered by all of
the parties hereto. Subject to the foregoing, Dealer and CCAR shall make
their own, independent decisions concerning the hiring and Erring of its
employees, including, without limitation, the Dealer Principal and Executive
Manager.
Dealer shall give Seller prior written notice of any proposed
change in Dealer Principal or Executive Manager and immediate notice of the
death or incapacity of Dealer Principal or Executive Manager. No change in
Dealer Principal or Executive Manager shall be effective unless and until
embodied in an appropriate amendment to this Agreement duly executed and
delivered by all of the parties hereto. Dealer acknowledges Seller's right
(as set forth herein and in the Standard Provisions) to require consent to
any change in the management of Dealer and Dealer and CCAR agree that a
change without such consent from Seller is void, of no force and effect, and
grounds for termination. Dealer and CCAR further agree that either will not
challenge, contest, dispute, or litigate:
(i) any action taken by Seller (including, without limitation,
termination of this Agreement) in response to an attempt to change the
management of Dealer without Seller's consent; or
(ii) any decision by Seller to withhold consent to a proposed change in
management of Dealer; or
(iii) any decision by Seller to withhold approval of a proposed
management candidate.
To enable Seller to evaluate and respond to Dealer concerning any
proposed change in Dealer Principal or Executive Manager or the appointment
of any chief executive or similar officer of CCAR, Dealer and CCAR agree to
provide, in the form requested by Seller and in a timely manner, all
applications and information customarily requested by Seller to evaluate the
proposed change. while Seller shall not unreasonably withhold its consent to
any such change, it is agreed that any successor Dealer Principal, Executive
Manager or chief executive or similar officer of CCAR must possess personal
qualifications, expertise, reputation, integrity, experience and ability
which are, in the opinion of Seller, satisfactory. Seller will determine
whether, in its opinion, the proposed change or appointment is likely to
result in a successful
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dealership operation with capable management that will satisfactorily perform
Dealer's obligations under this Agreement. Seller shall have no obligation to
transact business with any person who is not named as a Dealer Principal or
Executive Manager of Dealer hereunder prior to having concluded its
evaluation of such person.
Any successor Dealer Principal or Executive Manager and any chief
executive or similar officer of CCAR must meet the following minimum
requirements in order to be submitted to Seller for approval:
(i) At least three years of experience as a general manager of an
automobile dealer in a major metropolitan area or similar position involving
all aspects of the day-to-day operations of such an automobile dealership
(including, without limitation, new and used vehicle sales, service, parts
and administration); and
(ii) A demonstrated track record of success in his/her prior automobile
dealership activities as measured by the dealerships' performance under
his/her management. The dealership(s) shall have consistently demonstrated
at least the following:
1. An above average level of sales performance when measured
against regional or zone averages and as measured against sales performance
objectives established by the manufacturer; and
2. An above average level of customer satisfaction when
measured against regional or zone averages for the make; and
3. A history of cooperation and good relations with
manufacturer(s) and/or distributor(s).
(d) EVALUATION OF MANAGEMENT. Dealer and Seller understand and
acknowledge that the personal qualifications, expertise, reputation,
integrity, experience and ability of the Dealer Principal and Executive
Manager and their ability to effectively manage Dealer's day-to-day
Dealership Operations is critical to the success of Dealer in performing its
obligations under this Agreement. Seller may from time to time develop
standards and/or procedures for evaluating the performance of the Dealer
Principal and Executive Manager and of Dealer's personnel generally. Seller
may, from time to time, evaluate the performance of the Dealer Principal and
Executive Manager and will advise Dealer, the Dealer Principal and the
Executive Manager of the results of such evaluations and the way in which any
deficiencies affect Dealer's performance of its obligations under this
Agreement
(e) COMPENSATION OF EXECUTIVE MANAGER. Robbins will have a substantial
portion of his compensation tied to Dealer's overall performance with respect
to objectives for sales, market penetration and customer service which will
be established at quarterly intervals.
ARTICLE FIFTH: Additional Provisions
The additional provisions set forth in the attached "Nissan Dealer Sales
and Service Agreement Standard Provisions," bearing form number NDA-4S/9-88,
as amended in Article Thirteenth of this Agreement, and excepting only the
provisions contained in Sections 4, 14 and 16, are hereby incorporated in and
made a part of this Agreement The Notice of Primary Market Area, Dealership
Facilities Addendum, Product Addendum, Dealership Identification Addendum,
Holding Company Addendum, if applicable, and all Guides and Standards
referred
7
<PAGE>
to in this Agreement (including references contained in the Standard
Provisions referred to above) are hereby incorporated in and made a part of
this Agreement. Dealer further agrees to be bound by and comply with: the
Warranty Manual; Seller's Manuals or Instructions heretofore or hereafter
issued by Seller to Dealer; any amendment, revision or supplement to any of
the foregoing; and any other manuals heretofore or hereafter issued by Seller
to Dealer.
ARTICLE SIXTH: Termination of Prior Agreements
This Agreement cancels, supersedes and annuls all prior contracts,
agreements and understandings except as stated herein, all negotiations,
representations and understandings being merged herein. No waiver,
modification or change of any of the terms of this Agreement or change or
erasure of any printed part of this Agreement or addition to it (except
Filling of blank spaces and lines) will be valid or binding on Seller unless
approved in writing by the President or an authorized Vice President of
Seller.
ARTICLE SEVENTH: Term
This Agreement shall have a term commencing on the effective date hereof
and, subject to its earlier termination in accordance with the provisions of
this Agreement, expiring on the expiration date indicated in the Final
Article of this Agreement Subject to other applicable provisions hereof, this
Agreement shall automatically terminate at the end of such stipulated term
without any action by Dealer, Seller or any of the other parties hereto.
ARTICLE EIGHTH: License of Dealer
If Dealer is required to secure or maintain a license for the conduct of
its business as contemplated by this Agreement in any state or jurisdiction
where any of its Dealership Operations are to be conducted or any of its
Dealership Facilities are located, this Agreement shall not be valid until
and unless Dealer shall have furnished Seller with written notice specifying
the date and number, if any, of such license or licenses issued to Dealer,
Dealer shall notify Seller immediately in writing if Dealer shall fall to
secure or maintain any and all such licenses or renewal thereof or, if such
license or licenses are suspended or revoked, specifying the effective date
of any such suspension or revocation.
ARTICLE NINTH: Additional Representations and Warranties
(a) All of the representations and covenants made to Seller by the
other parties to this Agreement have been made jointly and severally by each
of the parties hereto which has made any such representation or covenant
(b) In addition to the representations set forth elsewhere in this
Agreement, Dealer and CCAR jointly and severally, represent to Seller that:
(i) all of the documents and correspondence provided to Seller by
Dealer, CCAR, or any of their agents in connection with the solicitation of
Seller's consent to this Agreement are true and correct copies of such
documents.
(c) In addition to the covenants set forth elsewhere in this Agreement,
Dealer, CCAR, jointly and severally, agree with Seller that:
8
<PAGE>
(i) Dealer will at all times be involved in the operation of the Nissan
dealership currently operated by it and Dealer will not conduct any other
type of business.
(ii) no distributions will be made to the stockholders of Dealer or CCAR
if such distributions would cause Dealer to fail to meet any of the Guides
and Standards relating to the capitalization of Dealer. In particular, CCAR
will not be permitted to voluntarily redeem any of its preferred stock, if
prior to and after giving effect to such redemption Dealer fails to meet any
&f the Guides and Standards relating to capitalization of Dealer.
(iii) CCAR and Dealer hereby, jointly and severally, indemnify and hold
harmless, Seller, its officers, directors, affiliates and agents, and each
person who controls Seller within the meaning of the Securities Act of 1933,
as amended (the "Act"), from and against any and all losses, claims, damages
or liabilities, to which they or any of them may become subject under the
Act, the Securities Exchange Act of 1934, as amended, or any other federal or
state securities law, rule or regulation, at common law or otherwise, insofar
as such losses, claims, damages or liabilities arise out of the sale by the
CCAR or Dealer of any securities. The indemnification provided for in this
paragraph shall be exclusive of, and in addition to, any indemnification
pursuant to Section 10 of the Standard Provisions, any indemnification
provided by law and the indemnification agreement executed by CCAR and
Gilliland attached as Exhibit "B".
(iv) One of the conditions to the effectiveness of this Agreement by
Seller is that all of the parties hereto (other than Seller) shall have been
advised by their counsel that this Agreement has been duly executed and
delivered by each of such parties thereto (other than Seller) and is the
legal, valid and binding obligation of each of such parties.
ARTICLE TENTH:
A. Seller's Right of First Refusal
In addition to its rights under this Agreement, in the event that CCAR
or Dealer should desire to enter into a transaction, which if not approved by
Seller, would result in a breach of the covenants set forth in Article Third,
Sections (a)(i), (a)(ii), (a) (iii), (a) (iv) or (b) of this Agreement or in
the event that any of the covenants set forth in the fourth full paragraph of
Article Third, Section (b), Article Fourth, Section (a)(vii) or Article
Ninth, Section (c)(ii) of this Agreement are breached, Seller shall have the
additional right and option to purchase the dealership assets or ownership
interests pursuant to this Article Tenth.
(a) If Seller chooses to exercise its right of First refusal, it must
do so in its written refusal to consent to the proposed sale or transfer
pursuant to Section 15 of the Standard Provisions or, if Section 15 of the
Standard Provisions does not apply, within sixty (60) days of receipt of
notification that a event triggering Seller's right of First refusal
hereunder has occurred. Dealer agrees not to complete any proposed change or
sale prior to the expiration of the period for exercise of Seller's right of
First refusal and without Seller's prior written consent. Such exercise shall
be null and void if Dealer withdraws its proposal within thirty (30) days
following Dealer's receipt of Seller's notice exercising its rights of First
refusal.
(b) After being exercised, Seller's right to purchase may be assigned
to any party, and Seller hereby agrees to guarantee the full payment of the
purchase price by such assignee. Seller's rights under this Article Tenth
shall be binding on and enforceable against any assignee or successor in
interest of Dealer or purchaser of Dealer's assets. Seller shall have no
obligation to exercise its rights hereunder.
9
<PAGE>
(c) If Dealer has entered into a bona fide written buy/sell agreement
respecting its Nissan dealership, Seller's right under this Article Tenth
shall be a right of first refusal, enabling Seller to assume the prospective
purchaser's purchase rights and obligations under such buy/sell agreement.
The purchase price and other terms of sale shall be those set forth in such
agreement and any related documents. Seller may request and Dealer agrees to
provide all other documents relating to Dealer and the proposed transfer,
including, but not limited to, those reflecting any other agreements or
understandings between the parties to the buy/sell agreement. If Dealer
refuses either to provide such documentation or to state in writing that no
such document exists, it shall be presumed that the agreement is not bona
fide.
(d) If Seller determines pursuant to paragraph (c) above that the
buy/sell agreement is not bona fide, Seller will so notify Dealer. Dealer
shall have ten (10) days from its receipt of such notice within which to
withdraw its proposal. Seller's exercise of its rights hereunder shall be
null and void if Dealer withdraws its proposal within such time period. If
the proposal is not withdrawn, Seller shall have the option, but no
obligation, under this Article Tenth to purchase the principal assets of
Dealer utilized in the Dealership Operations, including real estate an)
leasehold interest or to purchase the ownership interests of Dealer, and to
terminate this Agreement and all rights granted Dealer hereunder. If the
Dealership Facilities are leased by Dealer from an affiliated company, the
right to purchase the principal assets, or the ownership interests, of
Dealer, shall include the right to lease the Dealership Facilities. The
purchase price shall be at the then fair market value as determined by an
independent appraiser selected by Seller and reasonably acceptable to CCAR
and the other terms of sale shall be those agreed by Seller, Dealer and CCAR.
(e) Dealer shall transfer the affected property with marketable title
free and clear of liens, claims, encumbrances.
(f) In addition to any other rights Seller may have at law, in equity
or hereunder, any conveyance of the dealership in violation of this right of
first refusal shall be voidable by Seller.
(g) In the event that Seller elects not to exercise its right to
purchase the dealership assets or the ownership interests of the Dealer, CCAR
agrees that it will. offer to sell such assets or interests to the Dealer's
then current management team or to some other entity or persons acceptable to
Seller. If such individuals are not interested in such a transaction and no
other entity or individuals acceptable to Seller can be found then this
Agreement will be terminable at Seller's option, by deliver of written notice
to Dealer.
B. Right of First Refusal on Sale or Lease of Property to a Third Party.
a) In addition to its rights under Articles Third and Fourth and
Section 15 of the Standard Provisions, Dealer agrees that should Dealer seek
to sell or lease all or substantially all of the Approved Site to a third
party for use as a Nissan New Motor Vehicle Dealership, Seller shall have the
additional right and option, but not the obligation, to purchase or lease the
Approved Site pursuant to this Article Thirteenth. A sale or lease for use
other than a Nissan New Motor Vehicle Dealership is void.
b) If Seller chooses to exercise its right of first refusal, it
must do so by written notice delivered to Dealer within 60 days of Seller's
receipt of notice of the proposed sale
10
<PAGE>
or lease by Dealer. Dealer agrees not to complete any proposed sale or lease
prior to the expiration of the period for exercise of Seller's right of first
refusal and without Seller's prior written consent, and agrees to allow
Seller to perform an environmental study of the property. Such exercise shall
be null and void if Dealer withdraws its sale or lease proposal within thirty
(30) days following Dealer's receipt of Seller's notice exercising its right
of first refusal.
c) After being exercised, Seller's right to purchase or lease may
be assigned to any party, and Seller hereby agrees to guarantee the full
payment of the purchase price or the rental payment by such assignee.
Seller's rights under this Article Thirteenth shall be binding on and
enforceable against any assignee or successor in interest of Dealer or
purchaser of Dealer's assets. Seller shall have no obligation to exercise its
rights hereunder, and Seller may rescind its offer if the property is
determined to be contaminated pursuant to an environmental study. Such
contamination shall be deemed a breach of this agreement by dealer.
d) Should Seller actually purchase or lease the facility, Dealer
shall also furnish to Seller copies of any easements, licenses, environmental
studies or other documents affecting the property.
e) Dealer shall transfer the affected property by deed conveying
marketable title free and clear of liens, claims, mortgages, encumbrances,
tenancies and occupancies, or, if applicable, by an assignment of any
existing lease. The Warranty Deed shall be in proper form for recording.
Dealer shall deliver complete possession of the property at the time of
delivery of the Deed or lease assignment. Dealer shall also furnish to
Seller copies of any easements, licenses, or other documents affecting the
property and shall assign any permits or licenses which are necessary for the
conduct of the Dealership Operations.
f) In addition to any other rights Seller may have at law, in
equity or hereunder, any sale or lease of the Approved Site in violation of
this right of first refusal shall be voidable by Seller.
C. Exclusivity Provisions.
In order for Dealer to maintain competitive Dealership Facilities to
effectively market Nissan Products, Dealer hereby agrees to abide by and
never challenge the following provisions (hereinafter "Exclusivity
Provisions"). These Exclusivity Provisions shall be effective on or before
the execution of the Agreement, and continue in effect thereafter so long as
Dealer (or its principals) are authorized Nissan dealers and these provisions
shall be binding on any successors-in-interest, assigns or purchasers of
Dealer:
a) The only line-make of new, unused motor vehicles which Dealer
shall display and sell at the Approved Site shall be the Nissan line and make
of motor vehicles. Dealer shall not conduct any dealership operations for any
other make or line of vehicles from the Approved Site.
11
<PAGE>
b) Dealer shall sell and maintain a full line of Genuine Nissan
Parts and Accessories at the Approved Site and shall provide a full range of
automotive servicing for Nissan vehicles at the Approved Site pursuant to
Section 5 of the Standard Provisions to the Agreement. Nothing contained
herein, however, shall preclude Dealer from offering parts, accessories or
servicing for vehicles of other lines or makes so long as such products or
services are incidental to Dealer's Nissan Dealership Operations;
c) Dealer shall not advertise or promote any make or line of new,
unused vehicles from the Approved Site other than the Nissan line; and
d) Dealer shall not install or maintain any sign at or near the
Approved Site which would tend to lead the public into believing that any
line or make of vehicles other than the Nissan line is sold at the Approved
Site.
ARTICLE ELEVENTH: Breach By Dealer
In the event (i) that any of the representations and warranties of
Dealer, CCAR, Rice or Robbins contained in this Agreement shall prove not to
have been true and correct when made or (ii) of any breach of violation of
any of the covenants made by Dealer, CCAR, Rice or Robbins in Articles Third,
Fourth and Ninth of this Agreement or upon the occurrence of any of the
events warranting termination of this Agreement as set forth in Section 12.A
of the Standard Provisions, Seller may terminate this Agreement, prior to the
expiration date hereof, by giving Dealer written notice thereof, such
termination to be effective upon the date specified in such notice, or such
latter date as may be required by any applicable statute with the effect set
forth in Section 13 of the Standard Provisions.
ARTICLE TWELFTH: Execution of Agreement
This Agreement, and any Addendum or amendment or notice with respect
thereto, shall be valid and binding on Seller only when it bears the
signature of either the President or an authorized Vice President of Seller
and, when such signature is a facsimile, the manual countersignature of an
authorized employee of Seller at the Director level and a duplicate original
thereof is delivered personally or by mail to the Dealership Location. This
Agreement shall bind Dealer and the other parties hereto only when it is
signed by: a duly authorized officer or executive of Dealer or such party if
a corporation; one of the general partners of Dealer or such party if a
partnership; or Dealer or such party if an individual.
ARTICLE THIRTEENTH: Amendments to Standard Provisions
(a) Section 1.0 of the Standard Provisions is hereby amended to read as
follows:
"O. 'Principal Owners(s)' shall mean the persons named as Dealer Principal
in the Final Article of this Agreement upon whose personal qualifications,
expertise, integrity, experience, ability and representations Seller has relied
in entering into this Agreement."
(b) Section 6.1 of the Standard Provisions is hereby amended to read as
follows:
"Seller shall have the right, at all reasonable times during regular
business hours, to inspect the Dealership Facilities and to examine, audit and
make and take copies of all records,
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<PAGE>
accounts and supporting data relating to the sale, sales reporting, service
and repair of Nissan Products by Dealer. whenever possible, Seller shall
attempt to provide Dealer with advance notice of an audit or examination of
Dealer's operations. Seller shall also have the right, at all reasonable
times during regular business hours and upon advance notice, to examine,
audit and make and take copies of all records, accounts and supporting data
of CCAR relating to the business, ownership or operations of Dealer."
(c) Section 12.A.(1) of the Standard Provisions is hereby amended to read
as follows:
"(1) Any actual or attempted sale, transfer, assignment or delegation,
whether by operation of law or otherwise, by Dealer or CCAR of any interest
in or right, privilege or obligation under this Agreement, or of the
principal assets necessary for the performance of Dealer's responsibilities
under this Agreement, without, in either case, the prior written consent of
Seller having been obtained, which consent shall not be unreasonably
withheld;"
(d) Section 12.A.(3) of the Standard Provisions is hereby amended to read
as follows:
"(3) Removal, resignation, withdrawal or elimination from Dealer for any
reason of the Executive Manager, or removal, resignation, withdrawal or
elimination from Dealer of Gilliland as Chairman, or removal, resignation,
withdrawal or elimination from Dealer of Robbins as President or Executive
Manager; provided, however, in each case, Seller shall give Dealer a
reasonable period of time within which to replace such person with a
individual satisfactory to Dealer as the case may be, and Seller in
accordance with Article Fourth of this Agreement; or the failure of Dealer to
retain an Executive Manager who, in accordance with Article Fourth of this
Agreement, in Seller's reasonable opinion, is competent, possesses the
requisite qualifications for the position, and who will act in a manner
consistent with the continued interests of both Seller and Dealer."
(e) Section 12.B.(2)(i) of the Standard Provisions is hereby amended
to read as follows:
"(i) any dispute, disagreement or controversy between or among Dealer,
CCAR or and any third party or between the owners and management personnel of
Dealer relating to the management or ownership of Dealer, CCAR develops or
exists which, in the reasonable judgment of Seller, tends to adversely affect
the conduct of the Dealership Operations or the interests of Dealer or
Seller; or"
(f) Section 12.B.(2)(ii) of the Standard Provisions is hereby amended to
read as follows:
"(ii) any other act or activity of Dealer, CCAR or, or any of their
owners or management occurs, which substantially impairs the reputation or
financial standing of Dealer or any of its management subsequent to the
execution of this Agreement:"
(g) Section 3.B.I. of the Standard Provisions is hereby amended to read
as follows:
"1. Achievement of reasonable sales objectives which may be established
from time to time by Seller for Dealer as standards for performance, which,
because Dealer has indicated that the public structure of ownership of
Dealer's parent, CCAR, will not impair Dealer's operations and may, even
enhance Dealer's operations and performance, will include the requirement
that Dealer achieve at least regional average for sales penetration, Nissan
Purchase Index ("NPI") and Nissan Service Index ("NSI") and must maintain at
least regional average sales penetration, NPI and NSI at all times
thereafter. CCAR and Dealer understand and agree, in addition to
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<PAGE>
Seller's right to terminate under Section 12 of this Agreement, that Seller
will not consider any application for additional Nissan dealerships until
there is compliance with this provision.
FINAL ARTICLE
The Dealer is Performance Nissan, Inc., a corporation formed under the laws
of the State of Oklahoma. Dealer is located in Midwest City, OK.
The other parties to this Agreement are Cross-Continent Auto Retailers, Inc.,
a corporation incorporated under the laws of the state of Delaware ("CCAR),
Bill A. Gilliland ("Gilliland"), Emmett M. Rice, Jr. ("Rice") and Michael
Robbins ("Robbins").
The Dealer Principal is Emmett M. Rice, Jr.
The Executive Manager of Dealer is Michael Robbins.
Expiration Date: October 1, 1999
Working Capital Guide Requirement: $ 382,706
Net Worth Guide Requirement: $ 507,820
Flooring Line: $ 1,212,841
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
triplicate effective as of the 23rd day of September, 1996 at Carson,
California.
SELLER:
NISSAN DIVISION
NISSAN MOTOR DIVISION CORPORATION IN USA
By: /s/ NAME ILLEGIBLE By: /s/ J.C. FASSINO
---------------------------------- --------------------------------
Its: Vice President Nissan Division Its: Regional Vice President
PERFORMANCE NISSAN, INC.
By: /s/ BILL A. GILLILAND
--------------------------------
Its: President
--------------------------------
CROSS-CONTINENT AUTO RETAILERS, INC.
By: /s/ BILL A. GILLILAND
--------------------------------
Its: Chairman & CEO
--------------------------------
/s/ EMMETT M. RICE, JR.
- -------------------------------------
EMMETT M. RICE, JR.
/s/ MICHAEL ROBBINS
- -------------------------------------
MICHAEL ROBBINS
/s/ BILL A. GILLILAND
- -------------------------------------
BILL A. GILLILAND
15
<PAGE>
Exhibit B
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT ("Agreement"), made this 23rd day of September
1996 between Cross-Continent Auto Retailers, Inc., a Delaware corporation the
address of which is 1201 South Taylor Street, Amarillo, Texas 79101
("C-Car"), BILL A. GILLILAND, an individual with an address at 1201 South
Taylor Street, Amarillo, Texas 79101, ("Gilliland") (C-Car and Gilliland are
hereinafter referred to as the "Indemnitors") and Nissan Motor Corporation in
U.S.A., a corporation the address of which is 18501 South Figueroa Street,
P.O. Box 191, Gardena, CA 90248-0191 ("Nissan").
WITNESSETH
WHEREAS, C-Car was formed in May, 1996 and in June 1996 acquired all of
the capital stock of various automobile dealerships, including Quality
Nissan, Inc. of Amarillo Texas ("Quality Nissan") and Performance Nissan,
Inc. of Midwest City, Oklahoma ("Performance Nissan') (Quality Nissan and
Performance Nissan will be collectively referred to in this Agreement as "the
Dealerships").
WHEREAS, C-Car intends to offer and sell approximately 3,675,000 shares
of C-Car (the "Shares") in a public offering pursuant to the Securities Act
of 1933, as amended (the "Act");
WHEREAS, C-Car intends to use a portion of the proceeds from the public
offering to acquire, among other things, a Dodge automobile dealership, repay
debt and provide cash for working capital and general corporate purposes;
WHEREAS, prior to the formation of and acquisitions by C-Car, Gilliland
controlled the Dealerships, Gilliland will remain the principal stockholder
of C-Car immediately following the public offering;
WHEREAS, Nissan has consented to the transfer of the Dealerships, and
has agreed to enter into a Nissan Dealer Sales and Service Agreement (the
"Sales and Service Agreement")
-1-
<PAGE>
with C-Car, Gilliland and the Dealerships whereby Gilliland and Emmett Rice
Jr. will serve as Dealer Principals for Quality Nissan and Performance Nissan
respectively and for which Kenneth Knight and Emmett Rice Jr. will serve as
Executive Manager for Quality Nissan and Performance 'Nissan respectively;
WHEREAS, Nissan is not involved in the public offering of the Shares and
has no control over C-Car's activities in connection with that offering or
the sale of the Shares; and
WHEREAS, in recognition of Nissan's desire for complete protection
against liability and potential legal action and in order to obtain Nissan's
consent to the transfer of the Dealerships and the execution of the Sales and
Service Agreement, the Indemnitors wish to provide in this Agreement for the
indemnification of and the advancing of expenses to Nissan as set forth
herein.
NOW, THEREFORE, in consideration of the mutual promises made herein and
for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereby agree as follows:
1. INDEMNITY OF NISSAN
The Indemnitors hereby agree to indemnify and hold harmless Nissan from
and against any and all losses, liabilities, judgments, amounts paid in
settlement, claims, damages and expenses whatsoever (collectively a "Claim"),
including, but not limited to, any and all expenses whatsoever incurred
investigating, preparing or defending against any litigation, commenced or
threatened, to which Nissan may become subject under the Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the securities laws of
any state (the "Blue Sky Laws"), any other statute or at common law or
otherwise under the laws of any foreign country, arising in connection with
the offer and sale of the Shares, including any claim based upon the
allegation that Nissan is a "controlling person" within the meaning of 15 of
the Act or 20(a) of the Exchange Act. In addition, the Indemnitors hereby
agree to indemnify and hold harmless Nissan from any and all claims of the
shareholders of C-Car with respect to any matter, PROVIDED, that if it is
ultimately determined, based upon a final decision of a court, arbitrator or
other authorized panel or a settlement entered into by the parties to the
dispute and consented to by Nissan that Nissan
-2-
<PAGE>
was liable for such Claim in whole or in part, the indemnification set forth
herein shall be of no force or effect, and Nissan shall immediately reimburse
the Indemnitors for any expenses advanced by the Indemnitors pursuant to
paragraph 3 of this Agreement.
2. NOTIFICATION AND DEFENSE OF CLAIM
(a) If any claim is made or any litigation is commenced against Nissan
in respect of which indemnity may be sought pursuant to this Agreement,
Nissan shall promptly notify the Indemnitors in writing of the claim or the
commencement of any such litigation, and the Indemnitors shall then assume
the defense of any such litigation, including the employment and fees of
counsel (reasonably satisfactory to Nissan) and the payment of all such
expenses.
(b) Nissan shall have the right to employ its own counsel in any such
case to oversee the litigation on behalf of Nissan, to consult with the
attorneys engaged by the Indemnitors as to the proper handling of the
litigation and to take such actions in connection with the litigation as are
reasonably necessary to protect Nissan's interests. The Indemnitors shall pay
the reasonable fees and expenses of not more than one additional Firm of
attorneys for Nissan.
(c) The Indemnitors agree promptly to notify Nissan of the commencement of
any litigation against C-Car in connection with the issue and sale of the
Shares. C-Car and Nissan agree to cooperate with each other in the defense of
any litigation.
(d) The Indemnitors shall not be obligated to indemnify or reimburse
Nissan under this Agreement for any amounts paid in settlement of any
litigation effected without the Indemnitors' prior written consent. The
Indemnitors shall not, in the defense of any such litigation, except with
Nissan's prior written consent, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to Nissan of a release from all
liability in respect to such litigation. Neither the Indemnitors nor Nissan
shall unreasonably withhold its consent to any proposed settlement.
3. ADVANCEMENT OF EXPENSES
The Indemnitors agree that they will pay any and all expenses incurred
by Nissan in defending any claim, civil or criminal action, suit or
proceeding against Nissan in advance of the
-3-
<PAGE>
time such expenses are due. With respect to legal fees and disbursements of
Nissan's attorneys, the Indemnitors will pay such attorneys an advance
retainer of up to $20,000 and will pay additional fees and expenses of such
attorneys in increments of not more than $20,000 periodically in advance of
the dates that such fees and expenses are incurred.
4. ENFORCEMENT
(a) The Indemnitors expressly confirm and agree that they have entered
into this Agreement and assume the obligations imposed on them in order to
induce Nissan to consent to the transfer of the Dealerships and to execute
the Sales and Service Agreement and acknowledge that Nissan is relying upon
this Agreement, and other promises, to grant such consent. (b) In the event
Nissan is required to bring any action to enforce rights or to collect moneys
due under this Agreement and is successful in such action, the Indemnitors
shall reimburse Nissan for all of Nissan's reasonable fees and expenses in
bringing and pursuing such action.
5. SUBROGATION
(a) In the event of payment under this Agreement, the Indemnitors shall
be subrogated to the extent of such payment to all of the rights of recovery
of Nissan, which shall execute all papers required and shall do everything
that may be necessary to secure such rights, including the execution of such
documents necessary to enable the Indemnitors effectively to bring suit to
enforce such rights.
(b) The Indemnitors shall not be liable under this Agreement to make
any payment in connection with any Claim or litigation made against Nissan to
the extent Nissan has otherwise actually received payment (under any
insurance policy or otherwise) of the amounts otherwise indemnifiable
hereunder, provided, that nothing contained in this Agreement shall be deemed
to require Nissan to notify its insurance carriers with respect to any Claim
or litigation or to seek payments from such carriers with respect to such
Claim or litigation.
6. MISCELLANEOUS
(a) This Agreement shall be interpreted and construed in accordance
with the laws of the State of New York, without giving effect to the conflict
of law rules.
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<PAGE>
(b) This Agreement shall be binding upon and inure to the benefit of
C-Car, Gilliland and Nissan and their respective legal representatives,
successors and assigns.
(c) No amendment, modification or termination of this Agreement shall be
effective unless in writing and signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date First above written.
CROSS-CONTINENT AUTO RETAILERS, INC.
By: /s/ BILL A. GILLILAND
------------------------------------
its Chairman & CEO
By:
------------------------------------
Vice President & CEO
/s/ BILL A. GILLILAND
------------------------------------
BILL A. GILLILAND, Individually
NISSAN MOTOR CORPORATION U.S.A.
By: NAME ILLEGIBLE
-----------------------------------
Title: Vice President, Nissan Division
By: /s/ J.C. FASSINO
------------------------------------
Title: Regional Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
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0
0
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</TABLE>
