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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 March 31, 1997
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 X . No .
Number of shares outstanding of each of the issuer's classes of common stock,
as of May 14, 1997.
Class Shares Outstanding
- -------------------------- -------------------------
$.01 Par Value 14,079,020
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CROSS-CONTINENT AUTO RETAILERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands - Except Per Share Data)
(Unaudited)
Three Months Ended
March 31,
----------------------------
1997 1996
-------- -------
Revenues:
Vehicle sales $ 77,554 $ 64,009
Other operating revenue 11,468 7,220
-------- -------
Total Revenues 89,022 71,229
Cost of sales 73,839 59,896
-------- -------
Gross Profit 15,183 11,333
-------- -------
Operating Expenses:
Selling, general and administrative 10,901 7,537
Depreciation and amortization 381 270
-------- -------
11,282 7,807
-------- -------
Operating income 3,901 3,526
Other income (expense)
Interest income 736 219
Interest expense (1,211) (1,194)
-------- -------
Income before income taxes 3,426 2,551
Income tax provision 1,280 952
-------- -------
Net Income $ 2,146 $ 1,599
-------- -------
-------- -------
Net income per average common share $ .16
--------
--------
Weighted average common shares outstanding 13,800
--------
--------
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)
ASSETS
<TABLE>
March 31, 1997 December 31, 1996
-------------- -----------------
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 33,431 $ 36,946
Accounts receivable 15,122 18,629
Inventories 45,800 48,168
----------- -----------
Total current assets 94,353 103,743
Property and equipment, at cost, less
accumulated depreciation 13,854 13,391
Goodwill, net 22,002 22,094
Other assets 4,144 3,218
----------- -----------
Total assets $ 134,353 $ 142,446
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Floor plan notes payable $ 38,065 $ 46,282
Current maturities of long-term debt 1,345 1,345
Accounts payable 6,620 8,623
Due to affiliates 5,405 5,478
Accrued expenses and other liabilities 8,446 7,408
Deferred income taxes 1,927 1,914
----------- -----------
Total current liabilities 61,808 71,050
Long-term debt 10,551 10,568
Deferred warranty revenue - long-term portion 1,615 2,310
----------- -----------
Total long-term liabilities 12,166 12,878
Stockholders' equity
Preferred stock, $.01 par value, 10,000 shares
authorized, none issued - -
Common stock, $.01 par value, 100,000,000 shares
authorized, 13,800,000 issued and outstanding 138 138
Paid-in capital 47,476 47,761
Retained earnings 12,765 10,619
----------- -----------
Total stockholders' equity 60,379 58,518
----------- -----------
Commitments and contingencies
Total liabilities and stockholders' equity $ 134,353 $ 142,446
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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CROSS-CONTINENT AUTO RETAILERS, INC.
COMBINED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
-------------------
1997 1996
------- -------
Cash flows from operating activities
Net income $ 2,146 $ 1,599
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 381 270
Proceeds from in-house extended warranty sales,
net of cancellations - 1,040
Amortization of deferred warranty revenue (472) (516)
Deferred taxes and other 14 116
(Increase) decrease in
Accounts receivable 3,507 (914)
Inventory 2,367 7,639
Other assets (927) -
Increase (decrease) in
Accounts payable - trade (2,002) (215)
Accrued expenses and other liabilities 815 (534)
------- -------
Net cash provided by operating activities 5,829 8,485
------- -------
Cash flows used in investing activities
Acquisition of property and equipment (753) (323)
------- -------
Cash flows used in financing activities
Change in floor plan notes payable (8,216) (5,743)
Due to affiliates (73) (73)
Proceeds from borrowing on long-term debt 124 -
Long-term debt repayments (141) (382)
Other (285) -
------- -------
Net cash used in financing activities (8,591) (6,198)
------- -------
Increase - (Decrease) in cash and cash equivalents (3,515) 1,964
Cash and cash equivalents at beginning of period 36,946 8,362
------- -------
Cash and cash equivalents at end of period $33,431 $10,326
------- -------
------- -------
The accompanying notes are an integral part of these financial statements.
4
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CROSS-CONTINENT AUTO RETAILERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1997
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 three months ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1997. This interim report should be read in conjunction with the
consolidated financial statements and notes related thereto, and management's
discussion and analysis of results of operations and financial condition
included in Cross-Continent Auto Retailers, Inc.'s ("C-CAR" or the "Company")
Annual Report on Form 10-K for the year ended December 31, 1996. The
accompanying unaudited consolidated financial statements have been subject to
review by Price Waterhouse, L.L.P., the Company's independent accountants,
whose report is included herein.
NOTE 2. INITIAL PUBLIC OFFERING
In September 1996, the Company sold 3,675,000 shares of its common stock
(the "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 $45.2 million.
NOTE 3. NET INCOME PER COMMON SHARE
Earnings per share data are not presented for the three months ended
March 31, 1996 because the historical capital structure prior to the
Company's Offering is not comparable to the capital structure existing after
the Offering.
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Financial Accounting Standard No. 128, Earnings Per Share ("FAS 128"),
which is effective for financial statements issued for periods ending after
December 16, 1997, including interim periods. Effective December 31, 1997,
the Company will adopt FAS 128, which establishes standards for computing and
presenting earnings per share ("EPS"). The statement requires dual
presentation of basic and diluted EPS on the face of the income statement for
entities with complex capital structures and requires a reconciliation of the
numerator and denominator of the basic EPS computation, to the numerator and
denominator of the diluted EPS computation. Basic EPS excludes the effect of
potentially dilutive securities while diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised, converted, or resulted in the issuance of common stock
that would then share in the earnings of the entity.
Pro-forma basic and diluted EPS as computed pursuant to FAS 128 would
not have differed from the reported $0.16 per common share as presented on
the face of the consolidated statement of operations.
5
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NOTE 4. RELATED PARTY TRANSACTIONS
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 three months ended March 31,1997 and 1996 the Company
paid Plains Air, Inc. an aggregate of $112,536 and $70,155, respectively, for
the use of the airplane.
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") and Chrysler Financial Credit ("CFC")
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 and CFC, the Company may deposit funds with both
financial institutions 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 and CFC. The Company acts only as an
intermediary in this process. At March 31, 1997, funds advanced and
outstanding from affiliates approximated $5.4 million. 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 three months ended March 31, 1997 and 1996
approximated $112,745 and $40,000, respectively.
Gilliland Group Family Partnership ("GGFP") was the contracting agent
for the construction of certain facilities for the Company during the first
quarter of 1997. The total cost of the facilities approximated $389,000
during the first quarter of 1997. Such amount included approximately $27,000
as payment to GGFP for architectural and construction management fees.
NOTE 5. SUBSEQUENT EVENTS
On March 3, 1997, the Company announced the proposed acquisition of
Sahara Nissan, Inc., in Las Vegas, Nevada, which operates as Jack Biegger
Nissan ("Bigger Nissan"). The proposed purchase price is approximately $11.6
million consisting of $9 million in cash, $2 million in the Company's Common
Stock, and $0.6 million in a note payable to the sellers. Additionally, on
April 7, 1997, the Company announced the proposed acquisition of certain
assets of JRJ Investments, Inc., d/b/a Chaisson Motor Cars and Chaisson BMW,
a multiple-franchise auto dealership group, operating in Las Vegas, Nevada
and Henderson, Nevada. The proposed purchase price is approximately $27.5
million consisting of $19.5 million in cash, $5 million in the Company's
Common Stock and $3 million in a note payable to the seller. The Company
intends to fund the cash portion of these acquisitions with debt which is
currently being negotiated. These acquisitions will be accounted for under
the purchase method of accounting and the operations relating thereto will be
consolidated commencing at the effective date of each transaction. While
management believes these acquisitions and the related financing will be
completed in the near future, there can be no assurances to that effect until
the transactions actually close.
6
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On April 10, 1997, the Company purchased all of the outstanding capital
stock of each of Douglas Toyota, Inc., a Colorado corporation, and Toyota
West Sales and Service, Inc., a Nevada corporation, together with certain
real estate to be used in connection with both dealerships. The dealerships
were purchased in exchange for an aggregate consideration consisting of
279,720 shares of common stock with certain registration rights, par value
$.01 per share, of the Company, cash in the amount of $28,000,000 and an
unsecured promissory note in the principal amount of $7,000,000, payable on
March 31, 2002, bearing an adjustable rate of interest equal to the prime
rate quoted by Bank of America, as published in the western edition of the
Wall Street Journal. The Colorado property was purchased for consideration
consisting of a promissory note, secured by the property, in the principal
amount of $2,000,000, payable on October 1, 1997, bearing an adjustable rate
of interest equal to the prime rate quoted by Bank of America, as published
in the western edition of the Wall Street Journal. The Nevada property was
purchased for consideration consisting of a promissory note, secured by the
property, in the principal amount of $5,500,000, payable on October 1, 1997,
bearing an adjustable rate of interest equal to the prime rate quoted by Bank
of America, as published in the western edition of the Wall Street Journal.
The property was purchased to relocate the existing dealerships to newly
constructed facilities. Management estimates the total cost of the
locations, including construction costs, to be in the range of $18 million to
$20 million.
The cash portion of the purchase price for the dealerships was provided
by $22,000,000 of the proceeds from the Offering and $6,000,000 of borrowings
from Amarillo National Bank evidenced by an unsecured promissory note,
payable in twelve consecutive quarterly principal payments with a final
maturity of March 30, 2000, bearing an adjustable rate of interest equal to
LIBOR, as published in Wall Street Journal on the first business day of the
month, plus 200 basis points. In connection with the foregoing transactions,
Mr. R. Douglas Spedding, the sole shareholder of each of the dealerships,
entered into an employment agreement with the Company under which he agreed
to be employed by the Company until April 1, 2000. Pursuant to the terms of
the employment agreement, R. Douglas Spedding shall receive a base
compensation of $500,000 annually, an amount equal to 2% of the consolidated
pre-tax earnings of the Company paid on a quarterly basis and an amount equal
to 2% of the consolidated pre-tax earnings of the Company paid in non-
qualified stock options. Additionally, the Company entered into an
employment agreement with Mr. Douglas J. Spedding under which he agreed to be
employed by the Company until June 1, 2000. Pursuant to the terms of the
employment agreement, Douglas J. Spedding shall receive an amount equal to 7%
of the pre-tax earnings of the Toyota West Sales and Service, Inc.,
dealership, paid on a monthly basis.
The Company will file combined audited financial statements for the two
dealerships as of December 31, 1996 and 1995 and for the three year period
ended December 31, 1996, unaudited interim financial information as of and
for the three month period ended March 31, 1997 and 1996 and the required
pro-forma information within the prescribed filing time as required for
Current Report on Form 8-K.
NOTE 6. CONTINGENCIES
On April 4, 1997, certain members of a labor union initiated a strike at
a General Motors' new vehicle assembly plant in Oklahoma City, Oklahoma; and
on April 22, 1997, labor also initiated a strike at a General Motors' new
vehicle assembly plant in Pontiac, Michigan. General Motors has represented
that it has experienced a disruption in the production of certain of its new
7
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vehicles, including the popular extended cab pickup truck which is assembled
at the Pontiac, Michigan plant. The Company relies on General Motors as the
primary source of new vehicle inventory for its three Chevrolet dealerships
in the Amarillo, Texas market. As of the date of this filing, General Motors
has not announced a resolution to these strikes.
On April 9, 1997, labor initiated a strike at a Chrysler engine plant in
Detroit, Michigan. Chrysler has represented that it has experienced a
disruption in the production of certain of its new vehicles as a result of
the strike. On May 9, 1997, Chrysler announced a resolution to the strike.
The Company relies on Chrysler as the primary source of new vehicle inventory
for its two Dodge dealerships in the Oklahoma City market.
A continuation of the strikes discussed herein, or any other disruptions
in the availability of new vehicle inventory from the manufacturers, could
have an adverse affect on new vehicle sales at the Company's Chevrolet and
Dodge dealerships in the second quarter.
8
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INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
Cross-Continent Auto Retailers, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Cross-Continent Auto Retailers, Inc. and its subsidiaries (the "Company") as
of March 31, 1997, and the related consolidated statements of income and cash
flows for the three month period ended March 31, 1997. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objection of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of December 31,
1996, and the related consolidated statements of income, shareholders'
equity, and cash flows for the year then ended (not presented herein) and in
our report dated February 13, 1997, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of December 31, 1996,
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
PRICE WATERHOUSE, LLP
Fort Worth, Texas
April 24, 1997
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Cross-Continent Auto Retailers, Inc. ("C-CAR" or the "Company")
currently owns and operates a group of nine franchised automobile dealerships
in the Amarillo, Texas, Oklahoma City, Oklahoma, Denver, Colorado and Las
Vegas, Nevada markets. However, the financial condition and results of
operations reported herein are based solely upon the results of the seven
dealerships owned by C-CAR at March 31, 1997. The Company generates its
revenues from sales of new and used vehicles, fees for repair and maintenance
services, sales of replacement parts, and fees and commissions from arranging
financing, extended warranties, 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
The Company's total revenue increased 25.0% to $89.0 million in 1997
from $71.2 million in 1996. New vehicle sales increased 0.9% to $34.9
million in 1997 from $34.6 million in 1996, primarily because of the
acquisition of the Company's Lynn Hickey Dodge dealership in Oklahoma City.
The inclusion of the results of this dealership accounted for the overall
increase in new vehicle sales in 1997. The increase in new vehicle revenue
from the Company's Oklahoma City acquisition was offset by a lower demand for
new vehicles in the Company's Amarillo market and Oklahoma City market. This
lower demand is attributable to adverse weather conditions in the Company's
trade areas and a lower demand for new vehicles consistent with trends being
experienced in the automotive retail industry.
Used vehicle sales increased 45.7% to $42.7 million in 1997 from $29.3
in 1996. The inclusion of the results Company's Lynn Hickey Dodge acquisition
accounted for 91.8% of this increase in used vehicle sales. The Company
attributes the remaining increase to its market strategy for used vehicle
inventory management and increasing demand for used vehicles as the price of
new vehicles continues to increase.
The Company's other operating revenue increased 59.7% to $11.5 million
for 1997, compared to $7.2 million for 1996 primarily due to inclusion of the
Company's Lynn Hickey Dodge acquisition in the 1997 results of operations.
The Oklahoma City acquisition accounted for approximately 63.0% of the
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increase in other operating revenue. The remaining increase in other
operating revenue can be largely attributed to the Company, since July 1996,
selling third party vendor warranties at its dealerships rather than its own
warranties. Historically, the Company principally sold its own in-house
extended warranty at its dealerships and recognized the resulting revenue
over the term of the warranties. In contrast, upon the sale of third party
extended warranties the Company receives and immediately recognizes
commission income at the time of sale as the Company has no further
obligation pursuant to the extended warranty contracts.
On April 4, 1997, certain members of a labor union initiated a strike at
a General Motors' new vehicle assembly plant in Oklahoma City, Oklahoma; and
on April 22, 1997, labor also initiated a strike at a General Motors' new
vehicle assembly plant in Pontiac, Michigan. General Motors has represented
that it has experienced a disruption in the production of certain of its new
vehicles, including the popular extended cab pickup truck which is assembled
at the Pontiac, Michigan plant. The Company relies on General Motors as the
primary source of new vehicle inventory for its three Chevrolet dealerships
in the Amarillo, Texas market. As of the date of this filing, General Motors
has not announced a resolution to these strikes.
On April 9, 1997, labor initiated a strike at a Chrysler engine plant in
Detroit, Michigan. Chrysler has represented that it has experienced a
disruption in the production of certain of its new vehicles as a result of
the strike. On May 9, 1997, Chrysler announced a resolution to the strike.
The Company relies on Chrysler as the primary source of new vehicle inventory
for its two Dodge dealerships in the Oklahoma City market.
A continuation of the strikes discussed herein, or any other disruptions
in the availability of new vehicle inventory from the manufacturers, could
have an adverse affect on new vehicle sales at the Company's Chevrolet and
Dodge dealerships in the second quarter.
GROSS PROFIT
Gross profit increased 34.5% in 1997 to $15.2 million from $11.3 million
in 1996 primarily due to the recently acquired Lynn Hickey Dodge dealership
and due to selling third party extended warranties as opposed to in-house
warranties which the company sold during the 1996 period. Gross profit as a
percentage of sales increased to 17.1% in 1997 from 15.9% in 1996. The
increase in gross profit as a percentage of sales is primarily attributable
to higher gross margins on other operating revenue. Gross margin on other
operating revenue increased to 64.8% in 1997 as compared to 61.2% in 1996.
The increase in gross margin is also attributable to higher margin revenue
components representing an increased percentage of gross revenues.
The amount of revenue recognized related to the in-house warranties sold
in prior periods, which was deferred and amortized over the contractual
service period of the warranty contracts, will decline each quarter and will
eventually cease at the expiration of the warranty periods. As a result,
gross margin will be negatively impacted during future periods.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company's selling, general and administrative expenses increased to
$10.9 million, or 12.2% of the Company's revenues, in 1997 from $7.5 million,
or 10.5% of total revenues, in 1996.
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The increase is primarily attributable to incremental assimilation
expenses associated with the acquisition of the Company's Oklahoma City
dealerships. These expenses relate to integrating the Company's systems into
their operations and implementing the Company's strategies. 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.
INTEREST EXPENSE
The Company's interest expense, net of interest income, decreased
approximately 51.3% to $475,000 for 1997 compared to $975,000 for 1996. The
decrease is attributable to interest income earned from the investment of the
remaining portion of the proceeds from the Offering. For the three months
ended March 31, 1997 this income approximated $573,000. The interest income
was partially offset by an increase in interest expense due to the Company's
Lynn Hickey Dodge acquisition.
Net interest expense is expected to increase throughout 1997 as the
Company uses the proceeds from the Offering to acquire additional dealerships
and due to increased floor plan financing associated with the newly acquired
dealerships.
INCOME TAXES
The Company's effective income tax rate remained consistent at 37.4% for
1997 and 1996. Management expects the effective tax rate in 1997 to
approximate 37.5% to 38.0%.
NET INCOME
The Company's net income increased approximately 31.3% to $2.1 million
in 1997 compared to $1.6 million in 1996. The increase was primarily
attributable to the Company's Lynn Hickey Dodge acquisition, 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.
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
CFC. Floor plan financing from GMAC currently represents the primary source
of financing for vehicle inventories.
The Company currently finances its purchases of new vehicle inventory
with GMAC and CFC. The Company also maintains lines of credit with GMAC and
CFC for the financing of used vehicles, pursuant to which GMAC and CFC
provide 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
and CFC receive a security interest in all inventory they finance. The
Company makes monthly interest payments on the amounts financed by GMAC and
CFC. 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
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Company. The Company periodically renegotiates the terms of its financing
with GMAC and CFC, including the interest rate. As of March 31, 1997, the
Company had outstanding floor plan debt of $38.1 million and paid an average
annual interest rate of 8%.
During the first three months of 1997, the Company generated net cash of
$5.8 million from operating activities, compared to $8.5 million for the
three months ended March 31, 1996. The decrease is primarily attributable to
fluctuations in inventory levels and accounts receivable, partially offset by
decreased accounts payable. The fluctuation in inventory levels is primarily
determined by timing of new vehicle deliveries from the automakers, seasonal
factors and changes in the optimal level of inventory as determined by
management based on inventory management strategies.
Cash used in investing activities of $753,000 during the first three
months of 1997 were primarily capital expenditures. Capital expenditures for
the second quarter are expected to approximate $8,500,000 relating primarily
to the purchase of land and interim construction advances at Toyota West,
Inc. and Douglas Toyota, Inc., which will be financed through a $7.5 million
note to the seller and 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 used in financing activities amounted to $8.6 million for the three
months ended March 31, 1997 and was primarily attributable to reduced
floorplan notes payable. The reduction in floorplan financing in 1997 was
greater than the reduction in inventory which was primarily due to the
Company using a portion of its excess cash to reduce floorplan financing. The
Company anticipates the relation of floorplan financing to inventory to
increase to March 31, 1996 levels as the Company uses excess cash to fund
future acquisitions. In 1996 cash provided by financing activities reflected
a decrease in inventory financing and loans from affiliates.
The Company believes that its existing capital resources, including the
remaining proceeds of the Offering, will be sufficient to run the 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 will be required to pay this
liability in 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
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of management, could be expected to have a material adverse effect on the
business, financial condition or results of operations of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) LISTING OF EXHIBITS
(Exhibits followed by an (*) constitute management contracts or
compensatory plans or arrangements.)
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. (1)
2.2 Stock Purchase Agreement, dated as of January 23, 1997, by
and between Cross-Continent Auto Retailers, Inc. and R.
Douglas Spedding (2)
2.3 Amendment to Stock Purchase Agreement dated as of April 1,
1997, by and between Cross-Continent Auto Retailers, Inc.
and R. Douglas Spedding (3)
2.4 Stock Purchase Agreement dated as of February 28, 1997,
among Cross-Continent Auto Retailers, Inc., Jack Biegger,
Dale Edwards, and Sahara Datsun, Inc., d/b/a Jack Biegger
Nissan, as amended by the Amendment to Stock Purchase
Agreement dated as of March 17, 1997, among Cross-Continent
Auto Retailers, Inc., Jack Biegger, Dale Edwards, and
Sahara Nissan, Inc., d/b/a Jack Biegger Nissan (4)
2.5 Second Amendment to Stock Purchase Agreement dated as of
April 30, 1997, by and between Cross-Continent Auto
Retailers, Inc., Jack Biegger, Dale Edwards, and Sahara
Datsun, Inc., d/b/a Jack Biegger Nissan, as amended by the
Amendment to Stock Purchase Agreement dated as of March 17,
1997, among Cross-Continent Auto Retailers, Inc., Jack
Biegger, Dale Edwards, and Sahara Nissan, Inc., d/b/a Jack
Biegger Nissan
2.7 Purchase Agreement dated as of March 1, 1997, between RDS,
Inc. and Cross-Continent Auto Retailers, Inc.(omitting
exhibits thereto, which will be furnished supplementally to
the Commission upon request) (3)
2.8 Purchase Agreement dated as of March 1, 1997, between R.
Douglas Spedding and Cross-Continent Auto Retailers,
Inc.(omitting exhibits thereto, which will be furnished
supplementally to the Commission upon request) (3)
2.6 Asset Purchase Agreement dated as of April 16, 1997, by and
between JRJ Investments, Inc., a Nevada corporation, as
seller, The Chaisson Family Trust-R501, the shareholders
and the Company, as buyer
3.1 Amended and Restated Certificate of Incorporation of
Cross-Continent Auto Retailers, Inc. (5)
3.3 Amended and Restated Bylaws of Cross-Continent Auto
Retailers, Inc. (5)
4.1 Specimen Common Stock Certificate (5)
4.2 Rights Agreement between Cross-Continent Auto Retailers,
Inc. and The Bank of New York, as rights agent (5)
4.3 Amended and Restated 1996 Stock Option Plan of Cross-Continent
Auto Retailers, Inc. (6)
14
<PAGE>
4.4 Registration Rights Agreement dated as of April 1, 1997, by
and between Cross-Continent Auto Retailers, Inc. and R.
Douglas Spedding (3)
10.1 Dealer 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 (1)(7)
10.2 Sales and Service Agreement between Performance Dodge, Inc.
and Chrysler Corporation, dated as of October 1, 1996 (1)
10.3 Dealer Sales and Service Agreement dated September 23,
1996, between the Nissan Division of Nissan Motor
Corporation, U.S.A., Quality Nissan, Inc. and Cross-Continent
Auto Retailers, Inc. (8)
10.4 Dealer Sales and Service Agreement dated September 23,
1996, between the Nissan Division of Nissan Motor
Corporation, U.S.A., Performance Nissan and Cross-Continent
Auto Retailers, Inc. (5)
10.4 Dollar Volume Contract dated March 31, 1994, between Plains
Chevrolet, Inc., Westgate Chevrolet, Inc., Midway
Chevrolet, Inc., Quality Nissan, Inc. and Amarillo Globe News (1)
10.5 Sublease Agreement dated June 1, 1995, between Gilliland
Group Family Partnership and Performance Nissan, Inc. (1)
10.6 Lease Agreement dated March 1, 1994, among John W. Adams,
Eleanore A. Braly as Trustee of the Eleanore A. Braly
Trust, Romie G. Carpenter, Melody Lynn Goff, and Selden
Simpson and Quality Nissan, Inc. (1)
10.7 Office Lease dated June 1, 1996, between Gilliland Group
Family Partnership and Cross-Country Auto Retailers,
Inc.(now named Cross-Continent Auto Retailers, Inc.) (1)
10.8 Wholesale Security Agreement, as amended, dated December 4,
1995, between General Motors Acceptance Corporation and
Performance Dodge, Inc. (1)(9)
10.9 Corporation and Shareholders' Agreement of Xaris Management
Co. (1)
10.10 Documents dated December 4, 1995, relating to $5,550,000
loan by General Motors Acceptance Corporation to
Performance Dodge, Inc. (1)
10.10.1 Promissory Note by Performance Dodge, Inc. to General
Motors Acceptance Corporation, in the amount of $1,850,000 (4)
10.10.2 Promissory Note by Performance Dodge, Inc. to General
Motors Acceptance Corporation, in the amount of $3,700,000 (4)
10.10.3 Cross-Default and Cross-Collateralization Agreement between
General Motors Acceptance Corporation and Performance
Dodge, Inc. (4)
10.10.4 Security Agreement between General Motors Acceptance
Corporation and Performance Dodge, Inc. (4)
10.10.5 Mortgage, Assignment and Security Agreement between General
Motors Acceptance Corporation and Performance Dodge, Inc. (4)
10.11 Documents relating to loan by General Motors Acceptance
Corporation to Midway Chevrolet, Inc. (1)
10.11.1 Promissory Note dated December 15, 1989, by Midway
Chevrolet, Inc. to General Motors Acceptance Corporation,
in the amount of $977,249.74 (4)
10.11.2 Renewal, Extension and Modification Agreement dated
February 20, 1995, between General Motors Acceptance
Corporation and Midway Chevrolet, Inc. (4)
10.11.3 Security Agreement dated February 20, 1995, between General
Motors Acceptance Corporation and Midway Chevrolet, Inc. (4)
10.12 Documents dated December 4, 1995, relating to $1,350,000
loan by General Motors Acceptance Corporation to
Performance Nissan, L.L.C. (1)
15
<PAGE>
10.12.1 Promissory Note by Performance Nissan, L.L.C. to General Motors
Acceptance Corporation, in the amount of $1,350,000 (4)
10.12.2 Cross-Default and Cross-Collateralization Agreement between
General Motors Acceptance Corporation and Performance
Nissan, L.L.C. (4)
10.12.3 Security Agreement between General Motors Acceptance
Corporation and Performance Nissan, L.L.C. (4)
10.13 Documents relating to used vehicle inventory financing agreements
between General Motors Acceptance Corporation and Cross-Continent
Auto Retailers, Inc. dealership subsidiaries (1)
10.13.1 Used Vehicle Wholesale Borrowing Base Credit Line Loan
Agreement dated June 7, 1996, between General Motors
Acceptance Corporation and Performance Dodge, Inc. (4)(9)
10.13.2 Promissory Note dated June 7, 1996, by Performance Dodge,
Inc. to General Motors Acceptance Corporation, in the
amount of $3,000,000 (4)(10)
10.13.3 Cross-Default and Cross-Collateralization Agreements
between General Motors Acceptance Corporation and
Performance Nissan, Inc., Performance Dodge, Inc., Midway
Chevrolet, Inc., Plains Chevrolet, Inc., Quality Nissan,
Inc., and Westgate Chevrolet, Inc. (4)
10.14(*) Employment Contract dated February 21, 1997, by and between
Cross-Continent Auto Retailers, Inc. and James F. Purser (4)
10.15(*) Employment Contract dated February 18, 1997, by and between
Cross-Continent Auto Retailers, Inc. and R. Wayne Moore
10.16(*) Employment Agreement dated as of April 1, 1997, by and
between R. Douglas Spedding and Cross-Continent Auto
Retailers, Inc. (3)
10.17(*) Employment Agreement dated as of April 1, 1997, by and between
Douglas J. Spedding and Cross-Continent Auto Retailers, Inc. (3)
10.18 Promissory Note dated April 1, 1997, by Cross-Continent
Auto Retailers, Inc. to the order of R. Douglas Spedding in
the principal amount of $7,000,000 (3)
10.19 Promissory Note dated April 4, 1997, by Cross-Continent Auto
Retailers, Inc. to Amarillo National Bank in the principal amount
of $8,000,000 (3)
10.20 Documents dated April 10, 1997, relating to promissory note
by Cross-Continent Auto Retailers, Inc. to the order of
RDS, Inc. in the principal amount of $2,000,000 (3)
10.20.1 Promissory Note by Cross-Continent Auto Retailers, Inc. to
the order of RDS, Inc. (3)
10.20.2 Security Agreement between Cross-Continent Auto Retailers,
Inc. and RDS, Inc. (3)
10.20.3 Deed of Trust between Cross-Continent Auto Retailers, Inc.
and RDS, Inc. (3)
10.21 Documents dated April 10, 1997, relating to promissory note
by Cross-Continent Auto Retailers, Inc. to the order of R.
Douglas Spedding in the principal amount of $5,500,000 (3)
10.21.1 Promissory Note by Cross-Continent Auto Retailers, Inc. to
the order of R. Douglas Spedding (3)
10.21.2 Security Agreement between Cross-Continent Auto Retailers,
Inc. and R. Douglas Spedding (3)
10.21.3 Deed of Trust between Cross-Continent Auto Retailers, Inc.
and R. Douglas Spedding (3)
10.22 Release and Indemnification Agreement dated as of April 10,
1997, between Cross-Continent Auto Retailers, Inc. And R.
Douglas Spedding (3)
27.1 Financial Data Table
16
<PAGE>
- --------------------------
(1) Previously filed as an exhibit to the Company's Registration
Statement on Form S-1 (Registration No. 333-0685), incorporated
herein by reference.
(2) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996,
incorporated herein by reference.
(3) Previously filed as an exhibit to the Company's Current Report
on Form 8-K dated April 10, 1997, incorporated herein by
reference.
(4) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996,
incorporated herein by reference.
(5) Previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q for the Quarterly Period Ended September 30, 1996,
incorporated herein by reference.
(6) Previously filed as an exhibit to the Company's Registration
Statement on Form S-8, filed with the Securities and Exchange
Commission on March 7, 1997, incorporated herein by reference.
(7) Substantially identical agreements exist between the Chevrolet
Division and each of Midway Chevrolet, Inc. and Westgate
Chevrolet, Inc.
(8) Substantially identical Agreement exists between the Nissan
Division and Performance Nissan, Inc.
(9) Substantially identical Agreements exist between General Motors
Acceptance Corporation and each of Midway Chevrolet, Inc.,
Plains Chevrolet, Inc., Westgate Chevrolet, Inc., Quality
Nissan, Inc., and Performance Nissan, Inc.
(10) Substantially identical Promissory Notes have been executed by
Midway Chevrolet, Inc., Plains Chevrolet, Inc., Westgate
Chevrolet, Inc., Quality Nissan, Inc., and Performance Nissan,
Inc., in the amounts indicated for each dealership subsidiary in
the Cross-Default and Cross-Collateralization Agreement
(Exhibit 10.13.3)
(b) REPORTS ON FORM 8-K
A Form 8-K was filed on April 25, 1997 reporting the purchase of
all the outstanding capital stock of each of Douglas Toyota, Inc.,
a Colorado corporation, and Toyota West Sales & Service, Inc., a
Nevada corporation, together with certain real estate to be used
in connection with both dealerships.
17
<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: May 14, 1997 By: /s/ BILL GILLILAND
------------------------------------
Bill Gilliland, Chairman and
Chief Executive Officer
Date: May 14, 1997 By: /s/ JAMES F. PURSER
------------------------------------
James F. Purser,
Chief Financial Officer
Date: May 14, 1997 By: /s/ CHARLES D. WINTON
------------------------------------
Charles D. Winton, Vice President
and Chief Accounting Officer
18
<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. (1)
2.2 Stock Purchase Agreement, dated as of January 23, 1997, by
and between Cross-Continent Auto Retailers, Inc. and R.
Douglas Spedding (2)
2.3 Amendment to Stock Purchase Agreement dated as of April 1,
1997, by and between Cross-Continent Auto Retailers, Inc.
and R. Douglas Spedding (3)
2.4 Stock Purchase Agreement dated as of February 28, 1997,
among Cross-Continent Auto Retailers, Inc., Jack Biegger,
Dale Edwards, and Sahara Datsun, Inc., d/b/a Jack Biegger
Nissan, as amended by the Amendment to Stock Purchase
Agreement dated as of March 17, 1997, among Cross-Continent
Auto Retailers, Inc., Jack Biegger, Dale Edwards, and
Sahara Nissan, Inc., d/b/a Jack Biegger Nissan (4)
2.5 Second Amendment to Stock Purchase Agreement dated as of
April 30, 1997, by and between Cross-Continent Auto
Retailers, Inc., Jack Biegger, Dale Edwards, and Sahara
Datsun, Inc., d/b/a Jack Biegger Nissan, as amended by the
Amendment to Stock Purchase Agreement dated as of March 17,
1997, among Cross-Continent Auto Retailers, Inc., Jack
Biegger, Dale Edwards, and Sahara Nissan, Inc., d/b/a Jack
Biegger Nissan
2.7 Purchase Agreement dated as of March 1, 1997, between RDS,
Inc. and Cross-Continent Auto Retailers, Inc.(omitting
exhibits thereto, which will be furnished supplementally to
the Commission upon request) (3)
2.8 Purchase Agreement dated as of March 1, 1997, between R.
Douglas Spedding and Cross-Continent Auto Retailers,
Inc.(omitting exhibits thereto, which will be furnished
supplementally to the Commission upon request) (3)
2.6 Asset Purchase Agreement dated as of April 16, 1997, by and
between JRJ Investments, Inc., a Nevada corporation, as
seller, The Chaisson Family Trust-R501, the shareholders
and the Company, as buyer
3.1 Amended and Restated Certificate of Incorporation of
Cross-Continent Auto Retailers, Inc. (5)
3.3 Amended and Restated Bylaws of Cross-Continent Auto
Retailers, Inc. (5)
4.1 Specimen Common Stock Certificate (5)
4.2 Rights Agreement between Cross-Continent Auto Retailers,
Inc. and The Bank of New York, as rights agent (5)
4.3 Amended and Restated 1996 Stock Option Plan of Cross-Continent
Auto Retailers, Inc. (6)
4.4 Registration Rights Agreement dated as of April 1, 1997, by
and between Cross-Continent Auto Retailers, Inc. and R.
Douglas Spedding (3)
10.1 Dealer 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 (1)(7)
10.2 Sales and Service Agreement between Performance Dodge, Inc.
and Chrysler Corporation, dated as of October 1, 1996 (1)
19
<PAGE>
10.3 Dealer Sales and Service Agreement dated September 23,
1996, between the Nissan Division of Nissan Motor
Corporation, U.S.A., Quality Nissan, Inc. and Cross-Continent
Auto Retailers, Inc. (8)
10.4 Dealer Sales and Service Agreement dated September 23,
1996, between the Nissan Division of Nissan Motor
Corporation, U.S.A., Performance Nissan and Cross-Continent
Auto Retailers, Inc. (5)
10.4 Dollar Volume Contract dated March 31, 1994, between Plains
Chevrolet, Inc., Westgate Chevrolet, Inc., Midway Chevrolet,
Inc., Quality Nissan, Inc. and Amarillo Globe News (1)
10.5 Sublease Agreement dated June 1, 1995, between Gilliland
Group Family Partnership and Performance Nissan, Inc. (1)
10.6 Lease Agreement dated March 1, 1994, among John W. Adams,
Eleanore A. Braly as Trustee of the Eleanore A. Braly
Trust, Romie G. Carpenter, Melody Lynn Goff, and Selden
Simpson and Quality Nissan, Inc. (1)
10.7 Office Lease dated June 1, 1996, between Gilliland Group
Family Partnership and Cross-Country Auto Retailers,
Inc.(now named Cross-Continent Auto Retailers, Inc.) (1)
10.8 Wholesale Security Agreement, as amended, dated December 4, 1995,
between General Motors Acceptance Corporation and Performance
Dodge, Inc. (1)(9)
10.9 Corporation and Shareholders' Agreement of Xaris Management Co. (1)
10.10 Documents dated December 4, 1995, relating to $5,550,000 loan by
General Motors Acceptance Corporation to Performance Dodge, Inc. (1)
10.10.1 Promissory Note by Performance Dodge, Inc. to General Motors
Acceptance Corporation, in the amount of $1,850,000 (4)
10.10.2 Promissory Note by Performance Dodge, Inc. to General Motors
Acceptance Corporation, in the amount of $3,700,000 (4)
10.10.3 Cross-Default and Cross-Collateralization Agreement between General
Motors Acceptance Corporation and Performance Dodge, Inc. (4)
10.10.4 Security Agreement between General Motors Acceptance Corporation
and Performance Dodge, Inc. (4)
10.10.5 Mortgage, Assignment and Security Agreement between General Motors
Acceptance Corporation and Performance Dodge, Inc. (4)
10.11 Documents relating to loan by General Motors Acceptance Corporation
to Midway Chevrolet, Inc. (1)
10.11.1 Promissory Note dated December 15, 1989, by Midway Chevrolet, Inc.
to General Motors Acceptance Corporation, in the amount of
$977,249.74 (4)
10.11.2 Renewal, Extension and Modification Agreement dated
February 20, 1995, between General Motors Acceptance Corporation
and Midway Chevrolet, Inc. (4)
10.11.3 Security Agreement dated February 20, 1995, between General Motors
Acceptance Corporation and Midway Chevrolet, Inc. (4)
10.12 Documents dated December 4, 1995, relating to $1,350,000 loan by
General Motors Acceptance Corporation to Performance Nissan,
L.L.C. (1)
10.12.1 Promissory Note by Performance Nissan, L.L.C. to General Motors
Acceptance Corporation, in the amount of $1,350,000 (4)
10.12.2 Cross-Default and Cross-Collateralization Agreement between General
Motors Acceptance Corporation and Performance Nissan, L.L.C. (4)
10.12.3 Security Agreement between General Motors Acceptance Corporation
and Performance Nissan, L.L.C. (4)
10.13 Documents relating to used vehicle inventory financing agreements
between General Motors Acceptance Corporation and Cross-Continent
Auto Retailers, Inc. dealership subsidiaries (1)
20
<PAGE>
10.13.1 Used Vehicle Wholesale Borrowing Base Credit Line Loan Agreement
dated June 7, 1996, between General Motors Acceptance Corporation
and Performance Dodge, Inc. (4)(9)
10.13.2 Promissory Note dated June 7, 1996, by Performance Dodge, Inc. to
General Motors Acceptance Corporation, in the amount of
$3,000,000 (4)(10)
10.13.3 Cross-Default and Cross-Collateralization Agreements between General
Motors Acceptance Corporation and Performance Nissan, Inc.,
Performance Dodge, Inc., Midway Chevrolet, Inc., Plains Chevrolet,
Inc., Quality Nissan, Inc., and Westgate Chevrolet, Inc. (4)
10.14(*) Employment Contract dated February 21, 1997, by and between
Cross-Continent Auto Retailers, Inc. and James F. Purser (4)
10.15(*) Employment Contract dated February 18, 1997, by and between
Cross-Continent Auto Retailers, Inc. and R. Wayne Moore
10.16(*) Employment Agreement dated as of April 1, 1997, by and
between R. Douglas Spedding and Cross-Continent Auto
Retailers, Inc. (3)
10.17(*) Employment Agreement dated as of April 1, 1997, by and between
Douglas J. Spedding and Cross-Continent Auto Retailers, Inc. (3)
10.18 Promissory Note dated April 1, 1997, by Cross-Continent Auto
Retailers, Inc. to the order of R. Douglas Spedding in the
principal amount of $7,000,000 (3)
10.19 Promissory Note dated April 4, 1997, by Cross-Continent Auto
Retailers, Inc. to Amarillo National Bank in the principal amount
of $8,000,000 (3)
10.20 Documents dated April 10, 1997, relating to promissory note by
Cross-Continent Auto Retailers, Inc. to the order of RDS, Inc. in
the principal amount of $2,000,000 (3)
10.20.1 Promissory Note by Cross-Continent Auto Retailers, Inc. to the
order of RDS, Inc. (3)
10.20.2 Security Agreement between Cross-Continent Auto Retailers, Inc.
and RDS, Inc. (3)
10.20.3 Deed of Trust between Cross-Continent Auto Retailers, Inc.
and RDS, Inc. (3)
10.21 Documents dated April 10, 1997, relating to promissory note by
Cross-Continent Auto Retailers, Inc. to the order of R. Douglas
Spedding in the principal amount of $5,500,000 (3)
10.21.1 Promissory Note by Cross-Continent Auto Retailers, Inc. to
the order of R. Douglas Spedding (3)
10.21.2 Security Agreement between Cross-Continent Auto Retailers,
Inc. and R. Douglas Spedding (3)
10.21.3 Deed of Trust between Cross-Continent Auto Retailers, Inc.
and R. Douglas Spedding (3)
10.22 Release and Indemnification Agreement dated as of April 10, 1997,
between Cross-Continent Auto Retailers, Inc. And R. Douglas
Spedding (3)
27.1 Financial Data Table
- --------------------------
(1) Previously filed as an exhibit to the Company's Registration Statement
on Form S-1 (Registration No. 333-0685), incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996, incorporated
herein by reference.
(3) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated April 10, 1997, incorporated herein by reference.
21
<PAGE>
(4) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996,
incorporated herein by reference.
(5) Previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q for the Quarterly Period Ended September 30, 1996,
incorporated herein by reference.
(6) Previously filed as an exhibit to the Company's Registration
Statement on Form S-8, filed with the Securities and Exchange
Commission on March 7, 1997, incorporated herein by reference.
(7) Substantially identical agreements exist between the Chevrolet
Division and each of Midway Chevrolet, Inc. and Westgate
Chevrolet, Inc.
(8) Substantially identical Agreement exists between the Nissan
Division and Performance Nissan, Inc.
(9) Substantially identical Agreements exist between General Motors
Acceptance Corporation and each of Midway Chevrolet, Inc.,
Plains Chevrolet, Inc., Westgate Chevrolet, Inc., Quality
Nissan, Inc., and Performance Nissan, Inc.
(10) Substantially identical Promissory Notes have been executed by
Midway Chevrolet, Inc., Plains Chevrolet, Inc., Westgate
Chevrolet, Inc., Quality Nissan, Inc., and Performance Nissan,
Inc., in the amounts indicated for each dealership subsidiary in
the Cross-Default and Cross-Collateralization Agreement
(Exhibit 10.13.3)
22
<PAGE>
EXHIBIT 2.5
SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT
This Second Amendment to Stock Purchase Agreement (the "Amendment") is
made and entered into this 30th day of April, 1997, by and among CROSS-
CONTINENT AUTO RETAILERS, INC., a Delaware corporation ("C-CAR"), JACK BIEGGER,
DALE EDWARDS, and SAHARA NISSAN, INC., a Nevada corporation, d/b/a JACK BIEGGER
NISSAN (the "Company").
RECITALS
A. By that certain Stock Purchase Agreement dated February 28, 1997, by
and among C-CAR, Jack Biegger, Dale Edwards, and the Company; Jack Biegger and
Dale Edwards agreed to sell all of the issued and outstanding shares of capital
stock of the Company to C-CAR.
B. The Stock Purchase Agreement was amended by that certain Amendment to
Stock Purchase Agreement dated March 17, 1997, by and between C-CAR, Jack
Biegger, Dale Edwards and the Company.
C. The Stock Purchase Agreement, as amended by the Amendment to Stock
Purchase Agreement, shall hereinafter be referred to as the "Agreement."
D. C-CAR, Jack Biegger, Dale Edwards, and the Company desire to amend the
Agreement.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, C-CAR, Jack Biegger, Dale Edwards, and the Company agree
as follows:
1. Paragraph 5 of the Agreement is deleted in its entirety and the
following is substituted therefor:
"Subject to the terms and conditions set forth in this
Agreement, the closing ("Closing") of the purchase and sale
of the Shares shall take place at the offices of Singer,
Brown & Barringer, 520 S. Fourth Street, Las Vegas, Nevada
89101, or at such other place as may be mutually agreed upon
by Purchase and Sellers, as soon as practicable following
the date on which all conditions to the obligations of the
parties hereunder (other than those requiring the taking of
action at the Closing) have been satisfied or waived, but no
later than June 10, 1997 (effective as of May 31, 1997).
The date on which the Closing is to occur is hereinafter
referred to as the "Closing Date." Any other provision of
this Agreement to the contrary notwithstanding, if Sellers
have not obtained the consent of Nissan Motor Corporation,
U.S.A. prior to May 31, 1997, either Purchase or Sellers
shall have the right to extend the Closing Date thirty (30)
days by giving written notice to the other parties.
1
<PAGE>
2. As modified by this Amendment, the Agreement shall remain in full
force and effect, enforceable in accordance with its terms.
3. This Amendment shall be governed by and construed and enforced in
accordance with the laws of the State of Nevada.
4. This Amendment shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, administrators, executors,
successors and assigns.
CROSS-CONTINENT AUTO RETAILERS, INC.,
a Delaware corporation
By: /s/ Bill Gilliland
---------------------------------
Bill Gilliland,
Chairman and Chief Executive Officer
/s/ Jack Biegger SAHARA NISSAN, INC., a Nevada corporation,
- --------------------------------- d/b/a JACK BIEGGER NISSAN
JACK BIEGGER
/s/ Dale Edwards By: /s/ Jack Biegger
- --------------------------------- ----------------------------------
DALE EDWARDS Jack Biegger, President
2
<PAGE>
EXHIBIT 2.6
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and entered into
this 16th day of April, 1997, by and among JRJ INVESTMENTS, INC., a Nevada
corporation ("Seller"), THE CHAISSON FAMILY TRUST-R501 ("the "Shareholder") and
Cross-Continent Auto Retailers, Inc., a Delaware corporation ("Buyer").
RECITALS
A. Seller owns and operates a dealership known as Chaisson Motor Cars
located at 2333 S. Decatur, Las Vegas, Nevada (the "Las Vegas Dealership"), and
is about to open a dealership known as Chaisson BMW, located at 261 Auto Mall
Drive, Henderson, Nevada (the "Henderson Dealership"); hereinafter referred to
individually as a "Dealership" and collectively as the "Dealerships."
B. Seller has been granted and operates the following new automobile
manufacturer's franchises at the Las Vegas Dealership:
1. Land Rover,
2. Jaguar,
3. Volkswagen,
4. Audi,
5. Bentley and Rolls Royce, and
6. BMW,
and has been granted a Satellite Location Addendum to its Dealer Agreement to
operate a BMW new automobile manufacturer's franchise at the Henderson
Dealership. Pursuant to the Satellite Location Addendum, the Henderson
Dealership will be the primary BMW location and the Las Vegas Dealership will be
the satellite location.
C. Seller leases the premises (the "Las Vegas Premises") on which the
Las Vegas Dealership is located pursuant to a lease agreement with JRJ
Properties, a Nevada general partnership (the "Las Vegas Lease").
D. Seller leases the premises (the "Henderson Premises") on which the
Henderson Dealership is located pursuant to a lease agreement with the
Shareholder (the "Henderson Lease").
E. The Shareholder owns an approximate 2.5 acre tract (the "2.5 Acre
Tract") adjacent to the Henderson Premises and having an address of 251 Auto
Mall Drive.
1
<PAGE>
F. Subject to the terms and conditions set forth in this Agreement, Buyer
desires to purchase and receive from Seller, and Seller desires to sell to
Buyer, the right to operate the Dealerships and substantially all of the assets
used in or arising out of the operation of the Dealerships.
AGREEMENT
In consideration of the mutual promises, covenants, terms, representations
and warranties herein set forth, and other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties agree as
follows:
1. ASSETS PURCHASED. Subject to and upon the terms and conditions
hereof, and in reliance upon the covenants, representations and warranties
contained herein, Seller agrees to sell, transfer, convey, assign and deliver to
Buyer, and Buyer agrees to purchase and acquire from Seller, all of Seller's
right, title and interest in and to the following described assets (the
"Assets"), at the Closing:
(a) TANGIBLE PERSONAL PROPERTY. All tangible personal property,
including without limitation, signage, machinery, shop equipment,
tools, furniture, computers, office equipment, telephone system,
parts books, equipment records, tenant improvements (that are
readily removable from leased premises), vehicle lock boxes and
other items of tangible personal property that are or could be
used in connection with the operation of the Dealerships (the
"Tangible Personal Property") that is listed on the appraisal of
Marshall & Stevens, dated February 14, 1997 (the "Appraisal"),
adjusted to include those items of Tangible Personal Property
acquired by Seller and to exclude those items of Tangible
Personal Property disposed of by Seller, in the ordinary course
of business subsequent to the date of the Appraisal, in Seller's
inventory as of 12:01 AM on the Closing Date, and which, to the
extent not listed in the Appraisal, will be listed in Schedule
1(a);
(b) PARTS AND ACCESSORIES. The parts, accessories, oil, grease,
paint and any shop supplies and materials used in the operation
of the Seller's service department and body shop, in Seller's
inventory as of 12:01 AM on the Closing Date ("Parts");
(c) NEW VEHICLES. All new unregistered vehicles, including
demonstrators having no more that 6,000 miles on their odometer,
in Seller's inventory as of 12:01 AM on the Closing Date ("New
Vehicles");
(d) USED VEHICLES. All used vehicles, including without limitation,
sport utility vehicles, trucks, and Seller's service vehicles, as
mutually agreed
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upon by Seller and Buyer, in Seller's inventory as of 12:01 AM
on the Closing Date ("Used Vehicles");
(e) RENTAL VEHICLES. All rental vehicles in Seller's inventory as
of 12:01 AM on the Closing Date ("Rental Vehicles");
(f) GOODWILL. The expectation of continued public patronage of
Seller's former business, including the right of Buyer to
represent itself as carrying on each Dealership in succession to
the Seller ("Goodwill");
(g) RECORDS. Subject to Seller's reasonable right of inspection and
copying, the right to maintain at the Dealerships and have access
to and copy all books, records, information and other written
materials (including those comprised in or derived from data,
disks, tapes, manuals, source codes, flow charts and
instructions) directly related to the employee lists, fleet
customer lists, customer lists, supplier lists, parts lists,
price sheets, manuals, marketing materials, catalogs and any
similar items used directly in either Dealership (the "Records");
(h) INTELLECTUAL PROPERTY. All fictitious business firm names,
trade names, logos, trademarks, service marks, copyrighted
materials, trade secrets, patents, patent applications and other
proprietary business information, including without limitation
those items which will be identified in Schedule 1(h) that are
used in operating each Dealership ("Intellectual Property").
(i) CONTRACTS. All personal property leases, service contracts,
warranty contracts, maintenance contracts, written employment
contracts and other contracts and agreements with respect to the
providing of products or services to Seller on an ongoing basis,
which will be listed in Schedule 1(i) ("Personal Property
Contracts")
(j) LICENSES. All Dealer Franchise Agreements, licenses, permits,
authorizations, and consents (except those which by law or by
their terms are not transferable) necessary to carry on the
operation of each Dealership ("Licenses"); and
(k) GENERAL SUPPLIES. All license plate frames and inserts, office
supplies, letterhead, postage, purchase order forms, parts
invoices, repair order forms, counter tickets, file jackets, and
similar items related to the operation of each Dealership in
Seller's inventory as of 12:01 AM on the day of Closing ("General
Supplies").
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2. EXCLUDED ASSETS. Seller and Buyer mutually acknowledge and agree
that no assets shall be included in the Assets to be sold, transferred,
conveyed, assigned and delivered to Buyer under the terms of this Agreement
except the assets or rights of the Seller that are specifically included in the
Assets described in paragraph 1 hereof.
3. ASSUMED LIABILITIES. Except as set forth in subparagraphs 3(a), 3(b),
3(c) and 3(d) (the "Assumed Liabilities"), the Buyer is not assuming or
undertaking to assume any liability or obligation of the Seller, including, but
not limited to any indebtedness, account payable, product warranty, extended
warranty obligation, assessment, tax, penalty, contract, salary, wage,
compensation or benefit plan obligation, whether disclosed, unknown, contingent
or fixed, arising out of the conduct or operation of either Dealership or
otherwise, prior to the time of Closing, or as the result of the consummation of
the transactions contemplated by this Agreement. All liabilities other than
Assumed Liabilities shall be and remain the obligations of the Seller.
(a) FLOOR PLAN. Buyer shall either pay in full or, with the
consent of U.S. Bank and the release by U.S. Bank of Seller therefrom,
assume Seller's floor plan liability secured by liens on vehicles
referenced in subparagraph 1(c) (the "Floor Plan"). Buyer also agrees
to accept delivery of all merchandise, including new vehicles, on
order at Closing, in accordance with prior practices, and either pay
or floor plan the same. The holdback applicable to vehicles on which
delivery is accepted by Buyer after the date of Closing, which has
been or subsequently is received by Seller by any manufacturer
represented by Seller, will be paid to the Buyer by Seller at Closing,
or within ten (10) days after receipt of such holdback by Seller,
whichever is later;
(b) BMW RENTAL FLEET FINANCING. Buyer shall either pay in full or,
with the consent of BMW Financial Corporation and the release by BMW
Financial Corporation of Seller therefrom, assume Seller's obligations
with respect to amounts owed on all Rental Vehicles purchased by
Buyer;
(c) LICENSES. Buyer agrees to assume all liabilities relating to the
Licenses assigned by Seller, except such liabilities that accrued
prior to the Closing; and
(d) PERSONAL PROPERTY CONTRACTS. Buyer agrees to assume all
obligations and liabilities of Seller relating to the Personal
Property Contracts, except such liabilities that accrued prior to the
Closing.
4. PURCHASE PRICE. Subject to the terms and conditions of this
Agreement, in reliance on the representations, warranties and agreements of
Seller and the Shareholder's Covenant Not To Compete contained herein, and in
consideration of the aforesaid sale, transfer, conveyance, assignment and
delivery of the Assets and the Shareholder's Covenant Not To Compete, Buyer
shall, in addition to the assumption of the Assumed Liabilities as provided in
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paragraph 3 hereof, pay or deliver to Seller at Closing the following
thereinafter collectively referred to as the "Purchase Price"):
(a) CASH. Buyer shall pay $19,500,000, plus or minus the amount
of any increase or reduction in the Purchase Price in accordance with
paragraph 6 hereof, by cashiers check or other immediately available
funds ("Cash");
(b) RESTRICTED COMMON STOCK. Buyer shall issue to Seller the number
of shares of its restricted common stock ("Restricted Shares") that,
when multiplied by the average closing price of its common stock as
quoted in the Wall Street Journal for the last five business days
immediately preceding the date that the transactions contemplated by
this Agreement are announced to the public by Buyer (the "Pricing
Date"), will equal $5,000,000; provided, however, that if the closing
price for Buyer's common stock on the first anniversary of the Closing
Date is less than the price per share allocated to the Restricted
Stock on the Pricing Date, Buyer shall either:
(i) Issue to Seller shares of its fully registered unrestricted
common stock ("Unrestricted Shares") so that the aggregate
value of the Restricted Shares and the Unrestricted Shares
issued to Seller (based on the closing price for Buyer's
common stock on the first anniversary of the Closing Date)
shall equal $5,000,000, or
(ii) Cash in the form of a cashiers check or other immediately
available funds the amount equal to the difference between
$5,000,000 and the product of the number of Restricted
Shares that are required to be issued to Seller on the
Closing Date times the closing price for Buyer's common
stock on the first anniversary of the Closing date.
The Unrestricted Shares or the additional cash shall be delivered to
Seller within fifteen (15) days after the first anniversary of the
Closing date. Buyer shall not issue any fractional shares and shall
pay Seller cash in lieu of any fractional shares based on the price
per share allocated to the Restricted Shares on the Pricing Date or
the closing price of its common stock as quoted in the Wall Street
Journal on first anniversary of the Closing Date, whichever date is
applicable.
(c) PROMISSORY NOTE. Buyer shall execute and deliver a promissory
note (the "Note") to Seller in the original principal amount of
$3,000,000, bearing interest at eight percent (8%) per annum, payable
in thirty-six (36) equal monthly installments, commencing on the first
day of the second full month following the Closing Date, or if the
Closing Date is on the first day of a month on the first day of the
next month. The Note shall be in the form of Exhibit A hereto.
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5. ALLOCATION OF PURCHASE PRICE. Buyer and Seller agree that the Purchase
Price shall be allocated among the Assets in the manner which will be set forth
in Schedule 5. All federal, state, and local tax returns filed after the Closing
by either Buyer or Seller, including, but not limited to, IRS Form 8594, will
contain valuations which are consistent with the valuations set forth in
Schedule 5.
6. ADJUSTMENTS TO THE PURCHASE PRICE. The Purchase Price shall be
adjusted as follows:
(a) In the event the aggregate value of the Tangible Personal
Property and the General Supplies, as determined in accordance
with subparagraph 18(j), is more or less than $1,3000,000, the
Purchase Price shall be increased or reduced by an amount equal
to the difference between $1,300,000 and the aggregate value of
the Tangible Personal Property and the General Supplies.
(b) In the event the aggregate value of the Used Vehicles, as
determined in accordance with subparagraph 18(i)(i), is more or
less than $2,400,000, the Purchase Price shall be increased or
reduced by an amount equal to the difference between $2,400,000
and the aggregate value of the Used Vehicles.
(c) In the event the aggregate equity of the New Vehicle, as
determined in accordance with subparagraph 18(i)(ii), is more or
less than $237,000, the Purchase Price shall be increased or
reduced by an amount equal to the difference between $237,000 and
the aggregate equity of the New Vehicles.
(d) In the event the aggregate value of the Parts, as determined in
accordance with subparagraph 18(i)(iii), is more or less than
$1,000,000, the Purchase Price shall be increased or reduced by
an amount equal to the difference between $1,000,000 and the
aggregate value of the Parts.
(e) In the event the aggregate equity of the Rental Vehicles, as
determined in accordance with subparagraph 18(i)(iv), is more or
less than $142,000, the Purchase Price shall be increased or
reduced by an amount equal to the difference between $142,000 and
the aggregate equity of the Rental Vehicles.
7. CLOSING. Subject to the terms and conditions set forth in this
Agreement, the closing ("Closing") of the purchase and sale of the Assets shall
take place at the offices of Jones, Jones, Close & Brown, Chartered, 3773 Howard
Hughes Parkway, Third Floor South, Las Vegas, Nevada 89109, or at such other
place as may be mutually agreed upon by Buyer and Seller, on the earlier date
(a) as soon as practicable following the date on which all conditions to
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the obligations of the parties hereunder (other than those requiring the
taking of action at the Closing) have been satisfied or waived, or (b) June
1, 1997, subject to the mutual agreement of the parties to select another
date. The date on which the Closing is to occur is hereinafter referred to
as the "Closing Date."
8. TRANSACTIONS AT CLOSING. The following transactions shall take place
at Closing:
(a) DELIVERIES BY SELLER AND SHAREHOLDER. The Seller and the
Shareholder shall deliver the following to the Buyer:
(i) A Warranty Bill of Sale or Warranty Bills of Sale executed
by Seller, in the form of Exhibit C hereto, as are necessary
to convey to Buyer all Seller's right, title and interest in
and to the Tangible Personal Property and General Supplies,
the New Vehicles (including demonstrators and Rental
Vehicles treated as new vehicles), the Used Vehicles
(including demonstrators and Rental Vehicles treated as Used
Vehicles), and the Parts, to the extent and as provided in
paragraph 1;
(ii) An Assignment or Assignments executed by Seller, in the form
of Exhibit D hereto, as are necessary to convey to Buyer all
Seller's right, title and interest in and to the Licenses
and the Intellectual Property, to the extent and as provided
in paragraph 1;
(iii) Leases, executed by the respective landlords, for each
of the Las Vegas Premises, the Henderson Premises and
the 2.5 Acre Tract, in the forms of Exhibits E, F and G
hereto (collectively the "Leases");
(iv) a Phase I Environmental Report on the Las Vegas Premises,
paid for by the Seller, in form and substance satisfactory
to Buyer (the "Phase I Report");
(v) An Investment Letter executed by Seller with respect to the
Restricted Shares, in form satisfactory to Buyer's counsel;
(vi) The Registration Rights Agreement (hereinafter defined)
executed by Seller;
(vii) Copies of resolutions of the Board of Directors of the
Seller, duly certified by its Secretary, in form
reasonably satisfactory to Buyer's counsel, authorizing
the execution, delivery and performance of this
Agreement and all other documents to which Seller is a
party as
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contemplated hereby, and all action to be taken by Seller
hereunder;
(viii) A Seller's Certificate, in the form of Exhibit H
hereto, duly executed by Seller;
(ix) The Records referred to in subparagraph 1(g);
(x) An opinion of counsel to the Seller, in the form of Exhibit
I hereto;
(xi) Any instruments and other documents specifically enumerated
in paragraph 11 that is not otherwise set forth in this
subparagraph 8(a); and
(xii) Any other instruments or documents deemed reasonably
necessary or desirable by the Buyer in order to
consummate the transactions contemplated hereby.
(b) DELIVERIES BY BUYER. The Buyer shall deliver the following to
the Seller:
(i) The Cash portion of the Purchase Price, the Note, and a
stock certificate representing the Restricted Shares;
(ii) The Leases executed by the Buyer;
(iii) A Registration Rights Agreement executed by Buyer, in
the form of Exhibit J hereto, granting "piggy-back"
registration rights to Seller with respect to the
Restricted Shares (the "Registration Rights
Agreement");
(iv) Employment Agreements (hereinafter defined) executed by
Buyer, for each of the Key Employees (hereinafter defined),
in the forms of Exhibit K, L and M, respectively;
(v) Copies of resolutions of the Board of Directors of the
Buyer, duly certified by its Secretary, in form reasonably
satisfactory to Seller's counsel, authorizing the execution,
delivery and performance of this Agreement and all other
documents to which Buyer is a party as contemplated hereby,
and all action to be taken by Buyer hereunder;
(vi) A Buyer's Certificate, in the form of Exhibit N hereto, duly
executed by Buyer;
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(vii) An opinion of counsel to the Buyer, in the form of
Exhibit O hereto;
(viii) Evidence satisfactory to Buyer of the payment in full
of the Floor Plan and the BMW Rental Vehicle financing
obligations or of the approved assumption thereof by
Buyer and the release therefrom of the Seller;
(ix) Any instrument and other documents specifically enumerated
in paragraph 12 that is not otherwise set forth in this
subparagraph 8(b); and
(x) Any other instruments or documents deemed reasonably
necessary or desirable by the Seller in order to consummate
the transactions contemplated hereby;
9. REPRESENTATIONS AND WARRANTIES OF THE SELLER. In order to induce
the Buyer to enter into this Agreement, the Seller represents, warrants and
covenants to the Buyer, effective as of the date of this Agreement and again at
Closing, each of the following:
(a) ORGANIZATION AND STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Nevada and is duly qualified to do business as a
foreign corporation and is in good standing in the states of the
United States and foreign jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to
be so qualified.
(b) POWER AND AUTHORITY. Seller has all requisite right, power
and authority to own, lease and operate its properties and Assets
and to operate the Dealerships as they are now being operated.
This Agreement constitutes the valid and binding obligation of
the Shareholder (relating to those certain agreements of
Shareholder contained in this Agreement) and the Seller,
enforceable against them (and each of them respectively in their
individual capacity) in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to the
enforcement of creditors' rights generally and by general
principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). The
Shareholder and the Seller have all requisite right, power and
authority to execute and deliver this Agreement and to perform
all of his or its obligations under this Agreement.
(c) NO CONFLICTS. Neither the execution and delivery of this
Agreement by the
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Seller, nor the consummation by the Seller of the transactions
contemplated hereby, will (i) violate, conflict with, or result
in a breach of any provisions of, or constitute a default or an
event which, with notice or lapse of time or both, would
constitute a default under, or result in the termination of, or
accelerate the performance required by, or result in a right of
termination or acceleration, or result in the creation of any
material lien, security interest, charge or encumbrance upon
any of the properties or Assets of the Seller or otherwise
comprising a part of either Dealership under any of the terms,
conditions or provisions of, the Seller's Articles of
Incorporation, Bylaws, or any contract, note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Seller is a party or by
which it may be bound, or to which the Seller's properties or
Assets may be subject, or (ii) violate any judgment, ruling,
order, writ, injunction, decree, constitution, statute, rule or
regulation applicable to the Seller or any of its properties or
Assets, which in the case of either subparagraph (i) or (ii)
above would have a materially adverse effect on the operation
of either Dealership by the Seller.
(d) FINANCIAL STATEMENTS. The Seller has delivered to the Buyer
copies of the following financial statements (collectively
referred to herein as the "Financial Statements") of the Seller:
(i) Balance Sheet, as of March 31, 1997;
(ii) Income Statement, as of March 31, 1997; and
(iii) Balance Sheets and Income Statements for the
fiscal year ended December 31, 1996.
To the best of Seller's information, knowledge and belief, the
Financial Statements (including the notes thereto) are true and
correct in all respects and have been compiled in accordance with
standard dealer financial statement practices and applied on a
consistent basis throughout the periods indicated. Without
limitation of the foregoing, the Balance Sheet described in
subparagraph 9(d)(i) above presents fairly the financial position
of the Seller as of the date indicated thereon, and the Income
Statement described in subparagraph 9(d)(ii) above presents
fairly the results of operations of the Seller for the period
indicated thereon.
(e) TITLE AND RELATED MATTERS. The Seller is the lawful owner of,
and has good and valuable title to, or the right to use all of
the Assets, and the right to operate the Dealerships under the
Franchises set forth in Schedule 9(e), and the Assets and
Franchises, will at the Closing be free and clear of all
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liens and encumbrances except for:
(i) the Assumed Liabilities;
(ii) liens for current taxes not yet due and payable or for
taxes the validity of which is being contested in good
faith by appropriate proceedings; and
(iii) the rights of the franchisors under the Franchises.
All Parts which Buyer is obligated to purchase in accordance
herewith are in returnable condition and undamaged Parts that:
(w) are still in the original, resalable merchandising package
and in unbroken lots;
(x) were listed for sale in the then current dealer parts and
accessories price schedules for each represented
manufacturer or other supplier, except "discontinued" or
"replaced" parts and accessories;
(y) were purchased directly from represented manufacturers or
other reliable suppliers; and
(f) LICENSES. The Seller has made copies available to Buyer of, and
will list on Schedule 9(f), all Licenses relating to either
Dealership. All of the Licenses are adequate for the operation
of each Dealership, are valid and in full force and effect, and
will be transferred to the Buyer at the Closing, unless such
transfer is prohibited by law or by the terms of the material to
be transferred.
(g) INTELLECTUAL PROPERTY. The Seller owns or has the right to use
all Intellectual Property identified in Schedule 1(h) presently
in use by the Seller, but does not include any Intellectual
Property belonging to any represented manufacturer, which
Intellectual Property is expressly excluded here from. Other than
with respect to those items listed in Schedule 1(h), no royalties
or fees are payable by the Seller to any third party by reason of
the use of any of the Intellectual Property to which Buyer shall
acquire hereunder. No additional Intellectual Property is needed
to permit the Seller to operate either Dealership as now
operated, and no other Intellectual Property rights of any kind
are required by the Seller for its operations, except those
Intellectual Property rights belonging to the represented
manufacturers.
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(h) CONTRACTS AND AGREEMENTS: ADVERSE RESTRICTIONS. The Seller will
deliver to Buyer copies of all Personal Property Contracts listed
in Schedule 1(i) to which the Seller is a party or by which it or
any of its property which is subject hereto is bound. All
Personal Property Contracts included in Schedule 1(i) in full
force and effect and binding upon the parties thereto, and none
of the parties thereto is in breach of any of the provisions
thereof.
(i) LITIGATION AND OTHER PROCEEDINGS. Except as set forth in
Schedule 9(i) the Seller is not a party to any pending or
threatened claim, action, suit, investigation or proceeding, nor
is it subject to any order, judgment or decree, except for
matters which, in the aggregate, would not have or cannot
reasonably be expected to have, a material adverse effect on the
financial condition, or the results of operation of either
Dealership, and none that would relate to or affect the proposed
transaction hereunder.
(j) ENVIRONMENTAL PROTECTION. To the best of Seller's information,
knowledge and belief:
(i) The Seller has obtained all permits, licenses and other
authorizations, which are required under applicable laws
currently in effect relating to pollution or protection of
the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into
ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport,
or handling of pollutants, contaminants, or hazardous or
toxic materials or wastes or the manufacture of substances
subject to the Toxic Substances Control Act (hereinafter
collectively referred to as the "Environmental Laws").
(ii) The Seller is in compliance with all terms and conditions of
such permits, licenses and authorizations, and with all
other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and
timetables contained in such Environmental Laws or contained
in any regulation, code, plan, order, decree, judgment or
notice or demand letter from a governmental entity issued,
entered, promulgated or approved thereunder as they apply to
the Seller.
(iii) The Seller has not received any notification from any
governmental authority or any other person nor does the
Seller have knowledge,
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that any of the current or former properties, assets or
operations of the Seller or its former subsidiaries, if any,
are in violation of any applicable Environmental Laws.
(iv) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter from a governmental
entity pending or threatened against the Seller.
(v) There are no past or present events, conditions,
circumstances, activities, practices, incidents, actions or
plans, which will interfere with or prevent compliance or
continued compliance with the Environmental Laws or with any
regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter from a governmental entity issued,
entered, promulgated or approved thereunder, or which will
give rise to any common law or other legal liability,
including, without limitation, liability under the
Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") or similar state or local laws in
effect as of the date hereof, or otherwise form the basis of
any claim, action, demand, suit, proceeding, hearing, notice
of violation or investigation which would be materially
adverse to the Seller, based on or resulting from the
operation of either Dealership by the Seller, including the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission,
discharge, release or threatened release into the
environment, of any pollutant, contaminant, chemical, or
industrial toxic or hazardous material, substance or waste.
Without in any way limiting the foregoing, no release,
emission or discharge into the environment of any hazardous
substance (as that term is currently defined under CERCLA or
any applicable analogous state law) has occurred or is
currently occurring in connection with the operation of
either Dealership by the Seller and which would be
materially adverse to the Seller. The real property
currently owned, leased or otherwise utilized by the Seller
contains no spill, deposit, or discharge of any hazardous
substance (as that term is currently defined under CERCLA or
any applicable analogous state law), as a result of which
there would be a materially adverse effect on the Seller.
(k) EMPLOYMENT CONTRACTS AND EMPLOYEE BENEFIT PLANS. Schedule 9(k)
will contain (i) a complete and correct list of all pension,
bonus, profit sharing, retirement, stock option, medical expense,
dental expense, hospitalization, life insurance or other death
benefit, severance, and other
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benefit plans, agreements, arrangements or other programs
providing remuneration or benefits for Seller's employees,
whether or not funded and whether or not reflected in any plan
documents, including available vacation of Seller's employees
and (ii) a list all of the current employees of the Seller and
independent contractors regularly performing services on behalf
of the Seller and their respective rates of compensation
including any salary, bonus or other payment arrangement made
with any of them. The Seller is not a party to or bound by any
collective bargaining agreement, nor has the Seller experienced
any strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. The Seller has not, to
Seller's knowledge, committed any unfair labor practice. The
Seller has no knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union
with respect to employees of the Seller. There have been no
material defaults, breaches, omissions or other failings by the
Seller or any fiduciary under any of these contracts or
programs. Except as set forth in Schedule 9(m), the Seller does
not sponsor any employee benefit plan defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as
amended (29 U.S.C. Section 1002(3)).
(l) BROKERS AND FINDERS. Other than Elysium Enterprises, Inc. and
the Real Corporation (collectively, the "Broker"), no broker or
finder has any potential claim against Seller for a commission
or fee arising out of the transactions contemplated herein.
(m) CONSENTS TO CONSUMMATION. Except as will be disclosed in
Schedule 9(m), no consent, approval or other action of any third
party is required to be obtained by the Seller or the Shareholder
in connection with the transactions contemplated by this
Agreement.
(n) EQUIPMENT. To the best of Seller's information, knowledge and
belief, the Tangible Personal Property is in good repair and
operating condition.
(o) CONTINUATION OF BUSINESS. Except for the failure of Buyer to
qualify for all necessary federal, state and local licenses or
the failure of any manufacturer to approve a transfer of a
Franchise, the Seller knows of no reason why either Dealership
will not continue on in the same manner following the execution
of this Agreement and the Closing as it has been operated prior
thereto, except to the extent that the Buyer causes the operation
of the Dealership to change following the Closing. The Seller has
no reason to believe that at any time in the foreseeable future
either Dealership shall be materially or adversely affected by
any event, including but not limited to the loss of customers of
the Dealership, the reduction in
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the quality and quantity of its business, the termination or
reduction in the probability of any existing, pending, or
anticipated contracts or projects of the Dealership, or
otherwise, except to the extent that the Buyer causes the
operation of the Dealership to change following the Closing.
The Seller will use its best efforts to cause the employees,
agents, and independent contractors who have performed services
for each Dealership in the past to continue to do so following
the Closing, to the extent the Buyer so requests.
(p) COPIES COMPLETE; NO DEFAULT. The copies of all documents which
have been delivered or otherwise been made available to the Buyer
in connection with the transactions contemplated hereby are
complete and accurate and are true and correct copies of the
originals thereof, to the best of Seller's information, knowledge
and belief.
(q) BORROWED MONIES. The Seller is not in default in any respect
under, and is not otherwise in violation or contravention of, any
of the terms and provisions of any agreement for the repayment of
borrowed monies. All notes and other documents and instruments
evidencing or relating to indebtedness for borrowed monies by the
Seller and which relate to any of the Assets will be identified
in Schedule 9(q).
(r) COMPLIANCE WITH LAWS. Other than as set forth in Schedule
9(i), the Seller has no knowledge of (i) any governmental
proceeding or investigation involving the Seller, nor has any
reason to believe that any such proceeding or investigation is
pending or threatened or that there exists any basis for any such
proceeding or investigation which does or would materially
adversely affect either Dealership or the property of the Seller,
(ii) any facts which might reasonably be believed to be a basis
for any other action, suit, proceeding, arbitration, claim, or
counterclaim against the Seller which materially adversely
affects either Dealership or the property of the Seller, (iii)
any violations of federal, state or local laws, ordinances,
rules, codes, regulations or orders by the Seller which
materially affect either Dealership or the property of the Seller
or the possession, use, occupancy or operation of any of its
facilities or either Dealership, and (iv) any illegal kick backs,
bribes, or political contributions made by the Seller.
(s) NO CHANGES. Except as will be disclosed in Schedule 9(s), the
Seller has not since December 31, 1996, (i) operated either
Dealership except in the ordinary course of business, (ii)
incurred any debts, liabilities or obligations except in the
ordinary course of business, (iv) mortgaged, pledged or subjected
to lien or other encumbrance any of the Assets, except
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in the ordinary course of business, or (v) sold or transferred
any of its tangible Assets, or canceled any debts or claims,
except, in each case, in the ordinary course of business.
(t) FULL DISCLOSURE. No representation or warranty of the Seller
or the Shareholder in this paragraph 9 (including any information
in the Schedules attached or to be attached to this Agreement),
will at the Closing, when read together, contains or will contain
any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements herein or
therein, in light of the circumstances in which they are made,
not misleading.
10. REPRESENTATIONS AND WARRANTIES OF BUYER. The Buyer represents and
warrants to the Seller and the Shareholder effective as of the date of this
Agreement and again at Closing, as follows:
(a) ORGANIZATION AND STANDING OF BUYER. Buyer is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware, is duly qualified to do business
as a foreign corporation and is in good standing in the states of
the United States and foreign jurisdictions where its ownership
or leasing of property or conduct of its business requires it to
be so qualified.
(b) AUTHORIZATION. The Buyer has full power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate
action on the part of the Buyer. This Agreement constitutes the
valid and binding obligation of the Buyer, enforceable against
the Buyer in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to the
enforcement of creditors' rights generally and by general
principles of equity (regardless of whether such enforceability
is considered in a proceeding at law or in equity).
(c) NO CONFLICT. Neither the execution and delivery of this
Agreement nor the consummation by the Buyer of the transactions
contemplated hereby will (i) violate, conflict with, or result in
a breach of any provisions of, or constitute a default or an
event which, with notice or lapse of time or both, would
constitute a default under, or result in the termination of, or
accelerate the performance required by, or result in a right of
termination or acceleration, or result in the creation of any
material lien, security
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interest, charge or encumbrance upon any of the properties or
assets of the Buyer, or the Buyer's Articles of Incorporation,
Bylaws, or any contract, note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or
obligation to which the Buyer is a party or by which it may be
bound, or to which the Buyer's properties or assets may be
subject, or (ii) violate any judgment, ruling, order, writ,
injunction, decree, constitution, statute, rule or regulation
applicable to the Buyer or any of its properties or assets,
which in the case of either subparagraph (i) or (ii) above
would have a materially adverse effect on the Buyer or its
financial condition.
(d) BROKERS AND FINDERS. Other than Elysium Enterprises, Inc. and
the Real Corporation (collectively, the "Broker"), no broker or
finder has any potential claim against Buyer for a commission or
fee arising out of the transactions contemplated herein.
(e) LITIGATION OR OTHER PROCEEDINGS. Buyer is not a party to any
pending or to its knowledge any threatened claim, action, suit,
investigation or proceeding, or subject to any order, judgment or
decree, except for matters which in the aggregate, will not have,
or cannot reasonably be expected to have, a materially adverse
effect on the financial condition of the Buyer, and none that
would affect the Buyer's ability to consummate the transactions
and perform its obligations contemplated hereby.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER. The obligation
of the Buyer to effect the transactions contemplated hereby shall be subject, at
its option, to the fulfillment prior to the Closing Date of the following
additional conditions, each of which can be waived by the Buyer:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations, warranties, covenants and agreements made by the
Seller and the Shareholder in, or pursuant to, this Agreement
shall be true and correct as of the date hereof and shall be
deemed to have been made again at Closing and shall then be true
and correct.
(b) COMPLIANCE WITH AGREEMENT. The Seller and the Shareholder
shall have fully performed and strictly complied with all of
their covenants, agreements, conditions and obligations under
this Agreement to be performed or complied with by Seller or
Shareholder on or prior to the Closing Date and the Seller or
Shareholder shall have delivered to the Buyer a duly executed
Certificate.
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(c) THIRD PARTY CONSENTS. This Agreement and the transactions
contemplated hereby shall have received all approvals, consents,
authorizations, and waivers from governmental and other
regulatory agencies and other third parties, including lenders,
lessors, and represented manufacturers, required to consummate
the transactions. Without limiting the generality of the
foregoing, each represented manufacturer of each Dealership must
approve Buyer as a dealer in Las Vegas and Henderson, Nevada
prior to Closing, unless any represented manufacturer's approval
is waived by the Buyer.
(d) ABSENCE OF LITIGATION. No action, suit or proceeding before any
court or any governmental body or authority pertaining to the
transactions contemplated by this Agreement, or to their
consummation, shall have been instituted or threatened on or
before the Closing Date.
(e) AUDIT. Price Waterhouse shall have timely performed the Audit
(hereinafter defined), prepared the Audited Financial Statements
(hereinafter defined), and delivered a copy of the Audited
Financial Statements to Buyer.
(f) PHYSICAL INVENTORY. Buyer and Seller shall have jointly
conducted a physical inventory of all Tangible Personal Property,
Parts, New Vehicles, Used Vehicles, Rental Vehicles, General
Supplies and Intellectual Property, the results of which are
mutually satisfactory to Buyer and Seller.
(g) APPROVAL OF DOCUMENTATION. The form and substance of all
Schedules, certificates, instruments and other documents required
to be delivered to the Buyer under this Agreement shall be
satisfactory in all reasonable respects to Buyer and its counsel.
(h) HART-SCOTT-RODINO ACT. The applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "Act"),
and regulations promulgated thereunder, shall have expired.
(i) NO ADVERSE CHANGE. Buyer shall have determined, to its
satisfaction, that as of the Closing Date, there have been no
material adverse changes in the business, operations, properties,
Assets, revenues, earnings, liabilities, or condition (financial
or otherwise), of either Dealership.
(j) DUE DILIGENCE. Based on such examinations and inquiries as
Buyer shall have made or shall have caused to be made on or
before May 15, 1997, the business, operations, properties,
assets, revenues, earnings,
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liabilities, and condition (financial or otherwise) of each
Dealership shall be satisfactory to Buyer, in Buyer's sole
judgment and discretion.
(k) POST 1996 LETTER. Price Waterhouse shall have prepared the Post
1996 Letter and delivered it to Buyer.
(l) ADDITIONAL INFORMATION. Seller and Shareholder shall furnish to
Buyer and Buyer's counsel such additional information,
certificates, and other documents as Buyer shall have reasonably
requested.
12. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER. The obligation
of the Seller to effect the transactions contemplated by this Agreement shall be
subject, at its option, to the fulfillment prior to the Closing Date of the
following additional conditions each of which can be waived by the Seller:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties made by the Buyer in or pursuant
to this Agreement shall be true and correct as of the date hereof
and shall be deemed to have been made again at Closing and shall
then be true and correct.
(b) COMPLIANCE WITH AGREEMENT. The Buyer shall have performed and
complied with all of its obligations under this Agreement that
are to be performed or complied with by it at, or prior to, the
Closing Date.
(c) DELIVERY OF PURCHASE PRICE. The Seller shall have received the
Purchase Price in accordance with paragraph 4 hereof.
(d) APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments and other documents required to be
delivered to Seller under this Agreement shall be satisfactory in
all reasonable respects to Seller and its counsel.
(e) ADDITIONAL INFORMATION. Buyer shall furnish to Seller and
Seller's counsel such additional information, certificates, and
other documents as Seller shall have reasonably requested.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by the parties in this Agreement or in any certificate,
schedule, statement, document or instrument furnished hereunder or in connection
with the negotiation, execution and performance of this Agreement shall survive
the Closing for a period of 3 years, and any claim or cause of action for
indemnification under paragraph 16 for breaches of representations or warranties
set forth in this Agreement or in any exhibit or document furnished hereto may
be made so long as any claim may be made in respect of such matters under
applicable statutes of
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limitation. Notwithstanding any investigation or audit conducted before or
after the Closing or the decision of any party to complete the Closing, each
party shall be entitled to rely upon the representations and warranties set
forth herein for the time period set forth above.
14. SHAREHOLDER'S AND SELLER'S COVENANT NOT TO COMPETE. Because the
sale of the Assets involves the sale of the goodwill of the Dealerships, both
the Shareholder and the Seller agree that they will not, either directly or
indirectly, alone or with others, either as an employee, owner, partner, agent,
stockholder, member, director, officer or otherwise:
(a) enter into or engage in the business of operating a new vehicle
dealership, warranty repair business, or other related business which may
compete directly or indirectly with the Buyer, with respect to any of the
New Vehicle Franchises listed in Schedule 9(f) within the Las Vegas or
Henderson, Nevada metropolitan areas (the "Restricted Area") for a term of
three (3) years from the Closing Date (the "Restrictive Period"), or
(b) provided that none of the Key Employee's employment pursuant to the
Employment Contracts is terminated by Buyer for other than cause as defined
in the Employment Contracts during the Restricted Period, enter into or
engage in the business of operating any new vehicle dealership, warranty
repair business, or other related business which may compete directly or
indirectly with the Buyer within the Restricted Area for the Restrictive
Period.
Further, neither the Shareholder nor the Seller will individually, collectively
or in conjunction with others, directly or indirectly, within the Restricted
Period and Restricted Area, directly or indirectly solicit or hire any employee
of the Buyer or encourage any such employee to leave such employment unless such
employee has already terminated such employment with the Buyer or the Buyer and
the Seller have mutually agreed in advance to the solicitation or employment.
The Seller and the Shareholder also agree that in the event of breach of these
covenants, the Buyer may protect its property rights in the goodwill of the
Dealerships by injunction or otherwise.
15. TERMINATION. This Agreement may be terminated as follows:
(a) MUTUAL CONSENT. This Agreement may be terminated by the
written consent of the parties.
(b) BY THE BUYER. This Agreement may be terminated by written notice
of termination given by the Buyer to the Seller if (i) Buyer
elects to terminate as provided in subparagraph 18(o), (ii) all
of the conditions set forth in paragraph 11 are not satisfied, or
(iii) there shall occur any material default or failure on the
part of the Seller or the Shareholder to perform any obligations
of Seller or Shareholder set forth herein, and such default or
failure has not been waived by Buyer.
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(c) BY THE SELLER AND THE SHAREHOLDER. This Agreement may be
terminated by written notice of termination given by the Seller
or the Shareholder to the Buyer if (i) all of the conditions set
forth in paragraph 12 are not satisfied, or (ii) there shall
occur any material default or failure on the part of the Buyer to
perform any of its obligations set forth herein, and such default
or failure has not been waived by Seller or Shareholder as
applicable.
16. INDEMNIFICATION. (a) Seller hereby agrees as follows:
(i) GENERAL INDEMNIFY. That it will indemnify, defend and hold
harmless the Buyer and its respective successors and assigns (the
"Buyer Indemnified Parties") from and against all claims,
damages, other liabilities, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses, including
reasonable attorneys' fees and expenses of investigation
(hereinafter collectively referred to as the "Buyer Damages"),
incurred by any Buyer Indemnified Party as a result of or
incident to (a) any material breach of any representation,
warranty, covenant or agreement made by the Seller or the
Shareholder or either of them in this Agreement, or (b) any
liability of Seller of whatever nature arising out of the conduct
of the Dealerships or otherwise prior to the Closing Date.
(ii) ENVIRONMENTAL INDEMNIFICATION. With respect to any existing
or potential liability arising out of any condition, activity or
event existing or occurring prior to the date hereof with respect
to any property comprising part of either Dealership for which
there is any material risk of liability to any governmental
agency or body or any other person or entity for the violation of
any statute, rule, regulation, ordinance or other law or for
which there may be liability in tort, or otherwise, and which is
related to and arises out of an environmental condition, the
Seller agrees that it will indemnify, defend and hold harmless
the Buyer Indemnified Parties from and against all claims,
damages, actions, suits, proceeding, demands, assessments,
adjustments, costs, and expenses, including reasonable attorneys'
fees and expenses of investigation, incurred by any Buyer
Indemnified Party as a result of such environmental condition and
further including, if necessary, the costs and expenses of any
remediation, transportation, incineration, treatment, or other
necessary and appropriate disposition or mitigation of such
environmental condition.
(iii) OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any
statutory, equitable or common law remedy Buyer may have for
breach of representation, warranty, or covenant.
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(iv) THIRD PARTY CLAIMS. In the event that a Buyer Indemnified
Party desires to make a claim against the Seller under
subparagraphs 16(a)(i) or 16(a)(ii) in connection with any
action, suit, proceeding or demand at any time instituted
against, or made upon, the Buyer Indemnified party by any third
party for which the Buyer Indemnified Party may seek
indemnification hereunder (a "Third Party Claim"), the Buyer
Indemnified Party shall promptly notify the Seller of such Third
Party Claim and of the Buyer Indemnified Party's claim of
indemnification with respect thereto; provided, however, that no
reasonable delay on the part of the Buyer Indemnified Party in
notifying the Seller shall relieve the Seller from any obligation
hereunder. The Seller shall have thirty (30) days after receipt
of such notice to notify the Buyer Indemnified Party if it has
elected to assume the defense of such Third Party Claim. If the
Seller timely elects to assume the defense of such Third Party
Claim, the Seller shall be entitled at its own expense to conduct
and control the defense and settlement of such Third Party Claim
through counsel of its own choosing, provided that the Buyer
Indemnified Party may participate in the defense of such Third
Party Claim with its own counsel at its own expense, and provided
further that the Seller must conduct the defense of the Third
Party Claim actively and diligently in order to preserve its
rights in this regard. If the Seller fails to notify the Buyer
Indemnified Party within thirty (30) days after receipt of the
notice of a Third Party Claim, the Buyer Indemnified Party shall
be entitled to assume the defense of such Third Party Claim (and
the Buyer Indemnified Party need not consult with, or obtain the
consent of the Seller) and in the Buyer Indemnified Party's sole
discretion prosecute, litigate, settle and perform such other
actions as the Buyer Indemnified Party may deem necessary in
order fully to protect the Buyer Indemnified Party's interests,
and the Seller will remain responsible for indemnification of the
Buyer Indemnified Party to the full extent provided in this
paragraph 16(a).
(b) Buyer agrees as follows:
(i) GENERAL INDEMNIFY. That it will indemnify, defend and hold
harmless the Seller and its respective successors and assigns
(the "Seller Indemnified Parties") from and against all claims,
damages, other liabilities, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses, including
reasonable attorneys' fees and expenses of investigation
(hereinafter collectively referred to as the "Seller Damages"),
incurred by any Seller Indemnified Party as a result of or
incident to (a) any material breach of any representation,
warranty, covenant or agreement made by the Buyer in this
Agreement, or (b) any liability of Buyer, or any subsidiary of
Buyer, of whatever nature arising out of the conduct of the
Dealerships or otherwise subsequent to the Closing Date.
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(ii) ENVIRONMENTAL INDEMNIFICATION. With respect to any existing
or potential liability arising out of any condition, activity or
event caused by Buyer, or any subsidiary of Buyer, occurring
subsequent to the Closing with respect to any property comprising
part of either Dealership or the 2.5 Acre Tract for which there
is any material risk of liability to any governmental agency or
body or any other person or entity for the violation of any
statute, rule, regulation, ordinance or other law or for which
there may be liability in tort, or otherwise, and which is
related to and arises out of an environmental condition, the
Buyer agrees that it will indemnify, defend and hold harmless the
Seller Indemnified Parties from and against all claims, damages,
actions, suits, proceeding, demands, assessments, adjustments,
costs, and expenses, including reasonable attorneys' fees and
expenses of investigation, incurred by any Seller Indemnified
Party as a result of such environmental condition and further
including, if necessary, the costs and expenses of any
remediation, transportation, incineration, treatment, or other
necessary and appropriate disposition or mitigation of such
environmental condition.
(iii) OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any
statutory, equitable or common law remedy Buyer may have for
breach of representation, warranty, or covenant.
(iv) THIRD PARTY CLAIMS. In the event that the Seller Indemnified
Party desires to make a claim against the Buyer under
subparagraphs 16(b)(i) or 16(b)(ii) in connection with any
action, suit, proceeding or demand at any time instituted
against, or made upon, any Seller Indemnified Party by any third
party for which any Seller Indemnified Party may seek
indemnification hereunder (a "Third Party Claim"), the Seller
Indemnified Party shall promptly notify the Buyer of such Third
Party Claim and of the Seller Indemnified Party's claim of
indemnification with respect thereto; provided, however, that no
reasonable delay on the part of the Seller Indemnified Party in
notifying the Buyer shall relieve the Buyer from any obligation
hereunder. The Buyer shall have thirty (30) days after receipt of
such notice to notify the Seller Indemnified Party if it has
elected to assume the defense of such Third Party Claim. If the
Buyer timely elects to assume the defense of such Third Party
Claim, the Buyer shall be entitled at its own expense to conduct
and control the defense and settlement of such Third Party Claim
through counsel of its own choosing, provided that the Seller
Indemnified Party may participate in the defense of such Third
Party Claim with its own counsel at its own expense, and provided
further that the Buyer must conduct the defense of the Third
Party Claim actively and diligently in order to preserve its
rights in this regard. If the Buyer fails to
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notify the Seller Indemnified Party within thirty (30) days
after receipt of the notice of a Third Party Claim, the Seller
Indemnified party shall be entitled to assume the defense of
such Third Party Claim (and the Seller Indemnified Party need
not consult with, or obtain the consent of the Buyer) and in
the Seller Indemnified Party's sole discretion prosecute,
litigate, settle and perform such other actions as the Seller
Indemnified Party may deem necessary in order fully to protect
the Seller Indemnified party's interests, and the Buyer will
remain responsible for indemnification of the Seller
Indemnified Party to the full extent provided in this paragraph
16(b).
17. PRE-CLOSING COVENANTS. Buyer and Seller agree that prior to Closing:
(a) NOTICES AND CONSENTS. The Seller will give any notices to
third parties, and will use its best efforts to assist Buyer
in obtaining any third party consents, that the Buyer may
request in connection with consummating the transactions
contemplated by this Agreement.
(b) CONDUCT OF BUSINESS BY THE SELLER PRIOR TO THE CLOSING DATE.
During the time period from the date of this Agreement to the
earlier of the Closing Date or the termination of this Agreement,
the Seller shall conduct its operations according to their
ordinary and usual course of business reasonably consistent with
past and current practices in light of the Seller's current
financial position and use its best efforts to maintain and
preserve its business organization, properties and advantageous
business relationships, and retain the services of its officers
and key employees and the Seller will not engage in any practice,
take any action, or enter into any transaction outside the
ordinary course of business. Without limiting the generality of
the foregoing, the Seller will (i) not hold any kind of
liquidation or going out of business sale, (ii)) not sell,
transfer, mortgage, encumber or otherwise dispose of any of the
Assets, except in the ordinary course of business or pursuant to
contracts or agreements in force at the date of this Agreement,
(iii) except for transactions in the ordinary course of the
Seller's business, not enter into or terminate any contract or
agreement, or make any change in any of its leases or contracts,
other than renewals of contracts and leases without adverse
changes of terms; (iv) not increase in any manner the
compensation or fringe benefits of any of the Seller's employees
or officers or pay any pension or retirement allowance not
required by any existing plan or agreement, to any such employees
or officers, or become a party to, amend or commit itself to any
pension, retirement, profit-sharing or welfare benefit plan or
agreement or employment agreement with or for the benefit of any
employee or officer or other person other than payments
consistent with past practices and
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current incentive compensation plans, (v) not agree to, or make
any commitment to, take any of the actions prohibited by this
subparagraph 17(b), (vi) not change its past practices in the
acquisition or sale of the used or rental vehicle inventory of
either Dealership; (vii) not change its past practices in the
acquisition or sale of the new vehicle inventory of either
Dealership; or (viii) not change its past practices in the
acquisition or sale of Parts inventory of either Dealership.
(c) FULL ACCESS. Seller will permit representatives of the Buyer to
have full access, at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the
Seller, to the books, records, properties, assets and operations
of the Seller. The Seller shall furnish to Buyer and
representatives of Buyer such financial, operating and other data
and information, and copies of documents with respect to the
Seller as Buyer shall from time to time reasonably request. Such
access and information shall not in any way affect or diminish
any of the representations or warranties made by Seller in this
Agreement.
(d) NOTICE OF ADVERSE CHANGES. The Seller will give prompt written
notice to the Buyer of any material adverse change in the
business, operations, properties, assets, revenues, earnings,
liabilities, or condition (financial or otherwise) of either
Dealership.
(e) STANDSTILL. From the date hereof and through the date of
termination of this Agreement, the Seller shall not, directly or
indirectly, through any officer, director, agent or otherwise,
solicit, or initiate submission of any proposal or offer from any
person or entity (including any of their officers or employees)
relating to any liquidation, dissolution, recapitalization,
merger, consolidation or acquisition or purchase of all or a
material portion of the Assets of the Seller, or any equity
interest in the Seller, or participate in any negotiations
regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any manner with, or assist
or participate in, facilitate or encourage, any effort or attempt
by any other person or entity to do or seek any of the foregoing.
(f) ASSISTANCE. Both Buyer and Seller each agree to use their best
efforts to create a workable, smooth and orderly transition
between Seller's and Buyer's operation of the Dealerships.
(g) RISK OF LOSS. Risk of loss or damage by fire or other casualty
to the Assets before Closing is assumed by Seller. In the event
of a material loss or damage to the Assets, Buyer shall have the
option to terminate this Agreement.
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(h) HART-SCOTT-RODINO NOTIFICATION. Between the date of this
Agreement and the Closing Date, the parties shall, if and to the
extent required by law, file all reports or other documents
required or requested by the Federal Trade Commission ("FTC") or
the United States Department of Justice ("Justice Department")
under the Act, and all regulations promulgated thereunder,
concerning the transactions contemplated hereby, and comply
promptly with any requests by the FTC or Justice Department for
additional information concerning such transactions, so that the
waiting period specified in the Act will expire as soon as
reasonably possible after the execution and delivery of this
Agreement. The parties agree to furnish to one another such
information concerning the Buyer, the Seller, the Shareholder and
the Dealerships as the parties need to perform their obligations
hereunder. The Buyer agrees to pay all filing fees and costs due
governmental agencies with regard to the notification under and
compliance with the Act and all regulations promulgated
thereunder.
(i) AUDIT. Seller will consent to an audit (the "Audit") to be
conducted under generally accepted auditing standards of the
books, records, and financial statements of the Seller for 1995
and 1996 and any additional years if required by applicable law,
and shall allow Audited Financial Statements (hereinafter
defined) to be prepared in accordance with generally accepted
accounting principles, which shall include reserves for any
deferred warranties, charge backs, inventory write-downs,
repossessions, contracts in transit, and any other appropriate
reserves. As used in this Agreement, "Audited Financial
Statements" shall mean an audited (i) balance sheet dated
December 31, 1996 for the Seller, and (ii) income statement for
the year ending December 31, 1996 for the Seller. The Audit will
be conducted by Buyer's accountants, Price Waterhouse, LP,
assisted by the Seller's accountants, Conway, Stuart & Woodbury.
Seller agrees to cause the full cooperation of the officers,
directors, and employees of the Seller in the Audit as requested
by Buyer. The start date of the Audit will be no later than April
21, 1997. The Seller's accounting staff will assist in gathering
information and providing schedules and analyses in order to have
the Audit completed by May 15, 1997. In addition, as near as
possible prior to the Closing Date, Price Waterhouse shall review
the activities of the Seller for the period after December 31,
1996, and shall prepare a letter (the "Post 1996 Letter") setting
forth any material adverse changes in the revenues, earnings,
liabilities, or financial condition of either Dealership.
(j) FURTHER ASSURANCES. Seller shall from time to time, upon the
request of Buyer, execute and deliver to Buyer such further
instruments and take such further action as Buyer may reasonably
request, in order to
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consummate the transactions contemplated by this Agreement as
expeditiously as possible and to place Buyer in possession and
control of the Assets and to enable Buyer to exercise and enjoy
all rights and benefits with respect thereto.
18. ADDITIONAL AGREEMENTS AND COVENANTS.
(a) Intentionally Omitted.
(b) CHAISSON MOTORS CARS AND CHAISSON BMW NAMES. The Seller and
the Shareholder consent for all purposes to the Buyer's continued
use of the Chaisson Motor Cars, Chaisson BMW and any other names
including the word Chaisson (collectively, the "Chaisson Names")
that are, or could be used, in connection with the operation of
the Dealerships within the Restricted Area. Buyer is not
obligated to use any Chaisson Names. Neither Seller or
Shareholder shall be prohibited from using the name Chaisson in
any non-competing business venture, or from using any Chaisson
Name if Buyer ceases using the name Chaisson in connection with
all of its automobile dealerships within the Restricted Area.
The parties acknowledge that the Dealerships' television, radio
and print advertisements aimed at the Restricted Area may also be
broadcast or distributed outside the Restricted Area, and the
Seller and the Shareholder agree such advertisements shall not be
a violation of this Agreement, and
(i) No separate consideration, over and above the Purchase
Price, is owed by the Buyer to the Seller or the Shareholder
for this consent to use the "Chaisson" name as provided
herein.
(ii) As soon as practicable after the Closing, the Seller agrees
to file (a) with the Nevada Secretary of State any
terminations and/or consents necessary to allow Buyer to use
the "Chaisson" names and (ii) with the County Clerk of Clark
County, Nevada appropriate certificates acknowledging
Seller's termination of the Chaisson Names that have been
filed. As soon as practicable after the Closing, Buyer
agrees to file with the County Clerk of Clark County, Nevada
appropriate certificates acknowledging Buyer's use of any
Chaisson Names. The parties mutually agree to take other
reasonable steps as from time to time may be appropriate to
avoid confusion and mistake by third parties as to their
respective corporate identities.
(iii) The Buyer's right to use the Chaisson Names in the
Restricted Area shall be binding on the Seller as well
as the Shareholder and on all of their assignees,
licensees, transferees and successors in interest,
27
<PAGE>
and every such sale, assignment, license or transfer
entered into by either the Seller or the Shareholder
shall be expressly subject to the Buyer's continued
right to use the Chaisson Names in the Restricted Area
as provided in this Agreement.
(iv) Other provisions hereof to the contrary notwithstanding,
Buyer's right to continued use of the Chaisson Names shall
absolutely terminate on the first to occur of (a) the
termination of this Agreement; (b) the mutual agreement of
the Seller and the Buyer after Closing; or (c) the Buyer's
cessation of use thereof in the Restricted Area.
(c) WASTE DISPOSAL. Seller agrees, at its sole cost, to properly
dispose of all pollutants, contaminants, or hazardous or toxic
materials or wastes accumulated by Seller prior to Closing and
located on any of the properties of either Dealership.
(d) WE OWES AND WORK IN PROCESS. Seller agrees to reimburse Buyer
for the cost of Seller's "We Owes" accumulated prior to Closing
and performed by the Buyer after Closing. "We Owes" is a term of
art in the automobile dealer industry and its meaning for
purposes of this Agreement shall be the same as it is used in
such industry. Buyer agrees to pay Seller for the reasonable
value of its Work In Process (at Seller's cost for parts and
labor) accumulated prior to Closing. All We Owes shall be listed
on Schedule 18(d)(i) and All Work In Process shall be listed on
Schedule 18(d)(ii).
(e) RETURN RESERVE. Seller agrees to assign and transfer its
parts and accessories return reserve to the Buyer, if assignable,
and allow Buyer to participate in such return reserve accumulated
prior to Closing.
(f) BILLED WEEK. The parties will cooperate on transfer of in-bound
New Vehicles and Parts prior to Closing to properly reflect the
invoicing therefore to either Buyer or Seller, as appropriate,
using the manufacturers' related dealer codes.
(g) UTILITY AND TELEPHONE SERVICE. Seller agrees to sign over all
utility and telephone services, including telephone numbers, to
Buyer once Closing becomes eminent. Seller agrees to allow Buyer
to assume all utility and telephone deposits, provided that Buyer
shall pay to Seller the amount of any such assumed deposits.
Seller agrees to use its best efforts to assure that there will
be no breaks or discontinuances of any utility or telephone
services upon Closing.
28
<PAGE>
(h) EMPLOYEE LIST. To the extent not set forth in Schedule 9(k),
Seller agrees to provide, at least 10 days prior to Closing, a
list of all employees of the Seller. Such list shall contain the
employee's name, employment description, annual compensation or
formula for computing such annual compensation, accrued vacation
pay and tentative vacation plans. Buyer agrees to honor all
disclosed vacation plans, provided Seller pays to Buyer an amount
equal to all accrued vacation pay at the time of Closing.
(i) INVENTORIES. Prior to Closing, Buyer and Seller shall conduct a
physical inventory of all Parts, New Vehicles, Used Vehicles and
Rental vehicles owned by the Seller and shall determine the
values thereof in the following manner:
(i) Seller and Buyer shall agree to the value of the Used
Vehicle inventory of each Dealership. If Buyer and Seller
fail to agree on the value of any Used Vehicle, Seller shall
retain it and remove it from the Dealership.
(ii) Buyer and Seller shall calculate the value of the New
Vehicle inventory of each Dealership. The value of each new
vehicle shall be the cash sum equal to the factory invoice
price (excluding any Seller internal profit) to the
Dealership, less any factory hold back rebate, any other
factory rebate or incentive which the Dealership may have
received, or to which the Dealership is or may become
entitled to receive, advertising credits and interest
credits, plus performed PDI at Seller's cost (excluding any
internal profit), options added at Seller's costs (excluding
any internal profit), and any freight and handling charges.
All demonstrators shall be valued for a cash sum equal to an
amount as calculated above, except demonstrators having more
than 6,000 miles on the odometer shall be treated as a Used
Vehicle. The value of any New Vehicle shall be decreased by
an amount equal to Seller's cost (excluding any internal
profit) of repair for any physically damaged vehicle.
(iii) Seller and Buyer shall calculate the value of the Parts
inventory, based on the cost of the parts and
accessories set forth in the then-current dealer parts
and accessories price schedule for the applicable
represented manufacturer or other reliable supplier.
(iv) Seller and Buyer shall agree to the value of the Rental
Vehicle inventory of each Dealership. If any Rental Vehicle
has no more than 6,000 miles on its odometer it shall be
treated as though it were a New Vehicle. If any Rental
Vehicle has more than 6,000
29
<PAGE>
miles on its odometer, it shall be treated as though it
were a Used Vehicle.
(j) TANGIBLE PERSONAL PROPERTY. The value of the Tangible Personal
Property of the Dealerships shall be based on the appraisal from
dated, 1997. Any Tangible Personal Property added in 1997 that
is not shown on the appraisal and all General Supplies shall be
added to the value of the Tangible Personal Property at Seller's
cost (excluding any Seller internal profit).
(k) EMPLOYMENT CONTRACTS. Buyer will execute and deliver
employment contracts (the "Employment Contracts") with James J.
Chaisson, Jr., John P. Chaisson, and Ryan A. Cook (individually,
a "Key Employee", and collectively, the "Key Employees"). Each
employment contract shall be for a three (3) year term and shall
be terminable by Buyer only upon "Cause" consisting of either (i)
a conviction of a felony, (ii) commitment of fraud, (iii) theft
of any property of employer or employer's customers, (iv)
reporting to work under the influence of alcohol or controlled
substances (other than prescription medication which is possessed
and being taken pursuant to a current and valid physician's
prescription), or (v) repeated failure on the part of a Key
Employee to perform his duties in the usual and customary
manner in the retail automobile business. The Employment
Contracts shall contain the following terms and such other terms
upon which the Buyer and the employee shall mutually agree:
(i) James J. Chaisson, Jr shall be employed as the General
Manager of the Las Vegas Dealership at a salary of $3,500
per month, plus a monthly bonus of 10% of the net profits of
the Las Vegas Dealership before income taxes; provided that
he shall be guaranteed compensation of at least $15,000 per
month.
(ii) John P. Chaisson shall be employed as the Parts and Service
Director of the Las Vegas Dealership at a salary of $5,000
per month, plus a monthly bonus consisting of the sum of (a)
the of 3% of BMW, 1% of Jaguar and 1% of Land Rover, parts,
service, and body shop net income of the Las Vegas
Dealership so long as the respective BMW, Jaguar and Land
Rover C.S.I. is equal to or greater than the regional
average and (b) 2% of the net profits of the Las Vegas
Dealership before income taxes.
(iii) Ryan A. Cook shall be employed as the Sales Manager of
Volkswagen and Audi Franchises at the Las Vegas
Dealership at a salary of $2,500 per month plus a
commission not to exceed 7% of
30
<PAGE>
the gross sales and F&I for Volkswagen and Audi Franchises
at the Dealership; provided that he shall be guaranteed
compensation of at least $7,500 per month.
Each Employment Contract shall provide that either party may
terminate the Employment Contract upon thirty (30) days written
notice to the other party and that Buyer may terminate
immediately for Cause. In the event a Key Employee terminates
his Employment Contract or is terminated for Cause, he shall
receive his compensation calculated to the date of termination,
and Buyer shall be relieved of any further obligation to pay any
additional base compensation or bonus to the employee. In the
event Buyer terminates the employment contract without Cause, the
employee will receive his base compensation plus an amount equal
to his bonus or commission compensation earned by him for the
period of twelve (12) months prior to the date of termination.
(l) SELLER'S AND SHAREHOLDER'S NONDISCLOSURE OF CONFIDENTIAL
INFORMATION. Both the Seller and the Shareholder recognize and
acknowledge that they have in the past, they currently have, and
in the future may possibly have access to certain confidential
information of each Dealership, including, but not limited to,
lists of accounts, operational policies, and pricing and cost
policies that are valuable, special and unique assets of the
Dealerships (the "Confidential Information). The Seller and the
Shareholder agree that they will not disclose such Confidential
Information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except to
authorized representatives of the Buyer or Seller, or as required
by law, unless such Confidential Information becomes known to the
public generally through no fault of the Seller or Shareholder,
or the parties mutually agree to such disclosure. In the event of
a breach or threatened breach by the Seller or Shareholder of the
provisions of this subparagraph, the Buyer shall be entitled to
an injunction restraining the Seller or Shareholder from
disclosing, in whole or in part, such Confidential Information.
Nothing herein shall be construed as prohibiting the Buyer from
pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
(m) BUYER'S NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Buyer
recognizes and acknowledges that it has in the past, it currently
has, and in the future may possibly have access to the
Confidential Information. The Buyer agrees that it will not
disclose such Confidential Information to any person, firm,
corporation, association or other entity for any purpose or
reason whatsoever, except to affiliated entities and authorized
representatives of the Buyer, or as required by law, unless such
Confidential Information
31
<PAGE>
becomes known to the public generally through no fault of the
Buyer. In the event of a breach or threatened breach by the Buyer
of the provisions of this subparagraph, the Seller shall be
entitled to an injunction restraining the Buyer from disclosing,
in whole or in part, such Confidential Information. Nothing
herein shall be construed as prohibiting the Seller from pursuing
any other available remedy for such breach or threatened breach,
including the recovery of damages.
(n) PRO-RATING OF TAXES. Any and all real property taxes and
personal property taxes relating to the real property covered by
the Leases and the Assets shall be pro-rated to the time of
Closing and Buyer shall reimburse Seller for any such taxes paid
by Seller that are applicable to a period of time following the
Closing.
(o) AGGREGATE ADJUSTED 1996 EARNINGS. In the event the aggregate
adjusted 1996 earnings (hereinafter defined) are less than
$4,534,000, Buyer may either terminate this Agreement (and
neither Buyer nor Seller shall have any further obligations or
liabilities under this Agreement), or proceed to Closing in
accordance with the terms of this Agreement. As used in this
Agreement, the term "Aggregate Adjusted 1996 Earnings" shall mean
the aggregate amount of each dealership's 1996 net profit before
income taxes as shown on the Seller's consolidated income
statement for 1996 in the Audited Financial Statements prepared
by Price Waterhouse as a result of the Audit.
19. GENERAL PROVISIONS
(a) ENTIRE AGREEMENT. This Agreement contains and constitutes the
entire agreement between the parties regarding the subject matter
hereof and supersedes all prior agreements and understandings
between the parties relating to the subject matter of this
Agreement. Except as otherwise agreed to in writing signed by
all parties hereto, there are no agreements, understandings,
restrictions, warranties or representations between the parties
relating to the subject matter hereof other than those set forth
in this Agreement. This instrument is not intended to have any
legal effect whatsoever, or to be a legally binding agreement, or
any evidence thereof, until it has been signed by the Seller, the
Shareholder and the Buyer.
(b) THIRD PARTY CONSENTS. The Seller and the Buyer mutually agree
to cooperate and use their respective best efforts to prepare all
documentation, to effect all filings and to obtain all permits,
consents, approvals and authorizations of all third parties and
governmental bodies as may be necessary to consummate the
transactions contemplated by this Agreement.
32
<PAGE>
(c) EXHIBITS. Preliminary drafts of all Schedules and Exhibits C
through and including H shall be prepared by the Seller and
Shareholder by May 10, 1997, and delivered to Buyer for Buyer's
review. Preliminary drafts of Exhibits A and J through and
including O shall be prepared by Buyer by May 10, 1997, and
delivered to Seller for Seller's review. Final Schedules and
Exhibits shall be prepared by the party that prepared the
preliminary drafts, initialed by the parties, and attached to
this Agreement at Closing. When attached to this Agreement, the
exhibits shall be made a part of this Agreement by reference.
SCHEDULES:
Schedule 1 (a) - Tangible Personal Property
Schedule 1 (h) - Intellectual Property
Schedule 1 (i) - Personal Property Contracts
Schedule 5 - Allocation of Purchase Price
Schedule 9 (e) - Franchises
Schedule 9 (f) - Licenses
Schedule 9 (i) - Litigation
Schedule 9 (k) - Employment Contracts and Benefit Plans
Schedule 9 (m) - Consents to Consummation
Schedule 9 (s) - No Changes
EXHIBITS:
Exhibit "A" - The Note
Exhibit "B" - Intentionally Omitted
Exhibit "C" - Warranty Bill of Sale
Exhibit "D" - Assignment
Exhibit "E" - Las Vegas Premises Lease
Exhibit "F" - Henderson Premises Lease
Exhibit "G" - 2.5 Acre Tract Lease
Exhibit "H" - Seller's Certificate
Exhibit "I" - Seller's Counsel Opinion
Exhibit "J" - Registration Rights Agreement
Exhibit "K" - James J. Chaisson, Jr. Employment Agreement
Exhibit "L" - John P. Chaisson Employment Agreement
Exhibit "M" - Ryan A Cook Employment Agreement
Exhibit "N" - Buyer's Certificate
Exhibit "O" - Buyer's Counsel Opinion
(d) FURTHER ACTIONS. From time to time, as and when requested by any
party hereto, the other parties shall execute and deliver, or
cause to be executed and delivered, all such documents and
instruments and shall take, or cause
33
<PAGE>
to be taken, all such further or other actions as the requesting
party may reasonably deem necessary or desirable to consummate
the transactions contemplated by this Agreement.
(e) PUBLICITY. The parties hereto agree that no public release or
announcement concerning the terms of the transactions
contemplated by this Agreement shall be issued by any party
without the prior written consent of the other parties (which
consent shall not unreasonably be withheld), except as such
release or announcement may be required by law, in which case the
party required to make the release or announcement shall allow
the other parties reasonable time to comment on such release or
announcement in advance of such issuance.
(f) SALES AND TRANSFER TAXES. All sales and transfer taxes, if any,
incurred in connection with transfer of the Assets contemplated
hereby shall be borne by the Buyer.
(g) AMENDMENT. This Agreement may not be amended, modified or
terminated except by an instrument in writing signed by all the
parties to this Agreement.
(h) GOVERNING LAW. This Agreement shall be construed, enforced and
governed in accordance with the laws of the State of Nevada.
(i) CONSTRUCTION. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter gender
thereof or to the plurals of each, as the identity of the person
or persons or the context may require. The descriptive headings
contained in this Agreement are for reference purposes only and
are not intended to describe, interpret, define or limit the
scope, extent or intent of this Agreement or any provision
contained in this Agreement. As used in this Agreement the
phrase "Seller's cost" or "dealer's cost" or any variation
thereof shall be qualified by the phrase (excluding any Seller's
internal cost).
(j) INVALIDITY. If any provision contained in this Agreement shall
for any reason be held to be invalid, illegal, void or
unenforceable in any respect, such provision shall be deemed
modified so as to constitute a provision conforming as nearly as
possible to such invalid, illegal, void or unenforceable
provision while still remaining valid and enforceable; and the
remaining terms or provisions contained herein shall not be
affected thereby.
(k) BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding
upon,
34
<PAGE>
and shall inure to the benefit of, the parties hereto and
their respective legal representatives, successors, and permitted
assigns. Only with the prior written consent of the Seller, which
consent will not be unreasonably denied, the Buyer may assign its
rights under this Agreement to a related entity, and the Buyer
and its assignee shall be fully obligated, responsible and liable
for performance of the Buyer's obligations hereunder regardless
of any such assignment. The Seller and the Shareholder may not
assign any of their rights or delegate any of their obligations
hereunder. Any assignment in violation hereof shall be void.
(l) ATTORNEYS' FEES. In the event any party institutes litigation to
enforce or protect its rights under this Agreement, the party
prevailing in any such litigation shall be entitled, in addition
to ail other relief, to reasonable attorneys' fees, out-of-pocket
costs and disbursements relating to such litigation.
(m) NOTICES. All notices and other communications hereunder shall be
in writing, dated with the current date of such notice and signed
by the party giving such notice. Notices shall be deemed to be
duly received (i) on the date given or delivered personally or by
telecopy or telex, or (ii) on the earlier of the date received or
three business days after proven mailing, when mailed by
registered or certified mail (return receipt requested), to the
parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
if to Buyer:
Cross-Continent Auto Retailers, Inc.
1201 S. Taylor Street
Amarillo, Texas 79101
Attn: R. Wayne Moore
if to Seller:
JRJ Investments, Inc.
2333 S. Decatur
Las Vegas, Nevada 89102
Attn: James J. Chaisson, Sr.
if to Shareholder:
James J. Chaisson, Sr.
35
<PAGE>
40 Innisbrook
Las Vegas, Nevada 89113
with a copy to:
Jones, Jones, Close & Brown, Chartered
3773 Howard Hughes Parkway, 3rd Floor South
Las Vegas, Nevada 89109
Attn: Douglas G. Crosby
(n) DEFINITION OF KNOWLEDGE. As used in this Agreement, the Seller's
or the Shareholder's Knowledge" shall include the knowledge of
the Shareholder and the employees and agents of the Seller. Each
representation and warranty that is limited to the Seller's or
the Shareholder's "knowledge" is made with the understanding that
the Seller or the Shareholder has examined whatever sources of
information as are in the possession or control of the Seller or
the Shareholder in order to verify the truth and accuracy of such
representation and warranty.
(o) EXPENSES. Whether or not the transactions contemplated hereby are
consummated, each of the parties to this Agreement shall be
responsible for his or its own costs and expenses incurred in
connection with the preparation and negotiation of this
Agreement.
(p) TIME IS OF THE ESSENCE. Time shall be of the essence with respect
to this Agreement and the consummation of the transactions
contemplated hereby.
(q) WAIVER. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving
such waiver, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature.
(r) CONSULTING AGREEMENT. James J. Chaisson, Sr. ("Consultant")
agrees to provide consulting services to Buyer with respect to
the operation of the Dealerships for a period of three years at
such times and for such consulting fees and benefits (including
without limitation, stock options for Buyer's common stock), as
Consultant and Buyer mutually agree. Consultant agrees to
maintain his current private office at the Las Vegas Dealership
for such time within the three year period as Buyer shall
reasonably request, provided that Consultant shall not be charged
with any occupancy costs with respect to such office.
(s) MEDIATION. If a dispute arises out of or relates to this
Agreement, or the
36
<PAGE>
breach thereof, and if the dispute cannot be settled through
negotiation, the parties agree first to try in good faith to
settle the dispute by mediation administered by the American
Arbitration Association under its Commercial Mediation Rules
before restoring to arbitration, litigation, or some other
dispute resolution procedure.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
BUYER: SELLER:
CROSS-CONTINENT AUTO JRJ INVESTMENTS, INC.,
RETAILERS, INC., a Nevada corporation
a Delaware corporation
By: /s/ ROBERT W. HALL By: /s/ JAMES J. CHAISSON, SR.
------------------------------- ----------------------------------
Robert W. Hall, James J. Chaisson, Sr., President
Senior Vice Chairman
SHAREHOLDER:
THE CHAISSON FAMILY TRUST-R501
By: /s/ JAMES J. CHAISSON, SR.
----------------------------------
James J. Chaisson, Sr. Trustee
37
<PAGE>
EXHIBIT 10.15
EMPLOYMENT CONTRACT
By this Employment Contract (the "Contract"), CROSS-CONTINENT AUTO
RETAILERS, INC. ("Employer"), a Delaware corporation, located at 1201 S. Taylor,
Amarillo, Texas, employs R. WAYNE MOORE ("Employee"), whose mailing address is
2811 Parker, Amarillo, Texas 79109, who accepts employment on the following
terms and conditions:
ARTICLE 1
TERM OF EMPLOYMENT
1.1 By this Contract, Employer employs Employee and Employee accepts
employment with Employer for a period of three (3) years, beginning on February
18, 1997.
ARTICLE 2
COMPENSATION
2.1 BASIC COMPENSATION. As compensation for all services rendered under
this Contract, Employee shall be paid by Employer a salary of $150,000.00 for
the first year; $155,000.00 for the second year; and $160,000.00 for the third
year. Employee shall be paid in twelve equal monthly installments on the last
day of each month during the period of employment. The amount paid is to be
prorated for any partial employment period.
2.2 STOCK OPTIONS. Employer agrees to grant Employee the right and
option to purchase from the Company all or any part of an aggregate of 15,000
shares of non-qualified, common stock, priced at the fair market value (as
defined in Employer's Amended and Restated 1996 Stock Option Plan) as of the
date of Employee's executed Stock Option Agreement. This Option shall be
exercised proportionately over a 5-year period, as defined in Employee's Stock
Option Agreement.
ARTICLE 3
DUTIES OF EMPLOYEE
3.1 DUTIES. Employee is employed as General Counsel of Cross-Continent
Auto Retailers, Inc., with his office being located at 1201 S. Taylor, Amarillo,
Texas.
3.2 EXTENT OF SERVICES. Employee shall devote his entire productive time,
ability, attention, and general energies to the business of Employer. During
the term of this Contract, Employee shall not, directly or indirectly, render
any services of a business, commercial, or professional nature to any other
person or organization,
1
<PAGE>
whether or not for compensation, without the prior written consent of
Employer. The exclusive remedy of Employer for Employee's breach of this
section 3.2 shall be immediate discharge for cause.
ARTICLE 4
EMPLOYEE BENEFITS
4.1 HEALTH BENEFITS. Employer agrees to include Employee in the hospital,
surgical, and medical benefit plan adopted by Employer.
4.2 HEALTH INSURANCE PREMIUMS. Employee shall be reimbursed for fifty
percent (50%) of Employee's health insurance premiums carried through Employer.
4.3 RETIREMENT BENEFITS. Employee shall be eligible to participate in
the Employer's retirement plan.
ARTICLE 5
REIMBURSEMENT OF EXPENSES INCURRED BY EMPLOYEE
5.1 BUSINESS EXPENSES. Employee is authorized to incur reasonable
business expenses for promoting the business of Employer, including expenditures
for business entertainment and travel. Employer shall reimburse Employee for
all such reasonable expenses upon Employee's monthly presentation and itemized
account of the expenditures.
ARTICLE 6
PROPERTY RIGHTS OF PARTIES
6.1 TRADE SECRETS. During the term of employment, Employee will have
access to and become familiar with various trade secrets, consisting of
formulas, and compilations of information, records, and specifications owned by
Employer and regularly used in the operation of the business of Employer.
Employee must not disclose any such trade secrets, directly or indirectly, nor
use them in any way, either during the term of this Contract or at any time
thereafter, except as required in the course of his employment. All files,
records, documents, drawings, specifications, equipment, and similar items
relating to the business of Employer, whether or not prepared by Employee, will
remain the exclusive property of Employer and must not be removed from the
premises of Employer under any circumstances without the prior written consent
of Employer.
6.2 RETURN OF EMPLOYER'S PROPERTY. On the termination of employment or
whenever requested by Employer, Employee must immediately deliver to Employer
all property in Employee's possession or under Employee's control belonging to
Employer in good condition, ordinary wear and tear excepted.
2
<PAGE>
ARTICLE 7
OBLIGATION OF EMPLOYER
7.1 INDEMNIFICATION OF LOSSES OF EMPLOYEE. Employer shall indemnify
Employee for all losses sustained by Employee as a direct result of the
discharge of his duties required by this Contract, except for losses caused by
Employee's gross negligence or willful misconduct.
7.2 WORKING CONDITIONS. Employer will provide Employee with an office
and clerical services, and any other facilities and services as are suitable to
the Employee's position or required for the performance of his duties.
ARTICLE 8
TERMINATION
8.1 TERMINATION BY EMPLOYER. In the event of fraud, insubordination,
theft, or acts of moral turpitude, Employer has the right to terminate Employee
immediately. The termination shall not prejudice any remedy that Employer may
have at law or in equity. In the event that Employee is terminated for cause as
provided in this paragraph 9.1, Employee will be entitled to no further
compensation after the date of termination.
8.2 EFFECT OF TERMINATION ON COMPENSATION. In the event of the
termination of this Contract, without cause, prior to the completion of the term
of employment specified in Article 1, Employee will be entitled to the Basic
Compensation Employee would have received had he completed the terms of this
Contract, provided for in paragraph 2.1.
ARTICLE 9
GENERAL PROVISIONS
9.1 NOTICES. All notices or other communications required under this
Contract may be effected either by personal delivery in writing or by certified
mail, return receipt requested. Notice shall be deemed to have been given when
delivered or mailed to the parties at their respective addresses as set forth
above or when mailed to the last address provided in writing to the other party
by the addressee. Employer and Employee shall have the right from time to time
to change their respective addresses by not less than ten (10) days' prior
written notice to the other party.
3
<PAGE>
9.2 ENTIRETY OF AGREEMENT. This Contract supersedes all other agreements,
either oral or in writing, between the parties to this Contract with respect to
the employment of Employee by Employer. This Contract contains the entire
understanding of the parties and all of the covenants and agreements between the
parties with respect to the employment of Employee by Employer.
10.3 GOVERNING LAW. The construction, enforcement, interpretation, and
validity of this Contract shall be governed by the laws of the State of Texas.
Executed this 18th day of February, 1997.
EMPLOYER: CROSS-CONTINENT AUTO RETAILERS , INC.
By: /s/ Bill Gilliland
---------------------------------------
Bill Gilliland,
Chairman and Chief Executive Officer
EMPLOYEE: /s/ R. Wayne Moore
-------------------------------------------
R. Wayne Moore
4
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 33,431
<SECURITIES> 0
<RECEIVABLES> 15,122
<ALLOWANCES> 0
<INVENTORY> 45,800
<CURRENT-ASSETS> 94,353
<PP&E> 13,854
<DEPRECIATION> 0
<TOTAL-ASSETS> 134,353
<CURRENT-LIABILITIES> 61,808
<BONDS> 0
0
0
<COMMON> 138
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 134,353
<SALES> 89,022
<TOTAL-REVENUES> 89,022
<CGS> 73,839
<TOTAL-COSTS> 73,839
<OTHER-EXPENSES> 11,282
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 475
<INCOME-PRETAX> 3,426
<INCOME-TAX> 1,280
<INCOME-CONTINUING> 2,146
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 2,146
<EPS-PRIMARY> .16
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