As filed with the Securities and Exchange Commission on December 15, 2000
Registration No. 333-
=====================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SONIC AUTOMOTIVE, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<CAPTION>
Delaware 5511 56-010790
<S> <C> <C>
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
5401 East Independence Boulevard
P.O. Box 18747
Charlotte, North Carolina 28212
Telephone (704) 532-3320
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Mr. Stephen K. Coss
Vice President and General Counsel
5401 East Independence Boulevard
P.O. Box 18747
Charlotte, North Carolina 28212
Telephone (704) 532-3320
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent For Service)
Copies to:
Gary C. Ivey, Esq.
Parker, Poe, Adams & Bernstein L.L.P.
401 South Tryon Street, Suite 3000
Charlotte, North Carolina 28202
Telephone (704) 372-9000
Approximate date of commencement of proposed sale to
the public: From time to time after this registration
statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Each Class Maximum Maximum Amount Of
Of Securities To Amount To Be Offering Price Aggregate Offering Registration
Be Registered Registered Per Share (1) Price (1) Fee (1)
<S> <C> <C> <C> <C>
Class A Common Stock, par value $.01 per share 10,000,000 Shares $6.6875 $66,875,000 $17,655
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
Pursuant to Rule 457(c) under the Securities Act of 1933, the registration fee
is calculated based on the average of the high and low prices for the Class A
Common Stock, as reported on the New York Stock Exchange Composite Transactions
Tape on December 14, 2000, which was $6.6875.
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. WE MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR WILL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE WHERE THE OFFER, SOLICITATION OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED DECEMBER 15, 2000
PROSPECTUS
10,000,000 Shares
SONIC AUTOMOTIVE, INC.
Class A Common Stock
(Par Value $.01 Per Share)
Acquisitions.
o We may use this prospectus from time to time to offer and sell our Class A
common stock to the owners of automobile dealership and collision repair
businesses that we may acquire in the future as full or partial
consideration for the assets or ownership interests so acquired.
o The specific terms upon which we will issue these shares will be
determined by negotiation with the owners of businesses we may acquire.
o These shares may also be issued on the conversion of shares of our Class A
convertible preferred stock that are privately sold to the owners of
businesses we may acquire in the future.
Share Price.
o We expect the price of the shares we issue to be reasonably related to the
prevailing market prices of our Class A common stock (a) at or near the time
we enter into acquisition agreements or consummate acquisitions or (b)
during the periods before delivery of the shares, including delivery upon
preferred stock conversions.
Underwriting.
o We will pay all expenses of this offering. We will not pay underwriting
discounts or commissions in connection with issuing our stock in
acquisitions, although we may pay finder's fees in specific acquisitions.
Any person receiving a finder's fee may be deemed an "underwriter" within
the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
Resales.
o In addition to certain resale limitations imposed by federal securities
laws, we may require persons receiving our Class A common stock in
connection with an acquisition to agree to hold such stock for a certain
period of time from the date of the acquisition.
o All of the Class A common stock offered by this prospectus may, subject to
certain conditions, also be offered and resold from time to time pursuant to
this prospectus by persons who receive this stock in acquisitions or who
received this stock upon the conversion of preferred stock.
Our Business.
o We are based in Charlotte, North Carolina and operate automobile
dealerships and collision repair centers.
o The trading symbol for our Class A common stock on the New York Stock
Exchange is "SAH." On December 14, 2000, the closing for the Class A
common stock on the New York Stock Exchange was $6.5625 per share.
Before making an investment in our company, you should carefully consider
the "Risk Factors" beginning on page 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is December , 2000
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Section Page
------- ----
<S> <C>
Where You Can Find More Information About Sonic............................................. 2
Cautionary Notice Regarding Forward-Looking Statements...................................... 3
The Company................................................................................. 5
Risk Factors................................................................................ 5
Acquisition Terms........................................................................... 19
Selling Security Holders.................................................................... 20
Plan of Distribution by Selling Security Holders............................................ 20
Description of Capital Stock................................................................ 21
Certain Manufacturer Restrictions........................................................... 26
Legal Matters............................................................................... 27
Experts..................................................................................... 27
</TABLE>
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We will not make an offer
to sell these securities (1) in any jurisdiction where the offer or sale is not
permitted, (2) where the person making the offer is not qualified to do so, or
(3) to any person who cannot legally be offered the securities. You should
assume that the information appearing in this prospectus is accurate only as of
the date on the front cover of this prospectus. Our business, financial
condition, results of operations and prospects may have changed since that date.
This prospectus is based on information provided by us and other
sources that we believe are reliable. However, we cannot assure you that the
information is accurate or complete. For example, in preparing estimates of
market share and industry data, we utilized third party sources when possible,
but cannot verify some of the estimates through independent sources.
You should not consider any information in this prospectus to be legal,
business or tax advice. You should consult your own attorney, business advisor
and tax advisor for legal, business and tax advice regarding an investment in
the Company's securities.
You should base your decision to invest in the Company's securities
solely on information contained in this prospectus, related prospectus
supplement and information incorporated by reference herein and therein.
No representation or warranty, express or implied, is made as to the
accuracy or completeness of the information set forth herein, and nothing
contained in this prospectus is, or shall be relied upon as, a promise or
representation, whether as to the past or the future.
WHERE YOU CAN FIND MORE INFORMATION ABOUT SONIC
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. These reports and
information relate to our business, financial condition and other matters. You
may read and copy these reports, proxy statements and other information at the
Commission's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located at 7 World Trade
Center, Suite 1300, New York, New York 10048 and at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. You may obtain information on the operation
of the Commission's Public Reference Room in Washington, D.C. by calling the
Commission at 1-800-SEC-0330. Copies may be obtained from the Commission upon
payment of the required fees. The Commission maintains an Internet web site that
contains reports, proxy and information statements and other information
regarding us and other registrants that file electronically with the Commission.
The Commission's web site is http://www.sec.gov. Information that we file with
the Commission may also be read and copied at the offices of the New York Stock
Exchange at 20 Broad Street, New York, New York 10005.
The Commission allows us to "incorporate by reference" the information
we file with them, which means that we can disclose important business and
financial information to you by referring to documents we have previously filed
with the Commission. The information incorporated by reference is considered to
be a part of this prospectus, and information that we file later with the
Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the
2
<PAGE>
Securities Exchange Act of 1934, as amended (the "Exchange Act"), until selling
security holders sell all the shares that they may be allowed to offer from time
to time in the future hereunder or we decide to terminate this offering earlier:
(1) Our Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 (File No. 1-13395);
(2) Our Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2000;
(3) Our Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 2000;
(4) Our Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2000;
(5) Our Current Report on Form 8-K/A filed January 18, 2000
(Manhattan and Freeland acquisitions);
(6) Our Current Report on Form 8-K/A filed January 27, 2000
(FirstAmerica acquisition);
(7) Our Current Report on Form 8-K filed September 15, 2000;
(8) The combined financial statements of Williams Automotive
Group, the financial statements of Economy Cars, Inc., the
financial statements of Global Imports, Inc., the combined
financial statements of Newsome Automotive Group, the combined
financial statements of Lloyd Automotive Group and the
financial statements of Lute Riley Motors, Inc. included in
our Amendment No. 1 to Registration Statement on Form S-3
(Registration No. 333-71803) filed April 9, 1999;
(9) Our Definitive Proxy Statement dated May 1, 2000; and
(10) The description of our Class A common stock contained in our
Registration Statement on Form 8-A, as amended, filed with the
Commission pursuant to Section 12 of the Exchange Act.
All filings we file with the Commission pursuant to the Exchange Act
after the date of this initial registration statement and prior to effectiveness
of this registration statement shall be deemed to be incorporated by reference
into this prospectus.
We will provide without charge to each person to whom this prospectus
is delivered, upon their written or oral request, a copy of any or all of the
documents incorporated by reference in this prospectus (excluding exhibits to
such documents unless such exhibits are specifically incorporated by reference).
Written or telephone requests should be directed to Mr. Todd Atenhan, Director
of Investor Relations, P. O. Box 18747, Charlotte, North Carolina 28218,
Telephone (888) 766-4218. You must make your request for documents no later than
five business days before the date you make your investment decision concerning
our securities to obtain timely delivery of these documents.
This prospectus is a part of our registration statement on Form S-4
filed with the Commission. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits to the
registration statement. Statements about the contents of contracts or other
documents contained in this prospectus or in any other filing to which we refer
you are not necessarily complete. You should review the actual copy of such
documents filed as an exhibit to the registration statement or such other
filing. You may obtain a copy of the registration statement and the exhibits
filed with it from the Commission at any of the locations listed above.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains statements that constitute "forward-looking"
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. These forward-looking statements are not historical
facts, but only predictions and generally can be identified by use of statements
that include words such as "believe," "expect," "anticipate," "intend," "plan,"
"foresee" or other words or phrases of similar import. Similarly, statements
that describe our objectives, plans or goals are also forward-looking
statements. We intend such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements contained in the Private
Litigation Securities Reform Act of 1995, and we are including this statement
for purposes of complying with these safe harbor provisions. These statements
appear in a number of places in this prospectus and include statements regarding
our intent, belief or current expectations, or those of our directors or
officers, with respect to, among other things:
3
<PAGE>
o our potential acquisitions;
o trends in our industry;
o our financing plans;
o the effect of the Internet on our business and our ability to
implement our Internet business strategy;
o trends affecting our financial condition or results of
operations; and
o our business and growth strategies.
You are cautioned that these forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those projected in the forward-looking
statements as a result of various factors. Among others, factors that could
materially adversely affect actual results and performance include:
o local and regional economic conditions in the area we serve;
o the level of consumer spending;
o our relationships with manufacturers;
o high competition;
o site selection and related traffic and demographic patterns;
o inventory management and turnover levels;
o the effect of the Internet on our business;
o realization of cost savings; and
o our success in integrating recent and potential future
acquisitions, including integration of acquired information
systems.
4
<PAGE>
THE COMPANY
Sonic is the second largest automotive retailer in the United States,
as measured by total revenue, operating dealerships and collision repair centers
in several metropolitan areas of the southeastern, midwestern, mid-Atlantic,
western and southwestern United States. We sell new and used cars, light trucks
and replacement parts and provide vehicle maintenance, warranty, paint and
repair services. We also arrange related extended warranty and financing and
insurance for our automotive customers.
Our Class A common stock is traded on the New York Stock Exchange under
the trading symbol "SAH." Our principal executive offices are located at 5401
East Independence Blvd., Charlotte, North Carolina 28212, Telephone (704)
532-3320. We were incorporated in Delaware in 1997.
RISK FACTORS
The risk factors described below are not necessarily exhaustive, and
you are encouraged to perform your own investigation with respect to the
securities being offered and our company.
Our significant indebtedness could materially adversely affect our financial
health and prevent us from fulfilling our obligations.
As of September 30, 2000, our total outstanding indebtedness was
approximately $1,039.9 million, including the following:
o $341.6 million under a revolving credit agreement dated August
10, 2000 with Ford Motor Credit Company ("Ford Motor Credit")
and Chrysler Financial Company, LLC ("Chrysler Financial")(the
"2000 Revolving Facility" and together with any of our
predecessor revolving credit arrangements with Fort Motor
Credit, as in effect from time to time, the "Revolving
Facility") with a borrowing limit of $500 million, subject to
a borrowing base calculated on the basis of our receivables,
inventory and equipment and a pledge of certain additional
collateral by an affiliate of Sonic;
o $384.4 million under a standardized secured inventory floor
plan facility (the "Ford Floor Plan Facility") with Ford Motor
Credit;
o $131.4 million under a standardized secured floor plan
facility (the "Chrysler Floor Plan Facility") with Chrysler
Financial;
o $25.1 million under a standardized secured floor plan facility
(the "GMAC Floor Plan Facility" and together with the Ford
Floor Plan Facility and the Chrysler Floor Plan Facility, the
"Floor Plan Facilities") with General Motors Acceptance
Corporation ("GMAC");
o $121.2 million in 11% Senior Subordinated Notes due 2008
representing $125.0 million in aggregate principal amount less
unamortized discount of approximately $3.8 million; and
o $30.2 million of other secured debt, including $21.5 million
under a revolving real estate acquisition and new dealership
construction line of credit (the "Construction Loan") and a
related mortgage refinancing facility (the "Permanent Loan"
and together with the Construction Loan, the "Mortgage
Facility") with Ford Motor Credit.
As of September 30, 2000, we had approximately $78.5 million available
for additional borrowings under the Mortgage Facility for real estate
acquisitions and new dealership construction. We also have significant
additional capacity under our Floor Plan Facilities. In addition, the indentures
relating to our senior subordinated notes and other debt instruments allow us to
incur additional indebtedness, including secured indebtedness.
The degree to which we are leveraged after the offering could have
important consequences to the holders of our securities, including the
following:
5
<PAGE>
o our ability to obtain additional financing for acquisitions,
capital expenditures, working capital or general corporate
purposes may be impaired in the future;
o a substantial portion of our current cash flow from operations
must be dedicated to the payment of principal and interest on
our senior subordinated notes, borrowings under the Revolving
Facility and the Floor Plan Facilities and other indebtedness,
thereby reducing the funds available to us for our operations
and other purposes;
o some of our borrowings are and will continue to be at
variable rates of interest, which exposes us to the risk of
increased interest rates;
o the indebtedness outstanding under our credit facilities is
secured by a pledge of substantially all the assets of our
dealerships; and
o we may be substantially more leveraged than some of our
competitors, which may place us at a relative competitive
disadvantage and make us more vulnerable to changing market
conditions and regulations.
In addition, our debt agreements contain numerous covenants that limit
our discretion with respect to business matters, including mergers or
acquisitions, paying dividends, incurring additional debt, making capital
expenditures or disposing of assets.
Our future operating results depend on our ability to integrate our operations
with recent acquisitions.
Our future operating results depend on our ability to integrate the
operations of our recently acquired dealerships, as well as dealerships we
acquire in the future, with our existing operations. In particular, we need to
integrate our systems, procedures and structures, which can be difficult. Our
growth strategy has focused on the pursuit of strategic acquisitions that either
expand or complement our business. We acquired 19 dealerships in 1998, 72 during
1999 and 10 to date in 2000.
We cannot assure you that we will effectively and profitably integrate
the operations of these dealerships without substantial costs, delays or
operational or financial problems, including as a result of:
o the difficulties of managing operations located in geographic
areas where we have not previously operated;
o the management time and attention required to integrate and
manage newly acquired dealerships;
o the difficulties of assimilating and retaining employees; and
o the challenges of keeping customers.
These factors could have a material adverse effect on our financial
condition and results of operations.
Risks associated with acquisitions may hinder our ability to increase revenues
and earnings.
The automobile retailing industry is considered a mature industry in
which minimal growth is expected in industry unit sales. Accordingly, our future
growth depends in large part on our ability to acquire additional dealerships,
as well as on our ability to manage expansion, control costs in our operations
and consolidate both completed and anticipated dealership acquisitions into
existing operations. In pursuing a strategy of acquiring other dealerships, we
face risks commonly encountered with growth through acquisitions. These risks
include, but are not limited to:
o incurring significantly higher capital expenditures and
operating expenses;
o failing to assimilate the operations and personnel of the
acquired dealerships;
o entering new markets with which we are unfamiliar;
o potential undiscovered liabilities at acquired dealerships;
o disrupting our ongoing business;
6
<PAGE>
o diverting our limited management resources;
o failing to maintain uniform standards, controls and policies;
o impairing relationships with employees, manufacturers and
customers as a result of changes in management;
o causing increased expenses for accounting and computer
systems, as well as integration difficulties; and
o failure to obtain a manufacturer's consent to the acquisition
of one or more of its dealership franchises.
We may not adequately anticipate all of the demands that our growth
will impose on our systems, procedures and structures, including our financial
and reporting control systems, data processing systems and management structure.
If we cannot adequately anticipate and respond to these demands, our business
could be materially harmed.
Failure to retain qualified management personnel at any acquired
dealership may increase the risk associated with integrating the acquired
dealership. Installing new computer systems has disrupted existing operations in
the past as management and salespersons adjust to new technologies. We cannot
assure you that we will overcome these risks or any other problems encountered
with our acquisitions, including our 1998, 1999 and 2000 acquisitions.
Automobile manufacturers exercise significant control over our operations, and
we are dependent on them to operate our business.
Each of our dealerships operates pursuant to a franchise agreement with
the applicable automobile manufacturer or manufacturer authorized distributor.
We are significantly dependent on our relationships with these manufacturers.
Without a franchise agreement, we cannot obtain new vehicles from a
manufacturer.
Vehicles manufactured by the following manufacturers accounted for the
indicated approximate percentage of our new vehicle revenue for the nine months
ended September 30, 2000:
Percentage of Historical
New Vehicle Revenues for
the Nine Months ended
Manufacturer September 30, 2000
------------ ------------------
Honda 14.6%
Ford 13.8%
Chrysler 12.3%
General Motors 10.9%
BMW 10.1%
Toyota 8.5%
Nissan 6.4%
Lexus 5.0%
No other manufacturer accounted for more than 5% of our new vehicle
sales during the first six months of 2000. A significant decline in the sale of
Honda, Ford, Chrysler, General Motors ("GM"), BMW, Toyota, Nissan or Lexus new
vehicles could have a material adverse effect on our revenue and profitability.
Manufacturers exercise a great degree of control over the operations of
our dealerships. Each of our franchise agreements provides for termination or
non-renewal for a variety of causes, including any unapproved change of
ownership or management and other material breaches of the franchise agreements.
Manufacturers may also have a right of first refusal if we seek to sell
dealerships. We believe that we will be able to renew at expiration all of our
existing franchise agreements.
o We cannot assure you that any of our existing franchise
agreements will be renewed or that the terms and conditions of
such renewals will be favorable to us.
o If a manufacturer is allowed under state franchise laws to
terminate or decline to renew one or more of our significant
franchise agreements, this action could have a material
adverse effect on our results of operations.
7
<PAGE>
o Actions taken by manufacturers to exploit their superior
bargaining position in negotiating the terms of renewals of
franchise agreements or otherwise could also have a material
adverse effect on our results of operations.
o Manufacturers allocate their vehicles among dealerships
generally based on the sales history of each dealership.
Consequently, we also depend on the manufacturers to provide
us with a desirable mix of popular new vehicles. These popular
vehicles produce the highest profit margins and tend to be the
most difficult to obtain from the manufacturers.
o Our dealerships depend on the manufacturers for certain sales
incentives, warranties and other programs that are intended to
promote and support dealership new vehicle sales.
Manufacturers have historically made many changes to their
incentive programs during each year. A reduction or
discontinuation of a manufacturer's incentive programs may
materially adversely affect our profitability. Some of these
programs include:
o customer rebates on new vehicles;
o dealer incentives on new vehicles;
o special financing or leasing terms;
o warranties on new and used vehicles; and
o sponsorship of used vehicle sales by authorized new
vehicle dealers.
Adverse conditions affecting one or more manufacturers may negatively impact our
profitability.
The success of each of our dealerships depends to a great extent on the
manufacturers':
o financial condition;
o marketing;
o vehicle design;
o production capabilities;
o management; and
o labor relations.
Nissan, Dodge (a Chrysler brand) and Volvo have had significant
difficulty in the U.S. market in the recent past. If any of our manufacturers,
particularly Honda, Ford, Chrysler, GM, BMW, Toyota, Nissan, or Lexus were
unable to successfully design, manufacture, deliver and market their vehicles,
the manufacturer's reputation and our ability to sell the manufacturer's
vehicles could be adversely affected.
Events such as strikes and other labor actions by unions, or negative
publicity concerning a particular manufacturer or vehicle model, may materially
and adversely affect our results of operations. Similarly, the delivery of
vehicles from manufacturers later than scheduled, which may occur particularly
during periods when new products are being introduced, can reduce our sales.
Although, we have attempted to lessen our dependence on any one manufacturer by
establishing dealer relationships with a number of different domestic and
foreign automobile manufacturers, adverse conditions affecting manufacturers,
Honda, Ford, Chrysler, GM, BMW, Toyota, Nissan or Lexus in particular, could
have a material adverse effect on our results of operations. For example, in
June 1998, the United Auto Workers went on strike at two GM facilities in Flint,
Michigan. The strike lasted 53 days, causing 27 GM manufacturing facilities to
shut down during the strike and severely affecting production of GM vehicles
during the strike. In the event of another strike, we may need to purchase
inventory from other automobile dealers at prices higher than we would be
required to pay to the affected manufacturer in order to carry an adequate level
and mix of inventory. Consequently, strikes or other adverse labor actions could
materially adversely affect our profitability.
8
<PAGE>
Manufacturer stock ownership/issuance restrictions limit our ability to issue
additional equity to meet our financing needs.
Standard automobile franchise agreements prohibit transfers of any
ownership interests of a dealership and its parent and, therefore, often do not
by their terms accommodate public trading of the capital stock of a dealership
or its parent. Our manufacturers have agreed to permit trading in Sonic's Class
A common stock. A number of manufacturers impose restrictions on the
transferability of the Class A common stock.
o Honda may force the sale of our Honda or Acura franchises if
(1) an automobile manufacturer or distributor acquires
securities having 5% or more of the voting power of Sonic's
securities, (2) an individual or entity that has either a
felony criminal record or a criminal record relating solely to
dealings with an automobile manufacturer, distributor or
dealership acquires securities having 5% or more of the voting
power of Sonic's securities or (3) any individual or entity
acquires securities having 20% or more of the voting power of
Sonic's securities and Honda reasonably deems such acquisition
to be detrimental to Honda's interests in any material
respect.
o Ford may cause us to sell or resign from one or more of our
Ford, Lincoln or Mercury franchises if any person or entity
(other than O. Bruton Smith and any entity controlled by him)
acquires or has a binding agreement to acquire securities
having 50% or more of the voting power of Sonic's securities.
o GM, Toyota and Nissan Motor Corporation In U.S.A. may force
the sale of their respective franchises if 20% of more of
Sonic's voting securities are similarly acquired.
o Chrysler requires prior approval of any future sales that
would result in a change in voting or managerial control of
Sonic.
o Mercedes requires 60 days advance notice to approve any
acquisition of 20% or more of Sonic's voting securities.
o Volkswagen has approved the sale of no more than 25% of the
voting control of Sonic, and any future changes in ownership
or transfers among Sonic's current stockholders that could
affect the voting or managerial control of Sonic's Volkswagen
franchise subsidiaries requires the prior approval of
Volkswagen.
Other manufacturers may impose similar or more limiting restrictions.
Our lending arrangements also require that holders of Sonic's Class B
common stock maintain voting control over Sonic. We are unable to prevent our
stockholders from transferring shares of our common stock, including transfers
by holders of the Class B common stock. If such transfer results in a change in
control of Sonic, it could result in the termination or non-renewal of one or
more of our franchise agreements and a default under our credit arrangements.
Moreover, these issuance limitations may impede our ability to raise capital
through additional equity offerings or to issue our stock as consideration for
future acquisitions.
Manufacturers' restrictions on acquisitions could limit our future growth.
We are required to obtain the consent of the applicable manufacturer
before the acquisition of any additional dealership franchises. We cannot assure
you that manufacturers will grant such approvals, although the denial of such
approval may be subject to certain state franchise laws. Jaguar declined to
consent to our proposed 1997 acquisitions of franchises associated with
dealerships in Chattanooga, Tennessee and Greenville, South Carolina, and we
subsequently agreed with Jaguar not to acquire any Jaguar franchise until August
3, 2001.
Obtaining manufacturer consent for acquisitions could also take a
significant amount of time. Obtaining manufacturer approval for each of our
completed acquisitions has taken approximately three to five months. We believe
that manufacturer approvals of subsequent acquisitions from manufacturers with
which we have previously completed applications and agreements may take less
time, although we cannot provide you with assurances to that effect. In
addition, under an applicable franchise agreement or under state law, a
manufacturer may have a right of first refusal to acquire a dealership in the
event we seek to acquire that dealership franchise.
9
<PAGE>
If we experience delays in obtaining, or fail to obtain, manufacturer
approvals for dealership acquisitions, our growth strategy could be materially
adversely affected. In determining whether to approve an acquisition, the
manufacturers may consider many factors, including:
o our management's moral character;
o the business experience of the post-acquisition dealership
management;
o our financial condition;
o our ownership structure; and
o manufacturer-determined consumer satisfaction index (CSI)
scores.
In addition, a manufacturer may seek to limit the number of its
dealerships that we may own, our national market share of that manufacturer's
products or the number of dealerships we may own in a particular geographic
area. These restrictions may not be enforceable under state franchise laws.
o In September 1999, Ford and Sonic signed a new framework
agreement. The agreement places the following restrictions on
our ability to acquire Ford or Lincoln Mercury dealerships:
o We may not acquire additional Ford or Lincoln Mercury
dealerships unless we continue to satisfy Ford's requirement
that 80% of our Ford dealerships meet Ford's performance
criteria. Beyond that, we may not make an acquisition that
would result in our owning Ford or Lincoln Mercury dealerships
with sales exceeding 5% of the total Ford or total Lincoln
Mercury retail sales of new vehicles in the United States for
the preceding calendar year.
o We may not acquire additional Ford or Lincoln Mercury
dealerships in a particular state if such an acquisition would
result in our owning Ford or Lincoln Mercury dealerships with
sales exceeding 5% of the total Ford or total Lincoln Mercury
retail sales of new vehicles in that state for the preceding
calendar year.
o We may not acquire additional Ford dealerships in a
Ford-defined market area if such an acquisition would result
in our owning more than one Ford dealership in a market having
a total of three or less Ford dealerships or owning more than
25% of the Ford dealerships in a market having a total of four
or more Ford dealerships. An identical market area restriction
applies for Lincoln Mercury dealerships.
o In September 1999, Honda and Sonic signed a new framework
agreement. This framework agreement limits the number of Honda
and Acura dealerships that we may own on a national level, in
each Honda and Acura-defined geographic zone, and in each
Honda-defined metropolitan market. Nationally, the limitations
on Honda dealerships owned by us are based on specified
percentages of total Honda unit sales in the United States. In
Honda-defined geographic zones, the limitations on Honda
dealerships owned by us are based on specified percentages of
total Honda unit sales in each of 10 Honda-defined geographic
zones. In Honda-defined metropolitan markets, the limitations
on Honda dealerships owned by us are specified numbers of
dealerships in each market, which numerical limits vary based
mainly on the total number of Honda dealerships in a
particular market. For Acura, we may own no more than (1) two
Acura dealerships in a Honda-defined metropolitan market, (2)
three Acura dealerships in any one of six Honda-defined
geographic zones and (3) five Acura dealerships nationally.
o Toyota currently restricts the number of dealerships that may
be owned by any one group to seven Toyota and three Lexus
dealerships nationally and restricts the number of dealerships
that may be owned to (1) the greater of one dealership, or 20%
of the Toyota dealer count in a Toyota-defined "Metro" market,
(2) the lesser of five dealerships or 5% of the Toyota
dealerships in any Toyota region (currently 12 geographic
regions) and (3) two Lexus dealerships in any one of the four
Lexus geographic areas. Toyota further requires that at least
nine months elapse between acquisitions.
o Mercedes restricts any company from owning Mercedes
dealerships with sales of more than 3% of total sales of
Mercedes vehicles in the U.S. during the previous calendar
year.
10
<PAGE>
o GM currently limits the maximum number of GM dealerships that
we may acquire to 50% of the GM dealerships, by brand line, in
a GM-defined geographic market area having multiple GM
dealers.
o Subaru limits us to no more than two Subaru dealerships within
certain designated market areas, four Subaru dealerships
within its Mid-America region and 12 dealerships within
Subaru's entire area of distribution.
o BMW prohibits publicly held companies from owning BMW
dealerships representing more than 5% of all BMW sales in the
U.S. or more than 50% of BMW dealerships in a given
metropolitan market. We believe we are currently at BMW's
national sales limitation.
o Toyota, Honda and Mercedes also prohibit the coupling of a
franchise with any other brand without their consent.
o Honda also prohibits ownership of contiguous dealerships.
As a condition to granting their consent to our acquisitions, a number
of manufacturers required additional restrictions. These agreements principally
restrict:
o material changes in our company or extraordinary corporate
transactions such as a merger, sale of a material amount of
assets or change in our board of directors or management that
could have a material adverse effect on the manufacturer's
image or reputation or could be materially incompatible with
the manufacturer's interests;
o the removal of a dealership general manager without the
consent of the manufacturer; and
o the use of dealership facilities to sell or service new
vehicles of other manufacturers.
In addition, manufacturer consent to our acquisitions may impose conditions,
such as requiring facilities improvements by us at the acquired dealership.
If we are unable to comply with these restrictions, we generally:
o must sell the assets of the dealerships to the manufacturer or
to a third party acceptable to the manufacturer; or
o terminate the dealership agreements with the manufacturer.
Other manufacturers may impose other and more stringent restrictions in
connection with future acquisitions.
We currently own the following number of franchises for the following
manufacturers:
<TABLE>
<CAPTION>
Manufacturer Number of Franchises Manufacturer Number of Franchises
<S> <C> <C> <C>
Dodge 12 Lincoln 4
Honda 11 Mercedes 4
BWM 10 Mitsubishi 3
Ford 10 GMC 3
Nissan 10 Hyundai 3
Chevrolet 10 Isuzu 3
Cadillac 10 KIA 3
Volvo 9 Pontiac 3
Oldsmobile 7 Audi 2
Chrysler 7 Infiniti 2
Jeep 7 Range Rover 2
Plymouth 7 Porsche 2
Toyota 7 Acura 1
Volkswagen 6 Buick 1
Mercury 5 Subaru 1
Lexus 4 -----
169
</TABLE>
11
<PAGE>
Our failure to meet a manufacturer's consumer satisfaction requirements may
adversely affect our ability to acquire new dealerships and our profitability.
Many manufacturers attempt to measure customers' satisfaction with
their sales and warranty service experiences through systems which vary from
manufacturer to manufacturer, but which are generally known as "CSI." These
manufacturers may use a dealership's CSI scores as a factor in evaluating
applications for additional dealership acquisitions. The components of CSI have
been modified by various manufacturers from time to time in the past, and we
cannot assure you that these components will not be further modified or replaced
by different systems in the future. To date, we have not been materially
adversely affected by these standards and have not been denied approval of any
acquisition based on low CSI scores, except for Jaguar's refusal to approve our
acquisition of a Chattanooga Jaguar franchise in 1997. However, we cannot assure
you that we will be able to comply with these standards in the future. A
manufacturer may refuse to consent to an acquisition of one of its franchises if
it determines our dealerships do not comply with the manufacturer's CSI
standards. This could materially adversely affect our acquisition strategy. In
addition, we receive payments from the manufacturers based, in part, on CSI
scores, which could be materially adversely affected if our CSI scores decline.
There are limitations on our financial resources available for acquisitions.
We intend to finance our acquisitions with cash generated from
operations, through issuances of our stock or debt securities and through
borrowings under credit arrangements.
o We cannot assure you that we will be able to obtain additional
financing by issuing stock or debt securities.
o Using cash to complete acquisitions could substantially limit
our operating or financial flexibility.
o If we are unable to obtain financing on acceptable terms, we
may be required to reduce the scope of our presently
anticipated expansion, which could materially adversely affect
our growth strategy.
We estimate that we currently have approximately $10.6 million
available for additional borrowings under the 2000 Revolving Facility, based on
a borrowing base calculated on the basis of our receivables, inventory and
equipment and a pledge of certain additional collateral by an affiliate of Sonic
(which borrowing base was $431.7 million of the $500.0 million facility at
September 30, 2000).
In addition, we are dependent to a significant extent on our ability to
finance our inventory. Automotive retail inventory financing involves
significant sums of money in the form of "floor plan financing." Floor plan
financing is how a dealership finances its purchase of new vehicles from a
manufacturer. The dealership borrows money to buy a particular vehicle from the
manufacturer and pays off the loan when it sells that particular vehicle, paying
interest during this period. We must obtain new floor plan financing or obtain
consents to assume such financing in connection with our acquisition of
dealerships. As of September 30, 2000, we had approximately $540.9 million of
floor plan indebtedness outstanding, of which $384.4 million was under the Ford
Floor Plan Facility, $131.4 million was under the Chrysler Floor Plan Facility
and $25.1 million was under the GMAC Floor Plan Facility.
Substantially all the assets of our dealerships are pledged to secure
this floor plan indebtedness. In addition, substantially all the real property
and assets of our subsidiaries that are constructing new dealerships are pledged
under our newly obtained Mortgage Facility. These pledges may impede our ability
to borrow from other sources.
Finally, because Ford Motor Credit is associated with Ford, any
deterioration of our relationship with one could adversely affect our
relationship with the other. The same is true of our relationships with Chrysler
and Chrysler Financial, as well as GM and GMAC.
Although our officers and directors have previously facilitated our acquisition
financing, we cannot assure you that these individuals will be willing or able
to assist in our financing needs in the future.
O. Bruton Smith, our Chief Executive Officer and Chairman of the Board,
previously guaranteed our credit facilities and other financing arrangements to
facilitate our acquisitions. Mr. Smith may be unwilling to make any such
commitments in the future if such commitments are needed.
Mr. Smith initially guaranteed obligations under the Revolving
Facility. Such obligations were further secured with a pledge of shares of
common stock of Speedway Motorsports, Inc. owned by Sonic Financial Corporation,
a corporation
12
<PAGE>
controlled by Mr. Smith ("SFC"), having an estimated value at the time of pledge
of approximately $50.0 million (the "Revolving Pledge"). When the Revolving
Facility's borrowing limit was increased to $75.0 million in 1997, Mr. Smith's
personal guarantee of Sonic's obligations under the Revolving Facility was
released, although the Revolving Pledge remained in place. Mr. Smith was also
required by Ford Motor Credit to lend $5.5 million (the "Subordinated Smith
Loan") to Sonic to increase our capitalization because the net proceeds from our
November 1997 initial public offering were significantly less than expected. In
August 1998, Ford Motor Credit released the Revolving Pledge. In November 1999,
Ford Motor Credit further increased the borrowing limit under the 1999 Revolving
Facility to $350.0 million subject to a borrowing base calculated on the basis
of our receivables, inventory and equipment and a pledge by SFC of 5.0 million
shares of Speedway Motorsports, Inc. common stock. The 2000 Revolving Facility
is subject to a similar borrowing base, including SFC's continuing pledge of
Speedway Motorsports, Inc. stock.
Before our acquisition of FirstAmerica, Mr. Smith guaranteed the
obligations of FirstAmerica under FirstAmerica's new acquisition line of credit
with Ford Motor Credit. FirstAmerica obtained this new financing to enable it to
complete its then pending acquisitions. The borrowing limit on this credit
facility was approximately $138 million. Mr. Smith had guaranteed approximately
$107 million of this amount, which guarantee was secured by a pledge of 5.0
million shares of Speedway Motorsports, Inc. common stock owned by SFC. We
assumed FirstAmerica's obligations to Ford Motor Credit under our 1999 Revolving
Facility when we acquired FirstAmerica. Mr. Smith's secured guarantee in favor
of Ford Motor Credit guaranteed a portion of our obligations under the 1999
Revolving Facility. Under the 2000 Revolving Facility, Mr. Smith did not provide
a guarantee in favor of the lenders, but SFC continues to pledge Speedway
Motorsports, Inc. stock as collateral. We cannot assure you that Mr. Smith will
be willing or able to provide similar guarantees or credit support in the future
to facilitate Sonic's future acquisitions.
Automobile retailing is a mature industry with limited growth potential in new
vehicle sales, and our acquisition strategy will affect our revenues and
earnings.
The United States automobile dealership industry is considered a mature
industry in which minimal growth is expected in unit sales of new vehicles. As a
consequence, growth in our revenues and earnings is likely to be significantly
affected by our success in acquiring and integrating dealerships and the pace
and size of such acquisitions.
High competition in automobile retailing reduces our profit margins on vehicle
sales. Further, the use of the Internet in the car purchasing process could
materially adversely affect us.
Automobile retailing is a highly competitive business with
approximately 22,400 franchised automobile dealerships in the United States at
the end of 1999. Our competition includes:
o Franchised automobile dealerships selling the same or similar
makes of new and used vehicles that we offer in our markets
and sometimes at lower prices than we offer. Some of these
dealer competitors may be larger and have greater financial
and marketing resources than we do;
o Other franchised dealers;
o Private market buyers and sellers of used vehicles;
o Used vehicle dealers;
o Internet-based vehicle brokers that sell vehicles obtained
from franchised dealers directly to consumers;
o Service center chain stores; and
o Independent service and repair shops.
Our financing and insurance business and other related businesses,
which provide higher contributions to our earnings than sales of new and used
vehicles, are subject to strong competition from various financial institutions
and other third parties. This competition is increasing as these products are
now being marketed and sold over the Internet.
Gross profit margins on sales of new vehicles have been generally
declining since 1986. We do not have any cost advantage in purchasing new
vehicles from manufacturers, due to economies of scale or otherwise. We
typically rely on advertising, merchandising, sales expertise, service
reputation and dealership location to sell new vehicles. The following factors
could have a significant impact on our business:
13
<PAGE>
o The Internet has become a significant part of the sales
process in our industry. Customers are using the Internet to
compare pricing for cars and related financing and insurance
services, which may further reduce margins for new and used
cars and profits for related financing and insurance services.
In addition, CarsDirect.com and others are selling vehicles
over the Internet without the benefit of having a dealership
franchise, although they must currently source their vehicles
from a franchised dealer. CarsDirect.com has entered into an
alliance with United Auto Group to facilitate their sourcing
of vehicles. Also, AutoNation is selling vehicles for its new
car dealerships through its AutoNationDirect.com web site. If
Internet new vehicle sales are allowed to be conducted without
the involvement of franchised dealers, our business could be
materially adversely affected. In addition, other franchise
groups have aligned themselves with Internet car sellers or
are spending significant sums on developing their own Internet
capabilities, which could materially adversely affect our
business.
o Ford has entered into joint ventures to acquire dealerships in
various cities in the United States, and Saturn has acquired
some of its dealerships. GM, which previously announced
similar intentions, has cancelled its initiative in this area.
Other manufacturers may directly enter the retail market in
the future. Our revenues and profitability could be materially
adversely affected by manufacturers' direct retailing efforts.
o The increased popularity of short-term vehicle leasing also
has resulted, as these leases expire, in a large increase in
the number of late model vehicles available in the market,
which puts added pressure on new and used vehicle margins.
o Some of our competitors may be capable of operating on smaller
gross margins than we are, and the on-line auto brokers have
been operating at a loss.
o As we seek to acquire dealerships in new markets, we may face
increasingly significant competition as we strive to gain
market share through acquisitions or otherwise. This
competition includes other large dealer groups and dealer
groups that have publicly traded equity.
Our franchise agreements do not grant us the exclusive right to sell a
manufacturer's product within a given geographic area. Our revenues or
profitability could be materially adversely affected if any of our manufacturers
award franchises to others in the same markets where we operate, although
certain state franchise laws may limit such activities by the manufacturers. A
similar adverse effect could occur if existing competing franchised dealers
increase their market share in our markets. Our gross margins may decline over
time as we expand into markets where we do not have a leading position. These
and other competitive pressures could materially adversely affect our results of
operations.
The cyclical and local nature of automobile sales may adversely affect our
profitability.
The automobile industry is cyclical and historically has experienced
periodic downturns characterized by oversupply and weak demand. Many factors
affect the industry, including general economic conditions and consumer
confidence, the level of discretionary personal income, interest rates and
credit availability. For example, recent interest rate increases and other
factors have impacted the market and have reduced the seasonally adjusted
annualized selling rate of new cars since the beginning of the year.
Future recessions may have a material adverse effect on our business.
In addition, significant changes in interest rates may significantly impact our
car sales since many car buyers finance their purchases. Furthermore, higher
gasoline prices may lead to a reduction in automobile purchases or a shift in
buying patterns from luxury/SUV models (which typically provide high profit
margins to retailers) to smaller, more economical vehicles (which typically have
lower margins).
Local economic, competitive and other conditions also affect the
performance of dealerships. Our dealerships currently are located in the
Atlanta, Baltimore, Birmingham, Charleston, Charlotte, Chattanooga, Columbia,
Columbus, Dallas, Daytona Beach, Fort Myers, Greenville/Spartanburg, Houston,
Las Vegas, Los Angeles, Mobile/Pensacola, Montgomery, Nashville, San Diego, San
Francisco, San Jose/Silicon Valley, Tampa/Clearwater, Tulsa and Washington, D.C.
markets. We intend to pursue acquisitions outside of these markets, but our
operational focus is on our current markets. As a result, our results of
operations depend substantially on general economic conditions and consumer
spending habits in the Southeast and Northern California and, to a lesser
extent, the Houston and Columbus markets. Sales in our Northern California
market represented 15.7% of our sales for the nine months ended September 30,
2000. Our results of operations also depend on other factors, such as tax rates
and state and local regulations specific to Alabama, California, Florida,
Georgia, Maryland, Nevada, North Carolina, Ohio, Oklahoma, South Carolina,
Tennessee, Texas and Virginia. Sonic may not be able to expand geographically
and any such
14
<PAGE>
expansion may not adequately insulate it from the adverse effects of local or
regional economic conditions.
We can offer you no assurances that we will be able to continue executing our
acquisition strategy without the costs of future acquisitions escalating.
Although there are many potential acquisition candidates that fit our
acquisition criteria, we cannot assure you that we will be able to consummate
any such transactions in the future or identify those candidates that would
result in the most successful combinations, or that future acquisitions will be
able to be consummated at acceptable prices and terms. In addition, increased
competition for acquisition candidates could result in fewer acquisition
opportunities for us and higher acquisition prices. The magnitude, timing,
pricing and nature of future acquisitions will depend upon various factors,
including:
o the availability of suitable acquisition candidates;
o competition with other dealer groups for suitable acquisitions;
o the negotiation of acceptable terms;
o our financial capabilities;
o our stock price;
o the availability of skilled employees to manage the acquired companies;
and
o general economic and business conditions.
We may be required to file applications and obtain clearances under
applicable federal antitrust laws before completing an acquisition. These
regulatory requirements may restrict or delay our acquisitions, and may increase
the cost of completing acquisitions.
The operating condition of acquired businesses cannot be determined accurately
until we assume control.
Although we conduct what we believe to be a prudent level of
investigation regarding the operating condition of the businesses we purchase,
in light of the circumstances of each transaction, an unavoidable level of risk
remains regarding the actual operating condition of these businesses. Until we
actually assume operating control of such assets, we may not be able to
ascertain the actual value of the acquired entity.
Additional shares eligible for future sale could have an adverse effect on the
market price of our Class A common stock.
The market price of our Class A common stock could be adversely
affected by the availability for public sale of up to 23,395,444 shares held or
issuable on December 12, 2000, including:
<TABLE>
<CAPTION>
Number of Shares of Manner of Holding and/or Issuance
Class A Common Stock
<S> <C> <C> <C>
12,250,000 (1) Issuable on conversion of 12,250,000 shares of our Class B
common stock owned by existing stockholders of Sonic. These
shares of Class A common stock are subject to certain
piggyback registration rights.
242,782 (1) Issuable on exercise of warrants issued in our business
acquisitions.
29,384 (1)(2) Issuable on conversion of outstanding shares of our Class A
convertible preferred stock that were issued in our business
acquisitions.
5,482,270 Issued in our business acquisitions and currently registered for
sale under the Securities Act pursuant to a shelf registration.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
4,716,885 Issuable on exercise of options granted under our 1997 Stock
Option Plan. All such shares are registered for sale under the
Securities Act.
229,091 Issuable on exercise of options granted under our employee
stock purchase plans. All such shares are registered for
sale under the Securities Act.
335,032 Issuable on exercise of options granted under our Amended and
Restated FirstAmerica Automotive 1997 Stock Option Plan. All such
shares are registered for sale under the Securities Act.
110,000 Issuable on exercise of options granted under our Directors
Formula Stock Option Plan. All such shares are registered for
sale under the Securities Act.
</TABLE>
(1) All such shares are "restricted securities" as defined in Rule 144
under the Securities Act and may be resold in compliance with Rule 144.
(2) The number of shares of Class A common stock issuable upon conversion
of outstanding shares of our preferred stock is an estimate based on
the assumption that the average of the daily closing prices for the
Class A common stock on the New York Stock Exchange for the 20
consecutive trading days ending on trading day before such conversion
was $7.744 per share. This number is subject to adjustment based on the
common stock price on the date of conversion and could be materially
more or less than this estimated amount depending on factors that we
cannot presently determine. These factors include the future market
price of the Class A common stock and the decisions of the holders of
the preferred stock as to when to convert their shares of preferred
stock. Generally, such issuances of Class A common stock will vary
inversely with the market price of the Class A common stock.
In connection with pending acquisitions, we have agreed to issue
approximately $2.0 million in Class A common stock and approximately $4.6
million in liquidation value of preferred stock. Approximately $4.6 million in
value of these securities will have registration rights, all of which shares
will be subject to prohibitions on resales for the six months after their
issuance. We intend in our business acquisitions to issue additional shares of
equity securities that may have registration rights as well as be eligible for
resale under Rule 144. The resale of substantial amounts of Class A common
stock, or the perception that such resales may occur, could materially and
adversely affect the prevailing market prices for the Class A common stock and
our ability to raise equity capital in the future.
Potential conflicts of interest between Sonic and its officers could adversely
affect our future performance.
O. Bruton Smith serves as the chairman and chief executive officer of
Speedway Motorsports Inc. Accordingly, Sonic competes with Speedway Motorsports
Inc. for the management time of Mr. Smith. Under his employment agreement with
Sonic, Mr. Smith is required to devote approximately 50% of his business time to
our business. The remainder of his business time may be devoted to other
entities, including Speedway Motorsports Inc.
Sonic has in the past and will likely in the future enter into
transactions with Mr. Smith, entities controlled by Mr. Smith or other
affiliates of Sonic. For example, Sonic previously entered into property
transactions with MMR Holdings, L.L.C. and its subsidiaries (the "MMR Group").
The MMR Group was owned, directly and indirectly, and controlled by Mr. Smith.
On August 13, 1999, Mr. Smith and SFC sold the ownership of the MMR Group to CAR
MMR L.L.C. ("CAR MMR"), an affiliate of Capital Automotive REIT, which is
unaffiliated with Sonic or Mr. Smith. The MMR Group owned 50 properties leased
to 42 Sonic dealerships at the time of the MMR Group sale. As a part of the sale
of the MMR Group, Mr. Smith and SFC signed agreements with Sonic to induce Sonic
to sign its agreement with CAR MMR. Mr. Smith and SFC, under these agreements,
agreed to pay approximately $2.5 million to Sonic, which amount represented Mr.
Smith's and SFC's profits on the sale of the MMR Group less their expenses in
selling the MMR Group and a 14% annual return on their initial investment in the
MMR Group, net of any advances previously made by Sonic to the MMR Group.
We believe that all of our existing arrangements with affiliates are as
favorable to us as if the arrangements were negotiated between unaffiliated
parties, although such transactions have neither been independently verified in
that regard nor are likely to be so verified in the future. Potential conflicts
of interest could arise in the future between Sonic and its officers or
directors in the enforcement, amendment or termination of arrangements existing
between them.
16
<PAGE>
Under Delaware law generally, a corporate insider is precluded from
acting on a business opportunity in his individual capacity if that opportunity
is
(1) one which the corporation is financially able to undertake,
(2) is in the line of the corporation's business,
(3) is of practical advantage to the corporation, and
(4) is one in which the corporation has an interest or reasonable expectancy.
Accordingly, our corporate insiders are generally prohibited from engaging in
new dealership-related business opportunities outside of Sonic unless a majority
of Sonic's disinterested directors decide that such opportunities are not in our
best interest.
Sonic's charter contains provisions providing that transactions between
Sonic and its affiliates must be no less favorable to Sonic than would be
available in similar transactions with an unrelated third party. Moreover, any
such transactions involving aggregate payments in excess of $500,000 must be
approved by a majority of Sonic's directors and a majority of its independent
directors. Otherwise, Sonic must obtain an opinion as to the financial fairness
of the transaction to be issued by an investment banking or appraisal firm of
national standing. In addition, the terms of the Revolving Facility and Sonic's
existing senior subordinated notes restrict transactions with affiliates in a
manner similar to Sonic's charter restrictions.
Lack of majority of independent directors could result in conflicts between us
and our management and majority stockholders that may reduce our future
performance.
Independent directors do not constitute a majority of our board, and
our board may not have a majority of independent directors in the future.
Without a majority of independent directors, Sonic's executive officers,
principal stockholders and directors could establish policies and enter into
transactions without independent review and approval, subject to certain
restrictions under our charter. These policies and transactions could present
the potential for a conflict of interest between Sonic and its minority
stockholders and the controlling officers, stockholders or directors.
The loss of key personnel and limited management and personnel resources could
adversely affect our operations and growth.
Our success depends to a significant degree upon the continued
contributions of Sonic's management team, particularly its senior management,
and service and sales personnel. Several of our senior executives' employment
agreements will expire in 2000. We intend to renegotiate these agreements. We
believe, but cannot assure you, that we will be successful in retaining these
executives. The loss of any of these executives may have a material adverse
effect on our operations. Additionally, manufacturer franchise agreements may
require the prior approval of the applicable manufacturer before any change is
made in franchise general managers. We do not have employment agreements with
most of our dealership managers and other key dealership personnel.
Consequently, the loss of the services of one or more of these key employees
could have a material adverse effect on our results of operations.
In addition, we may need to hire additional managers as we expand. The
market for qualified employees in the industry and in the regions in which we
operate, particularly for general managers and sales and service personnel, is
highly competitive and may subject us to increased labor costs during periods of
low unemployment. The loss of the services of key employees or the inability to
attract additional qualified managers could have a material adverse effect on
our results of operations. In addition, the lack of qualified management or
employees employed by potential acquisition candidates may limit our ability to
consummate future acquisitions.
Seasonality of the automotive retail business adversely affects first quarter
revenues.
Our business is seasonal, with a disproportionate amount of revenues
received generally in the second, third and fourth fiscal quarters.
Import product restrictions and foreign trade risks may impair our ability to
sell foreign vehicles profitably.
Some of the vehicles and major components of vehicles we sell are
manufactured in foreign countries. Accordingly, we are subject to the import and
export restrictions of various jurisdictions and are dependent to some extent
upon general
17
<PAGE>
economic conditions in, and political relations with, a number of foreign
countries, particularly Germany, Japan and Sweden. Fluctuations in currency
exchange rates may also adversely affect our sales of vehicles produced by
foreign manufacturers. Imports into the United States may also be adversely
affected by increased transportation costs and tariffs, quotas or duties.
Governmental regulation and environmental regulation compliance costs may
adversely affect our profitability.
We are subject to a wide range of federal, state and local laws and
regulations, such as local licensing requirements and consumer protection laws.
The violation of these laws and regulations can result in civil and criminal
penalties against us or in a cease and desist order against our operations if we
are not in compliance. Our future acquisitions may also be subject to
regulation, including antitrust reviews. We believe that we comply in all
material respects with all laws and regulations applicable to our business, but
future regulations may be more stringent and require us to incur significant
additional costs.
Our facilities and operations are also subject to federal, state and
local laws and regulations relating to environmental protection and human health
and safety, including those governing wastewater discharges, air emissions, the
operation and removal of underground and aboveground storage tanks, the use,
storage, treatment, transportation, release, recycling and disposal of solid and
hazardous materials and wastes and the cleanup of contaminated property or
water. We may be required by these laws to pay the full amount of the costs of
investigation and/or remediation of contaminated properties, even if we are not
at fault for disposal of the materials or if such disposal was legal at the
time. People who may be found liable under these laws and regulations include
the present or former owner or operator of a contaminated property and companies
that generated, transported, disposed of or arranged for the transportation or
disposal of hazardous substances found at the property.
Our past and present business operations are subject to environmental
laws and regulations governing the use, storage, handling, recycling and
disposal of hazardous or toxic substances such as new and waste motor oil, oil
filters, transmission fluid, antifreeze, freon, new and waste paint and lacquer
thinner, batteries, solvents, lubricants, degreasing agents, gasoline and diesel
fuels. We are also subject to laws and regulations relating to underground
storage tanks that exist or used to exist at many of our properties. Like many
of our competitors, we have incurred, and will continue to incur, capital and
operating expenditures and other costs in complying with such laws and
regulations. In addition, soil and groundwater contamination exists at certain
of our properties. We cannot assure you that our other properties have not been
or will not become similarly contaminated. In addition, we could become subject
to potentially material new or unforeseen environmental costs or liabilities
because of our acquisitions.
Environmental laws and regulations, including those governing air
emissions and underground storage tanks, could require compliance with new or
more stringent standards that are imposed in the future. We cannot predict what
other environmental legislation or regulations will be enacted in the future,
how existing or future laws or regulations will be administered or interpreted
or what environmental conditions may be found to exist in the future.
Consequently, we may be required to make substantial expenditures in the future.
Concentration of voting power and antitakeover provisions of our charter,
Delaware law and our dealer agreements may reduce the likelihood of any
potential change of control of Sonic.
Sonic's common stock is divided into two classes with different voting
rights. This dual class stock ownership allows the present holders of the Class
B common stock to control Sonic. Holders of Class A common stock have one vote
per share on all matters. Holders of Class B common stock have 10 votes per
share on all matters, except that they have only one vote per share on any
transaction proposed by the Board of Directors or a Class B common stock holder
or otherwise benefiting the Class B common stock holders constituting a:
(1) "going private" transaction;
(2) disposition of substantially all of our assets;
(3) transfer resulting in a change in the nature of our business; or
(4) merger or consolidation in which current holders of common stock
would own less than 50% of the common stock following such
transaction.
The holders of Class B common stock currently hold less than a majority
of Sonic's outstanding common stock, but a majority of Sonic's voting power.
This may prevent or discourage a change of control of Sonic even if such action
were favored by holders of Class A common stock.
Sonic's charter and bylaws make it more difficult for its stockholders
to take corporate actions at stockholders'
18
<PAGE>
meetings. In addition, options under our 1997 Stock Option Plan become
immediately exercisable on a change in control. Also, Delaware law makes it
difficult for stockholders who have recently acquired a large interest in a
company to consummate a business transaction with the company against its
directors' wishes. Finally, restrictions imposed by our dealer agreements may
impede or prevent any potential takeover bid. Generally, our franchise
agreements allow the manufacturers the right to terminate the agreements upon a
change of control of our company and impose restrictions upon the
transferability of any significant percentage of our stock to any one person or
entity who may be unqualified, as defined by the manufacturer, to own one of its
dealerships. The inability of a person or entity to qualify with one or more of
our manufacturers may prevent or seriously impede a potential takeover bid.
These agreements, corporate documents and laws, as well as provisions of our
lending arrangements creating an event of default on a change in control, may
have the effect of delaying or preventing a change in control or preventing
stockholders from realizing a premium on the sale of their shares upon an
acquisition of Sonic.
Amortization of goodwill from acquisitions could change, resulting in
significant reduction in earnings for future periods.
Goodwill, net of accumulated amortization, represented approximately
39.5% of our total assets and 147.2% of our stockholders' equity as of December
31, 1999, and represented approximately 38.4% of our total assets and 143.3% of
our stockholders' equity as of September 30, 2000. Goodwill arises when an
acquiror pays more for a business than the fair value of the tangible and
separately measurable intangible net assets. Accounting principles generally
accepted in the United States of America require that this and all other
intangible assets be amortized over the period benefited. We determined that the
period benefited by all of the goodwill will be no less than 40 years.
Accordingly, we amortize goodwill over a 40 year period. Earnings reported in
periods immediately following the acquisition would be overstated if we
attributed a 40 year benefit period to an intangible asset that should have had
a shorter benefit period. In later years, we would be burdened by a continuing
charge against earnings without the associated benefit to income valued by
management in arriving at the price paid for the businesses. Earnings in later
years also could be significantly affected if management determined then that
the remaining balance of goodwill was impaired. We periodically compare the
carrying value of goodwill with anticipated undiscounted future cash flows from
operations of the businesses we have acquired to evaluate the recoverability of
goodwill. We have concluded that the anticipated future cash flows associated
with intangible assets recognized in the acquisitions will continue
indefinitely, and there is no persuasive evidence that any material portion will
dissipate over a period shorter than 40 years. We will incur additional goodwill
in our future acquisitions.
The Financial Accounting Standards Board proposed new rules relating to
the accounting for business combinations and intangible assets in 1999. During
its reconsideration of that proposal, the Board tentatively decided that
goodwill should not be amortized to earnings, but rather, reviewed for
impairment as necessary. We cannot assure that such a tentative decision will be
adopted and, if adopted, as to the final provisions of the new rules.
ACQUISITION TERMS
This prospectus covers the offer and sale of up to 10,000,000 shares of
our Class A common stock that we may issue from time to time in connection with
(1) the future direct and indirect acquisitions of other businesses, properties
or securities in business combination transactions and (2) upon the conversion
of shares of our preferred stock that are privately sold to the owners of
businesses, properties or securities in business combination transactions. We
will furnish this prospectus, together with our latest annual report on a Form
10-K, to the security holders or owners of the businesses we acquire in exchange
for the shares we offer by this prospectus and to holders of shares of our
preferred stock who are entitled to receive registered shares of our Class A
common stock when they convert their shares of preferred stock.
We expect that the terms upon which we issue the shares will be
determined through negotiations with the security holders or principal owners of
the businesses whose securities or assets we acquire. We expect that the shares
we issue in an acquisition or upon conversion of preferred stock will be valued
at prices reasonably related to the market prices for our common stock
prevailing at or near the time we enter into an acquisition agreement or
consummate the acquisition, or during the period or periods prior to the
delivery of such shares, or on such other basis as the parties may agree.
We will pay all expenses of the offering of these shares. We will pay
no underwriting discounts or commissions in connection with the issuance of
these shares, although we may pay finder's fees with respect to specific
acquisitions. Any person receiving a finder's fee may be deemed to be an
"underwriter" within the meaning of the Securities Act.
We will use this prospectus in connection with the issuance of our
shares only in those acquisitions that would be exempt from registration except
for the possibility of integration with other transactions. If an acquisition
would not be so exempt, we will furnish those offerees this prospectus, as
amended by a post-effective amendment to the registration statement, on Form
S-4, of which this prospectus is a part.
19
<PAGE>
If we consummate an acquisition (or series of acquisitions since the
date of our most recently audited financial statements) that would have a
material financial effect on us, we will file a Current Report on Form 8-K
containing the financial and other information about the acquisition(s) that
would be material to subsequent purchasers of the shares we offer through this
prospectus.
Our Class A common stock is traded on the New York Stock Exchange and
we intend to list the shares offered by this prospectus for trading on the New
York Stock Exchange. For a further description of our Class A common stock, see
"Description of Capital Stock." The shares we issue in acquisitions may be
subject to restrictions on resale imposed by Rules 144 and 145 under the
Securities Act. In addition, we may impose certain contractual holding period
requirements upon persons acquiring our shares in acquisitions.
SELLING SECURITY HOLDERS
This prospectus may also be used for reoffers and resales by persons
(a) who receive our Class A common stock in acquisition transactions or who
receive our Class A common stock upon the conversion of our preferred stock that
is privately sold in acquisition transactions, and, (b) who may be entitled to
reoffer and resale such common stock under circumstances requiring the use of a
prospectus. However, no person will be authorized to use this prospectus for an
offer of such common stock without first obtaining our consent. We may consent
to the use of this prospectus by such selling security holders for a limited
period of time and subject to limitations and conditions, which may be varied by
agreement between us and such selling security holders. A supplement to this
prospectus will set forth information identifying any such selling security
holders and disclosing the information about such selling security holders and
the securities to be sold as may then be required by the Securities Act and the
rules of the Commission.
PLAN OF DISTRIBUTION BY SELLING SECURITY HOLDERS
Resales of our Class A common stock may be made on the New York Stock
Exchange or such national securities exchange or other quotation service on
which our Class A common stock may be listed or quoted at the time of sale, in
the over-the-counter market, in private transactions or pursuant to underwriting
agreements. Such resales may be affected in one or more of the following
methods:
o ordinary brokers' transactions, which may include long or
short sales;
o transactions involving cross or block trades or otherwise on
the New York Stock Exchange;
o purchases by brokers, dealers or underwriters as principal and
resale for their own accounts pursuant to this prospectus;
o "at the market" to or through market makers or into an
existing market for the Class A common stock;
o in other ways not involving market makers or established
trading markets, including direct sales to purchasers or sales
effected through agents;
o through transactions in options, swaps or other derivatives
(whether exchange-listed or otherwise); and
o any combination of the methods listed above, or by any other
legally available means.
Agreements with selling security holders permitting use of this
prospectus may provide that any such offering be effected in an orderly manner
through securities dealers, acting as broker or dealer, selected by us; that
selling security holders enter into custody agreements with one or more banks
with respect to the Class A common stock offered; and that sales be made only by
one or more of the methods described in this prospectus, as appropriately
supplemented or amended when required. The selling security holders may be
deemed to be "underwriters" within the meaning of the Securities Act.
Brokers, dealers, underwriters or agents participating in the sale of
our Class A common stock as principals or agents may receive compensation in the
form of commissions, discounts or concessions from the selling security holders
and/or purchasers of the Class A common stock for whom such broker-dealers may
act as agent, or to whom they may sell as principal, or both (which compensation
as to a particular broker-dealer may be less than or in excess of customary
commissions). Sales of Class A common stock by such broker, dealer, underwriter
or agent may be made on the New York Stock Exchange or any securities exchange
from time to time at prices related to prices then prevailing, at negotiated
prices or at fixed prices, which may be changed. Any such sales may be by block
trade. Any such broker/dealer or agent may be deemed to be an "underwriter"
within the meaning of the Securities Act, and any commissions earned by such
member firm may be deemed to be underwriting discounts and commissions under the
Securities Act.
When we are notified by a selling security holder that it proposes to
make a block trade, a prospectus supplement, if required, will be filed pursuant
to Rule 424 under the Securities Act (or successor rule), disclosing the name of
the broker or
20
<PAGE>
dealer, the number of shares of Class A common stock involved, the price at
which such shares of Class A common stock are being sold by such selling
security holder, and the commissions to be paid by such selling security holder
to such broker or dealer.
To comply with the securities laws of certain jurisdictions, if
applicable, the Class A common stock will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain jurisdictions, such securities may not be offered or sold
unless they have been registered or qualified for sale in such jurisdictions or
any exemption from registration or qualification is available and is complied
with.
DESCRIPTION OF CAPITAL STOCK
Sonic's authorized capital stock consists of (a) 100,000,000 shares of
Class A common stock, $.01 par value, (b) 30,000,000 shares of Class B common
stock, $.01 par value and (c) 3,000,000 shares of preferred stock, $.10 par
value (of which 300,000 shares have been designated as Class A convertible
preferred stock). As of December 12, 2000, Sonic had 29,957,270 outstanding
shares of Class A common stock, 12,250,000 outstanding shares of Class B common
stock and 250.5 outstanding shares of Class A convertible preferred stock. In
pending acquisitions, Sonic has agreed to issue approximately $2.0 million in
Class A common stock and $4.6 million in Class A convertible preferred stock
convertible into Class A common stock.
The following summary description of Sonic's capital stock does not
purport to be complete and is qualified in its entirety by reference to Sonic's
Amended and Restated Certificate of Incorporation (which was filed as an exhibit
to Sonic's registration statement on Form S-1 (File No. 333-33295)), Sonic's
amendment to its Amended and Restated Certificate of Incorporation (which is
filed as an exhibit to the registration statement on Form S-3 (File No.
333-82615)), Sonic's Certificate of Designations relating to the Class A
convertible preferred stock (which was filed as an exhibit to Sonic's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998) and to Delaware law.
Reference is made to such exhibits and to Delaware law for a detailed
description of the provisions thereof summarized below.
Preferred Stock
Class A Convertible Preferred Stock
Dividends. The preferred stock has no preferential dividends. Rather,
holders of preferred stock are entitled to participate in dividends payable on
the Class A common stock on an "as-if-converted" basis.
Voting Rights. Each share of preferred stock entitles its holder to a
number of votes equal to that number of shares of Class A common stock into
which it could be converted as of the record date for the vote.
Liquidation Rights. The preferred stock has a liquidation preference of
$1,000 per share.
Conversion Rights. Each share of preferred stock is convertible into
shares of Class A common stock at the holder's option at specified conversion
rates. After the second anniversary of the date of issuance, any shares of
preferred stock that have not been converted are subject to mandatory conversion
to Class A common stock at the option of Sonic. No fractional shares of Class A
common stock will be issued upon conversion of any shares of preferred stock.
Instead, Sonic will pay cash equal to the value of such fractional share.
Generally, each share of preferred stock is convertible into that number
of shares of Class A common stock that has an aggregate Market Price at the time
of conversion equal to $1,000 (with certain adjustments for the Series II and
Series III preferred stock). Conversion of Series II preferred stock is subject
to certain adjustments that have the effect of limiting increases and decreases
in the value of the Class A common stock receivable upon conversion by 10% of
the original value of the shares of Series II preferred stock. Conversion of
Series III preferred stock is subject to certain adjustments that have the
effect of limiting increases in the value of Class A common stock receivable
upon conversion by 10% of the original value of the shares of Series III
preferred stock. "Market Price" is defined as the average closing price per
share of Class A common stock on the New York Stock Exchange for the 20 trading
days immediately preceding the date of conversion. If the Class A common stock
is no longer listed on the New York Stock Exchange, then the Market Price will
be determined on the basis of prices reported on the principal exchange on which
the Class A common stock is listed, or if not so listed, prices furnished by
NASDAQ. If the Class A common stock is not listed on an exchange or reported on
by NASDAQ, then the Market Price will be determined by Sonic's board of
directors.
21
<PAGE>
Before the first anniversary of the date of issuance of preferred stock,
each holder of preferred stock is unable to convert without first giving Sonic
10 business days' notice and an opportunity to redeem such preferred stock at
the then applicable redemption price.
Redemption. The preferred stock is redeemable at Sonic's option at any
time after the date of issuance. The redemption price for the Series I preferred
stock is $1,000 per share. The redemption price for the Series II preferred
stock and the Series III preferred stock is as follows: (a) prior to the second
anniversary of the date of issuance, the redemption price is the greater of
$1,000 per share or the aggregate Market Price of the Class A common stock into
which it could be converted at the time of redemption, and (b) after the second
anniversary of the date of issuance, the redemption price is the aggregate
Market Price of the Class A common stock into which it could be converted at the
time of redemption. There is no restriction on Sonic's ability to redeem the
preferred stock while there is an arrearage in payment of dividends on such
preferred stock.
Undesignated Preferred Stock
As of the date of this prospectus, no shares of preferred stock are
outstanding other than the Class A convertible preferred stock discussed above.
Our board of directors may authorize the issuance of preferred stock in one or
more series from our undesignated preferred stock or our Class A convertible
preferred stock and, with respect to presently undesignated preferred stock, may
determine, with respect to any series, the designations, powers, preferences and
rights of that series, and the qualifications, limitations and restrictions of
that series, including:
o the designation of the series;
o the number of shares of the series, which number may
thereafter be increased or decreased by our board of directors
but not below the number of shares of that series then
outstanding);
o whether dividends, if any, will be cumulative or noncumulative
and the dividend rate of the series;
o the conditions under which and the dates upon which dividends
will be payable, and the relation which those dividends will
bear to the dividends payable on any other class or classes of
stock;
o the redemption rights and price or prices, if any, for shares
of the series;
o the terms and amounts of any sinking fund provided for the
purchase or redemption of shares of the series;
o the amounts payable on and the preferences of shares of the
series, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of our
company;
o whether the shares of the series will be convertible into
shares of any other class or series, or any other security, of
our company or any other corporation, and, if so, the
specification of that other class or series or that other
security, the conversion price or prices or rate or rates,
that adjustments to that price or those prices or that rate or
those rates, the date or dates as of which those shares will
be convertible and all other terms and conditions upon which
the conversion may be made;
o restrictions on the issuance of shares of the same series or
of any other class or series; and
o the voting rights, if any, of the holders of shares of that
series.
We believe that the ability of our board of directors to issue one or
more series of preferred stock from our undesignated preferred stock will
provide us with flexibility in structuring possible future financings and
acquisitions and in meeting other corporate needs that might arise. Our
authorized shares of preferred stock will be available for issuance without
further action by our stockholders, unless that action is required by applicable
law or the rules of any stock exchange or automated quotation system on which
our securities may be listed or traded. The New York Stock Exchange currently
requires stockholder approval as a prerequisite to listing shares in several
instances, including where the present or potential issuance of shares could
result in an increase in the number of shares of common stock outstanding, or in
the amount of voting securities outstanding, of at least 20%.
Although our board of directors has no intention at the present time of
doing so, it could issue a series of preferred stock that could, depending on
the terms of that series, impede the completion of a merger, tender offer or
other takeover attempt. Our board of directors may decide to issue those shares
based on its judgment as to the best interests of our company and our
22
<PAGE>
stockholders. Our board of directors, in so acting, could issue preferred stock
having terms that could discourage a potential acquiror from making an
unsolicited and unwanted acquisition attempt through which that acquiror may be
able to change the composition of our board of directors, including a tender
offer or other transaction that some, or a majority, of our stockholders might
believe to be in their best interests or in which stockholders might receive a
premium for their stock over the then current market price of that stock.
Common Stock
Sonic's Class A common stock and Class B common stock are equal in all
respects except for voting rights, conversion rights of the Class B common stock
and as required by law, as discussed more fully below.
Voting Rights; Conversion of Class B Common Stock to Class A Common Stock
The voting powers, preferences and relative rights of the Class A common
stock and the Class B common stock are subject to the following provisions.
Holders of Class A common stock have one vote per share on all matters submitted
to a vote of the stockholders of Sonic. Holders of Class B common stock are
entitled to 10 votes per share except as described below. Holders of all classes
of common stock entitled to vote will vote together as a single class on all
matters presented to the stockholders for their vote or approval except as
otherwise required by Delaware law. There is no cumulative voting with respect
to the election of directors.
In the event any shares of Class B common stock held by a member of the
Smith Group (as defined below) are transferred outside of the Smith Group, such
shares will automatically be converted into shares of Class A common stock. In
addition, if the total number of shares of common stock held by members of the
Smith Group is less than 15% of the total number of shares of common stock
outstanding, all of the outstanding shares of Class B common stock automatically
will be reclassified as Class A common stock. In any merger, consolidation or
business combination, the consideration to be received per share by holders of
Class A common stock must be identical to that received by holders of Class B
common stock, except that in any such transaction in which shares of common
stock are distributed, such shares may differ as to voting rights to the extent
that voting rights now differ between our classes of common stock.
Notwithstanding the foregoing, the holders of Class A common stock and
Class B common stock vote as a single class, with each share of each class
entitled to one vote per share, with respect to any transaction proposed or
approved by the board of directors of Sonic or proposed by or on behalf of
holders of the Class B common stock or as to which any member of the Smith Group
or any affiliate thereof has a material financial interest other than as a then
existing stockholder of Sonic constituting a
o "going private" transaction,
o sale or other disposition of all or substantially all of
Sonic's assets,
o sale or transfer that would cause the nature of Sonic's
business to be no longer primarily oriented toward automobile
dealership operations and related activities, or
o merger or consolidation of Sonic in which the holders of the
common stock will own less than 50% of the common stock
following such transaction.
A "going private" transaction is defined as any "Rule 13e-3 Transaction,"
as such term is defined in Rule 13e-3 promulgated under the Securities Exchange
Act of 1934. An "affiliate" is defined as (a) any individual or entity who or
that, directly or indirectly, controls, is controlled by, or is under common
control with any member of the Smith Group, (b) any corporation or organization
(other than Sonic or a majority-owned subsidiary of Sonic) of which any member
of the Smith Group is an officer, partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class of voting securities, or in which
any member of the Smith Group has a substantial beneficial interest, (c) a
voting trust or similar arrangement pursuant to which any member of the Smith
Group generally controls the vote of the shares of common stock held by or
subject to such trust or arrangement, (d) any other trust or estate in which any
member of the Smith Group has a substantial beneficial interest or as to which
any member of the Smith Group serves as trustee or in a similar fiduciary
capacity or (e) any relative or spouse of any member of the Smith Group or any
relative of such spouse, who has the same residence as any member of the Smith
Group.
As used in this prospectus, the term the "Smith Group" consists of the
following persons:
o Mr. Smith and his guardian, conservator, committee, or
attorney-in-fact;
23
<PAGE>
o William S. Egan and his guardian, conservator, committee, or
attorney-in-fact;
o each lineal descendant of Messrs. Smith and Egan (a
"Descendant") and their respective guardians, conservators,
committees or attorneys-in-fact; and
o each "Family Controlled Entity."
The term "Family Controlled Entity" means (a) any not-for-profit
corporation if at least 80% of its board of directors is composed of Mr. Smith,
Mr. Egan and/or Descendants; (b) any other corporation if at least 80% of the
value of its outstanding equity is owned by members of the Smith Group; (c) any
partnership if at least 80% of the value of the partnership interests are owned
by members of the Smith Group; and (d) any limited liability or similar company
if at least 80% of the value of the company is owned by members of the Smith
Group.
Under Sonic's charter and Delaware law, the holders of Class A common
stock and/or Class B common stock are each entitled to vote as a separate class,
as applicable, with respect to any amendment to Sonic's Certificate that would
increase or decrease the aggregate number of authorized shares of such class,
increase or decrease the par value of the shares of such class, or modify or
change the powers, preferences or special rights of the shares of such class so
as to affect such class adversely.
Dividends
Holders of the Class A common stock and the Class B common stock are
entitled to receive ratably such dividends, if any, as are declared by our Board
of Directors out of funds legally available for that purpose. An additional
requirement is that dividends paid in shares of Class A common stock shall be
paid only to holders of Class A common stock, and dividends paid in shares of
Class B common stock shall be paid only to holders of Class B common stock.
Sonic's charter provides that if there is any dividend, subdivision, combination
or reclassification of either class of common stock, a proportionate dividend,
subdivision, combination or reclassification of the other class of common stock
must be made at the same time.
Other Rights
Stockholders of Sonic have no preemptive or other rights to subscribe for
additional shares. In the event of the liquidation, dissolution or winding up of
Sonic, holders of Class A common stock and Class B common stock are entitled to
share ratably in all assets available for distribution to holders of common
stock after payment in full of creditors. No shares of any class of common stock
are subject to a redemption or a sinking fund.
Delaware Law, Certain Charter and Bylaw Provisions
Certain provisions of Delaware Law and of Sonic's charter and bylaws,
summarized in the following paragraphs, may be considered to have an
antitakeover effect and may delay, deter or prevent a tender offer, proxy
contest or other takeover attempt that a stockholder might consider to be in
such stockholder's best interest, including such an attempt as might result in
payment of a premium over the market price for shares held by stockholders.
Delaware Antitakeover Law. Sonic is subject to the provisions of Delaware
law, including Section 203. In general, Section 203 prohibits a public Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which such person became an interested stockholder unless: (a) prior to such
date, the Board of Directors approved either the business combination or the
transaction, which resulted in the stockholder becoming an interested
stockholder; or (b) upon becoming an interested stockholder, the stockholder
then owned at least 85% of the voting stock, as defined in Section 203; or (c)
subsequent to such date, the business combination is approved by both the Board
of Directors and by holders of at least 66 2/3% of the corporation's outstanding
voting stock, excluding shares owned by the interested stockholder. For these
purposes, the term "business combination" includes mergers, asset sales and
other similar transactions with an "interested stockholder." An "interested
stockholder" is a person who, together with affiliates and associates, owns (or,
within the prior three years, did own) 15% or more of the corporation's voting
stock. Although Section 203 permits a corporation to elect not to be governed by
its provisions, Sonic to date has not made this election.
Classified Board of Directors. Sonic's bylaws provide for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the Board of Directors
will be elected each year. Classification of the Board of Directors expands the
time required to change the composition of a majority of directors and may tend
to discourage a takeover bid for Sonic. Moreover, under Delaware law, in the
case of a corporation having a classified board of directors, the stockholders
may remove a director only for cause. This provision, when coupled with the
provision of
24
<PAGE>
the bylaws authorizing only the board of directors to fill vacant directorships,
will preclude stockholders of Sonic from removing incumbent directors without
cause, simultaneously gaining control of the Board of Directors by filing the
vacancies with their own nominees.
Special Meetings of Stockholders. Sonic's bylaws provide that special
meetings of stockholders may be called only by the Chairman or by the Secretary
or any Assistant Secretary at the request in writing of a majority of Sonic's
Board of Directors. Sonic's bylaws also provide that no action required to be
taken or that may be taken at any annual or special meeting of stockholders may
be taken without a meeting; the powers of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied. These
provisions may make it more difficult for stockholders to take action opposed by
the Board of Directors.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. Sonic's bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for election
as directors at an annual or a special meeting of stockholders, must provide
timely notice thereof in writing. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive office of
Sonic, (a) in the case of an annual meeting that is called for a date that is
within 30 days before or after the anniversary date of the immediately preceding
annual meeting of stockholders, not less than 60 days nor more than 90 days
prior to such anniversary date, and, (b) in the case of an annual meeting that
is called for a date that is not within 30 days before or after the anniversary
date of the immediately preceding annual meeting, or in the case of a special
meeting of stockholders called for the purpose of electing directors, not later
than the close of business on the tenth day following the day on which notice of
the date of the meeting was mailed or public disclosure of the date of the
meeting was made, whichever occurs first. Our bylaws also specify certain
requirements for a stockholder's notice to be in proper written form. These
provisions may preclude some stockholders from bringing matters before the
stockholders at an annual or special meeting or from making nominations for
directors at an annual or special meeting.
Conflict of Interest Procedures. Sonic's charter contains provisions
providing that transactions between Sonic and its affiliates must be no less
favorable to Sonic than would be available in transactions involving arms'
length dealing with unrelated third parties. Moreover, any such transaction
involving aggregate payments in excess of $500,000 must be approved by a
majority of Sonic's directors and a majority of Sonic's independent directors.
Otherwise, Sonic must obtain an opinion as to the financial fairness of the
transactions to be issued by an investment banking or appraisal firm of national
standing.
Limitation of Liability of Officers and Directors
Delaware law authorizes corporations to limit or eliminate the personal
liability of officers and directors to corporations and their stockholders for
monetary damages for breach of officers' and directors' fiduciary duty of care.
The duty of care requires that, when acting on behalf of the corporation,
officers and directors must exercise an informed business judgment based on all
material information reasonably available to them. Absent the limitations
authorized by Delaware law, officers and directors are accountable to
corporations and their stockholders for monetary damages for conduct
constituting gross negligence in the exercise of their duty of care. Delaware
law enables corporations to limit available relief to equitable remedies such as
injunction or rescission.
Our certificate of incorporation limits the liability of our officers and
directors to us and our stockholders to the fullest extent permitted by Delaware
law. Specifically, our officers and directors will not be personally liable for
monetary damages for breach of an officer's or director's fiduciary duty in such
capacity, except for liability
o for any breach of the officer's or director's duty of loyalty to us or
our stockholders,
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
o for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation law, or
o for any transaction from which the officer or director derived an
improper personal benefit.
The inclusion of this provision in our certificate of incorporation may
reduce the likelihood of derivative litigation against our officers and
directors, and may discourage or deter stockholders or management from bringing
a lawsuit against our officers and directors for breach of their duty of care,
even though such an action, if successful, might have otherwise benefitted us
and our stockholders.
25
<PAGE>
Both our certificate of incorporation and bylaws provide indemnification
to our officers and directors and certain other persons with respect to certain
matters to the maximum extent allowed by Delaware law as it exists now or may
hereafter be amended. These provisions do not alter the liability of officers
and directors under federal securities laws and do not affect the right to sue
(nor to recover monetary damages) under federal securities laws for violations
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling Sonic
pursuant to the foregoing provisions, Sonic has been informed that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
Transfer Agent and Registrar
Our transfer agent and registrar of our common stock is First Union
National Bank.
CERTAIN MANUFACTURER RESTRICTIONS
Under our agreements with certain manufacturers, we have agreed to
provide the statement below:
No automobile manufacturer or distributor has been involved,
directly or indirectly, in the preparation of this prospectus or in the
offering being made hereby. No automobile manufacturer or distributor has
been authorized to make any statements or representations in connection
with the offering, and no automobile manufacturer or distributor has any
responsibility for the accuracy or completeness of this prospectus for
the offering.
Under our Dealer Agreement with General Motors ("GM"), we have agreed,
among other things, to disclose the following provisions:
Sonic will deliver to GM copies of all Schedules 13D and 13G, and
all amendments thereto and terminations thereof, received by Sonic,
within five days of receipt of such Schedules. If Sonic is aware of any
ownership of its stock that should have been reported to it on Schedule
13D but that is not reported in a timely manner, it will promptly give GM
written notice of such ownership, with any relevant information about the
owner that Sonic possesses.
If Sonic, through its board of directors or through shareholder
action, proposes or if any person, entity or group sends Sonic a Schedule
13D, or any amendments thereto, disclosing (a) an agreement to acquire or
the acquisition of aggregate ownership of more than 20% of the voting
stock of Sonic and (b) Sonic, through its board of directors or through
shareholder action, proposes or if any plans or proposals which relate to
or would result in the following: (i) the acquisition by any person of
more than 20% of the voting stock of Sonic other than for the purposes of
ordinary passive investment; (ii) an extraordinary corporate transaction,
such as a material merger, reorganization or liquidation, involving Sonic
or a sale or transfer of a material amount of assets of Sonic and its
subsidiaries; (iii) any change which, together with any changes made to
the board of directors within the preceding year, would result in a
change in control of the then current board of Sonic; or (iv) in the case
of an entity that produces motor vehicles or controls or is controlled by
or is under common control with an entity that either produces motor
vehicles or is a motor vehicle franchiser, the acquisition by any person,
entity or group of more than 20% of the voting stock of Sonic and any
proposal by any such person, entity or group, through the Sonic board of
directors or shareholders action, to change the board of directors of
Sonic, then, if such actions in GM's business judgment could have a
material or adverse effect on its image or reputation in the GM
dealerships operated by Sonic or be materially incompatible with GM's
interests (and upon notice of GM's reasons for such judgment), Sonic has
agreed that it will take one of the remedial actions set forth in the
next paragraph within 90 days of receiving such Schedule 13D or such
amendment.
If Sonic is obligated under the previous paragraph to take
remedial action, it will (a) transfer to GM or its designee, and GM or
its designee will acquire the assets, properties or business associated
with any GM dealership operated by Sonic at fair market value as
determined in accordance with GM's dealership agreement with Sonic, or
(b) provide evidence to GM that such person, entity or group no longer
has such threshold level of ownership interest in Sonic or that the
actions described in clause (b) of the previous paragraph will not occur.
Should Sonic or its GM franchisee subsidiary enter into an
agreement to transfer the assets of the GM franchisee subsidiary to a
third party, the right of first refusal described in the GM dealer
agreement shall apply to any such transfer.
26
<PAGE>
LEGAL MATTERS
The validity of the securities issuable under this prospectus will be
passed upon for Sonic by Parker, Poe, Adams & Bernstein L.L.P., Charlotte, North
Carolina.
EXPERTS
The consolidated financial statements of Sonic Automotive, Inc. and
Subsidiaries, the combined financial statements of Williams Automotive Group,
the financial statements of Economy Cars, Inc., the financial statements of
Global Imports, Inc., the combined financial statements of Newsome Automotive
Group, the combined financial statements of Lloyd Automotive Group, the
financial statements of Lute Riley Motors, Inc., the combined financial
statements of Certain Dealerships, Assets and Liabilities of Lucas Dealership
Group, Inc., the combined financial statements of Manhattan Automotive Group and
the financial statements of Freeland Automotive, incorporated by reference in
this prospectus and elsewhere in the registration statement, have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports,
which are incorporated by reference herein and have been so incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of FirstAmerica Automotive, Inc.
and Subsidiaries incorporated by reference in this prospectus and elsewhere in
the registration statement, have been audited by KPMG LLP, independent auditors,
as stated in their reports, which are incorporated by reference herein and have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
27
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers
Sonic's bylaws effectively provide that Sonic shall, to the full extent
permitted by Section 145 of the General Corporation Law of the State of
Delaware, as amended from time to time ("Section 145"), indemnify all persons
whom it may indemnify pursuant thereto. In addition, Sonic's Certificate of
Incorporation eliminates personal liability of its directors to the full extent
permitted by Section 102(b)(7) of the General Corporation Law of the State of
Delaware, as amended from time to time ("Section 102(b)(7)").
Section 145 permits a corporation to indemnify its directors and officers
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlements actually and reasonably incurred by them in connection with any
actions, suit or proceeding brought by a third party if such directors or
officers acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, indemnification may be made only for expenses
actually and reasonably incurred by directors and officers in connection with
the defense or settlement of an action or suit and only with respect to a matter
as to which they shall have acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interest of the corporation, except
that no indemnification shall be made if such person shall have been adjudged
liable to the corporation, unless and only to the extent that the court in which
the action or suit was brought shall determine upon application that the
defendant officers or directors are reasonably entitled to indemnity for such
expenses despite such adjudication of liability.
Section 102(b)(7) provides that a corporation may eliminate or limit the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for willful or negligent conduct
in paying dividends or repurchasing stock out of other than lawfully available
funds or (iv) for any transaction from which the director derived an improper
personal benefit. No such provision shall eliminate or limit the liability of a
director for any act or omission occurring prior to the date when such provision
becomes effective. Sonic maintains insurance against liabilities under the
Securities Act for the benefit of its officers and directors.
Sonic maintains insurance against liabilities under the Securities Act
for the benefit of its officers and directors. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officer or persons controlling the Company pursuant to the foregoing provisions,
Sonic has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Item 21. Exhibits and Financial Statement Schedules.
The following is a list of all the exhibits and financial statement
schedules filed as part of the Registration Statement:
Exhibit No. Description
4.1* Amended and Restated Certificate of Incorporation of Sonic
(incorporated by reference to Exhibit 3.1 to Sonic's
Registration Statement on Form S-1 (Reg. No. 333-33295) (the
"Form S-1")).
4.2* Certificate of Amendment to Sonic's Amended and Restated
Certificate of Incorporation effective June 18, 1999
(incorporated by reference to Exhibit 3.2 to Sonic's December
31. 1999 Form 10-K (the "1999 Form 10-K")).
4.3* Certificate of Designation, Preferences and Rights of Class A
Convertible Preferred Stock (incorporated by reference to
Exhibit 4.1 to Sonic's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998).
4.4* Bylaws of Sonic (incorporated by reference to Exhibit 3.2 to
the Form S-1).
4.5* Specimen Certificate representing Class A common stock
(incorporated by reference to Exhibit 4.1 to the Form S-1).
4.6* Indenture dated as of July 1, 1998 between Sonic, as issuer,
the subsidiaries of Sonic named therein, as guarantors, and
U.S. Bank Trust National Association, as trustee (the
"Trustee"), relating to the 11% Senior Subordinated Notes due
2008 (incorporated by reference to Exhibit 4.2 to the
Registration Statement on Form S-4 (Registration Nos.
333-64397 and 333-64397-001 through 333-64397-044) of Sonic
(the "Form S-4")).
4.7* Form of 11% Senior Subordinated Note due 2008, Series B
(incorporated by reference to Exhibit 4.3 to the Form S-4).
4.8* First Supplemental Indenture dated as of December 31, 1999
among Sonic, as issuer, the subsidiaries of Sonic named
therein, as guarantors and additional guarantors, and the
Trustee, relating to the 11% Senior Subordinated Notes due
2008 (incorporated by reference to Exhibit 4.2 to the 1999
Form 10-K).
4.9* Second Supplemental Indenture dated as of September 15, 2000
among Sonic, as issuer, the subsidiaries of Sonic named
therein, as guarantors and additional guarantors, and the
Trustee, relating to the 11% Senior Subordinated Notes due
2008 (incorporated by reference to Exhibit 4.4 to Sonic's
Quarterly Report on Form 10-Q for the quarter ended September
30, 2000).
5.1** Opinion of Parker, Poe, Adams & Bernstein L.L.P. regarding the
legality of the securities being registered.
II-1
<PAGE>
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of KPMG LLP.
23.3 Consent of Parker Poe Adams & Bernstein L.L.P. (included in Exhibit
5.1).
24.1 Powers of Attorney (included on Signature Page of this Registration
Statement).
* Filed previously.
** To be filed by amendment.
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in the volume of securities
offered (if the total dollar value of securities offered
would not exceed that which was registered) and any
deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this
registration statement or any material change to such
information in the registration statement;
provided, however, that the undertakings set forth in paragraphs (a)(i) and
(a)(ii) above do not apply if the registration statement is on Form S-3, Form
S-8 or Form F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the Securities and Exchange Commission by Sonic pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrants pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933 and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
II-2
<PAGE>
(d) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report, to security holders that is
incorporated by reference in the prospectus and furnished pursuant to
and meeting the requirements of Rule 14a-3 or 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X is
not set forth in the prospectus, to deliver or cause to be delivered to
each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
(e) The undersigned registrant hereby undertakes as follows:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes
that such reoffering prospectus will contain the information called for
by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph
(e)(1) immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Securities Act of 1933 and is
used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(f) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this form, within one business
day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to
the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject
of and included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Charlotte, state of North
Carolina, on December 15, 2000.
SONIC AUTOMOTIVE, INC.
By: /s/ Theodore M. Wright
----------------------
Theodore M. Wright
Chief Financial Officer,
Vice President and Treasurer
POWER OF ATTORNEY
We the undersigned directors and officers of Sonic Automotive, Inc., do
hereby constitute and appoint each of Messrs. O. Bruton Smith, Bryan Scott Smith
and Theodore M. Wright, each with full power of substitution, our true and
lawful attorney-in-fact and agent to do any and all acts and things in our names
and in our behalf in our capacities stated below, which acts and things either
of them may deem necessary or advisable to enable Sonic Automotive, Inc. to
comply with the Securities Act of 1933, as amended, and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, including specifically, but not limited to, power
and authority to sign for any or all of us in our names, in the capacities
stated below, any and all amendments (including post-effective amendments)
hereto and any subsequent registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission; and we do hereby ratify and confirm all that
they shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ O. Bruton Smith Chairman, Chief Executive Officer December 15, 2000
---------------------------- (Principal Executive Officer) and Director
O. Bruton Smith
/s/ Thomas A. Price Vice Chairman and Director December 15, 2000
----------------------------
Thomas A. Price
/s/ B. Scott Smith President, Chief Operating Officer and December 15, 2000
---------------------------- Director
B. Scott Smith
/s/ Theodore M. Wright Chief Financial Officer (Principal December 15, 2000
---------------------------- Financial and Accounting Officer),
Theodore M. Wright Vice President, Treasurer and Director
/s/ Jeffrey C. Rachor Executive Vice President of Retail December 15, 2000
---------------------------- Operations and Director
Jeffrey C. Rachor
/s/ William R. Brooks Director December 15, 2000
----------------------------
William R. Brooks
/s/ William P. Benton Director December 15, 2000
----------------------------
William P. Benton
/s/ William I. Belk Director December 15, 2000
----------------------------
William I. Belk
/s/ H. Robert Helle Director December 15, 2000
----------------------------
H. Robert Heller
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
4.1* Amended and Restated Certificate of Incorporation of Sonic
(incorporated by reference to Exhibit 3.1 to Sonic's
Registration Statement on Form S-1 (Reg. No. 333-33295) (the
"Form S-1")).
4.2* Certificate of Amendment to Sonic's Amended and Restated
Certificate of Incorporation effective June 18, 1999
(incorporated by reference to Exhibit 3.2 to Sonic's December
31. 1999 Form 10-K (the "1999 Form 10-K")).
4.3* Certificate of Designation, Preferences and Rights of Class A
Convertible Preferred Stock (incorporated by reference to
Exhibit 4.1 to Sonic's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998).
4.4* Bylaws of Sonic (incorporated by reference to Exhibit 3.2 to
the Form S-1).
4.5* Specimen Certificate representing Class A common stock
(incorporated by reference to Exhibit 4.1 to the Form S-1).
4.6* Indenture dated as of July 1, 1998 between Sonic, as issuer,
the subsidiaries of Sonic named therein, as guarantors, and
U.S. Bank Trust National Association, as trustee (the
"Trustee"), relating to the 11% Senior Subordinated Notes due
2008 (incorporated by reference to Exhibit 4.2 to the
Registration Statement on Form S-4 (Registration Nos.
333-64397 and 333-64397-001 through 333-64397-044) of Sonic
(the "Form S-4")).
4.7* Form of 11% Senior Subordinated Note due 2008, Series B
(incorporated by reference to Exhibit 4.3 to the Form S-4).
4.8* First Supplemental Indenture dated as of December 31, 1999
among Sonic, as issuer, the subsidiaries of Sonic named
therein, as guarantors and additional guarantors, and the
Trustee, relating to the 11% Senior Subordinated Notes due
2008 (incorporated by reference to Exhibit 4.2 to the 1999
Form 10-K).
4.9* Second Supplemental Indenture dated as of September 15, 2000
among Sonic, as issuer, the subsidiaries of Sonic named
therein, as guarantors and additional guarantors, and the
Trustee, relating to the 11% Senior Subordinated Notes due
2008 (incorporated by reference to Exhibit 4.4 to Sonic's
Quarterly Report on Form 10-Q for the quarter ended September
30, 2000).
5.1** Opinion of Parker, Poe, Adams & Bernstein L.L.P. regarding the
legality of the securities being registered.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of KPMG LLP.
23.3 Consent of Parker Poe Adams & Bernstein L.L.P. (included in
Exhibit 5.1).
24.1 Powers of Attorney (included on Signature Page of this
Registration Statement).
* Filed previously.
** To be filed by amendment.
II-5
