<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____ to ____
Commission file number: 2-97254-NY
FIRSTAMERICA AUTOMOTIVE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 88-0206732
(State or other jurisdiction of (I.R.S. Employer
incorporation Identification No.) or organization)
601 Brannan Street
San Francisco, California 94107
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 284-0444
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of July 30, 1998.
Class A Common stock, $0.00001 par value 11,179,029
Class B Common stock, $0.00001 par value 3,032,000
<PAGE>
FIRSTAMERICA AUTOMOTIVE, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets - June 30, 1998 and December 31, 1997 2
Condensed Consolidated Statements of Operations - Three and Six Months
Ended June 30, 1998 and 1997 4
Condensed Consolidated Statement of Stockholders' Equity - June 30, 1998
and December 31, 1997 5
Condensed Consolidated Statements of Cash Flows - Six Months Ended
June 30, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRSTAMERICA AUTOMOTIVE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
--------------- ---------------------
ASSETS
------
<S> <C> <C>
Cash ............................................................ $ 2,187 $ 2,924
Contracts in transit ............................................ 14,163 9,454
Accounts receivable, net of allowance for doubtful accounts of
$408 in 1998 and $320 in 1997 .......................... 14,399 10,328
Inventories:
New vehicles ........................................... 68,023 58,344
Used vehicles .......................................... 16,021 14,027
Parts and accessories .................................. 5,732 5,223
-------- --------
Total inventories ............................... 89,776 77,594
Prepaid costs - extended warranty service contracts ............... 881 848
Deferred income taxes ........................................... 676 618
Deposits, prepaid expenses and other ............................ 4,101 2,779
-------- --------
Total current assets ............................ 126,183 104,545
Property and equipment, net of accumulated depreciation of $2,570
in 1998 and $2,133 in 1997 ............................. 9,672 7,081
Other assets:
Prepaid costs - extended warranty service contracts ...... 1,117 1,287
Loan origination and other costs, net of amortization of
$452 in 1998 and $195 in 1997 ................... 3,301 3,407
Other noncurrent assets ................................ 1,522 1,342
Goodwill, net of accumulated amortization of $287
in 1998 and $125 in 1997 ........................ 20,226 6,340
-------- --------
Total assets .................................... $162,021 $124,002
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
FIRSTAMERICA AUTOMOTIVE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
------------------------------------ -------- --------
<S> <C> <C>
Current liabilities:
Accounts payable ......................................................... $ 6,523 $ 6,137
Accrued liabilities ...................................................... 11,936 8,804
Floor plan notes payable ................................................. 81,617 66,539
Secured lines of credit .................................................. 16,525 4,000
Other notes payable ...................................................... 6,552 1,218
Deferred revenue - extended warranty service contracts ..................... 2,115 2,034
-------- --------
Total current liabilities ................................... 125,268 88,732
Long-term liabilities:
Senior notes, net of unamortized discount of $1,963
in 1998 and $2,062 in 1997 ......................................... 22,037 21,938
Deferred income taxes .................................................... 327 269
Deferred revenue - extended warranty service contracts .................... 2,708 3,061
-------- --------
Total liabilities ........................................... 150,340 114,000
8% cumulative redeemable preferred stock, $0.00001 par value; 3,500 shares
issued and outstanding in 1998 and 1997 (net of discount of $491 and $526,
liquidation preference of $3,500) ........................................ 3,009 2,974
Redeemable preferred stock, $0.00001 par value; 500 shares issued and
outstanding in 1998 and 1997 (net of discount of $70 and $75, liquidation
preference of $580 and $540) ............................................. 510 465
Stockholders' Equity
Common stock, $0.00001 par value:
Class A, 30,000,000 shares authorized, 11,179,029 shares issued
and outstanding in 1998 and 11,201,152 in 1997 .............. -- --
Class B, 5,000,000 shares authorized, 3,032,000 shares issued
and outstanding in 1998 and 1997 ............................ -- --
Class C, 30,000,000 shares authorized, 0 issued and outstanding .... -- --
Additional paid-in capital ............................................... 6,544 6,544
Retained earnings ........................................................ 1,618 19
-------- --------
Total shareholders' equity .................................. 8,162 6,563
-------- --------
Total liabilities and shareholders' equity .................. $162,021 $124,002
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
FIRSTAMERICA AUTOMOTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales:
Vehicle ....................................................... $ 155,026 $ 81,588 $ 291,766 $ 160,533
Service, parts and other ...................................... 28,025 15,462 51,902 29,541
----------- ----------- ----------- -----------
Total sales ............................................. 183,051 97,050 343,668 190,074
Cost of sales:
Vehicle ....................................................... 142,149 76,317 268,096 150,393
Service, parts and other ...................................... 11,991 7,117 22,243 13,632
----------- ----------- ----------- -----------
Total cost of sales ..................................... 154,140 83,434 290,339 164,025
Gross profit ............................................ 28,911 13,616 53,329 26,049
Operating expenses:
Selling, general and administrative ........................... 23,782 12,344 44,440 22,876
Depreciation and amortization ................................. 566 206 965 330
Combination and related expenses .............................. -- 1,584 -- 2,268
----------- ----------- ----------- -----------
Operating income (loss) ................................. 4,563 (518) 7,924 575
Other expense:
Interest expense, floor plan .................................. (1,509) (790) (2,689) (1,612)
Interest expense, other ....................................... (1,152) (133) (2,043) (133)
----------- ----------- ----------- -----------
Income (loss) before income taxes ....................... 1,902 (1,441) 3,192 (1,170)
Income tax (benefit) expense ......................................... 818 (1,262) 1,373 (1,025)
----------- ----------- ----------- -----------
Net income (loss)........................................ $ 1,084 $ (179) $ 1,819 $ (145)
=========== =========== =========== ===========
Basic earnings (loss) per share of common stock ......... $ .07 $ (0.02) $ .11 $ (0.02)
Weighted average common shares outstanding .............. 14,211,067 7,841,092 14,218,400 7,841,092
Diluted earnings (loss) per share of common stock ....... $ .07 $ (0.02) $ .11 $ (0.02)
Weighted average common and common
equivalent shares outstanding ......................... 14,720,671 7,841,092 14,678,160 7,841,092
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
FIRSTAMERICA AUTOMOTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
---------------------------------------
Class A Class B
--------------------------------------- Paid-in Retained Total
Shares Amount Shares Amount Capital Earnings Equity
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 ................ 11,201 $ -- 3,032 $ -- $ 6,544 $ 19 $ 6,563
Preferred dividend, liquidation preference,
and discount amortization ............ (220) (220)
Retirement of shares ...................... (22)
Net income ................................ 1,819 1,819
--------------------------------------------------------------------------
Balance, June 30, 1998 .................... 11,179 $ -- 3,032 $ -- $ 6,544 $ 1,618 $ 8,162
==========================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
FIRSTAMERICA AUTOMOTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------------------
1998 1997
-------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ...................................... $ 1,819 $ (145)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ................ 965 330
Non-cash stock compensation .................. -- 701
Deferred income taxes ........................ -- (589)
Deferred warranty revenue amortization, net .. (135) (162)
Changes in operating assets and liabilities:
Receivables and contracts in transit .... (8,780) (1,110)
Inventories ............................. (8,146) (4,917)
Deposits, prepaids and other assets ..... (1,961) (169)
Floor plan notes payable ................ 12,600 (2,467)
Accounts payable and accrued liabilities 3,518 6,981
-------------- -------------
Net cash used in operating activities ... (120) (1,547)
Cash flows from investing activities:
Capital expenditures ................................... (2,704) (225)
Cash paid for acquisitions ............................. (15,481) (6,091)
-------------- -------------
Net cash used in investing activities ... (18,185) (6,316)
-------------- -------------
Cash flows from financing activities:
Borrowings on secured lines of credit .................. 12,525 --
Borrowings on notes payable ............................ 5,334 8,075
Loan origination costs ................................. (151) --
Distributions to shareholders, pre-Combination (Note 1) -- (468)
Preferred stock dividend ............................... (140) --
-------------- -------------
Net cash provided by financing activities 17,568 7,607
-------------- -------------
Net decrease in cash and cash equivalents (737) (256)
Cash at beginning of period .................................. $ 2,924 $ 668
-------------- -------------
Cash at end of period ........................................ $ 2,187 $ 412
============== =============
Cash paid during the period for:
Interest ............................................... $ 3,786 $ 1,545
Income taxes ........................................... $ 1,222 $ 261
Non-cash activity was as follows:
Common stock issued as compensation .......................... $ -- $ 701
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
FIRSTAMERICA AUTOMOTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
(Unaudited)
(1) BASIS OF PRESENTATION
The financial information included herein for the three and six-month periods
ended June 30, 1998 and 1997 is unaudited and reflects, in the opinion of
management, all material adjustments (which include only normal recurring
adjustments) necessary to fairly state the financial position and the results of
operations for the periods presented. The financial information as of December
31, 1997 is derived from FirstAmerica Automotive, Inc.'s Annual Report on Form
10-K filed with the Securities and Exchange Commission on May 14, 1998. These
interim condensed consolidated financial statements should be read in
conjunction with FirstAmerica Automotive, Inc.'s audited consolidated financial
statements and the notes thereto included in FirstAmerica Automotive, Inc.'s
Form 10-K. The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full year.
(a) Organization and Combination
Effective July 11, 1997, FirstAmerica Automotive, Inc. (the Company) combined
(the "Combination") with a group of automobile dealership entities under common
ownership and control (the "Price Dealerships"). The stockholders of the Price
Dealerships received 5,526,000 shares of FirstAmerica Automotive, Inc.'s common
stock, which represented a majority of the total outstanding shares of capital
stock of FirstAmerica Automotive, Inc. immediately following the Combination.
The Combination was accounted for as the acquisition of FirstAmerica Automotive,
Inc. by the Price Dealerships, and accordingly, the financial statements for
periods before the Combination represent the financial statements of the Price
Dealerships.
(b) Business
The Company's plan is to acquire and operate multiple automobile dealerships in
the highly fragmented automobile retailing industry. The Company operates 16
automobile dealerships in California, including 12 in Northern California and
four in Southern California. In June 1998 the Company also opened its
previously announced multi-brand service and repair facility in downtown San
Francisco, California. The Company sells new and used cars and light trucks,
sells replacement parts, provides vehicle maintenance, warranty and repair
services, and arranges related financing and insurance products ("F&I") for its
customers. The Company sells 12 domestic and foreign brands, which consist of
BMW, Buick, Dodge, GMC, Honda, Isuzu, Lexus, Mitsubishi, Nissan, Pontiac, Toyota
and Volkswagen.
(c) Principles of Consolidation
The condensed consolidated financial statements include the accounts of
FirstAmerica Automotive, Inc. and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions are eliminated in
consolidation.
(2) FLOOR PLAN NOTES PAYABLE AND SECURED LINES OF CREDIT
At the time of the Combination, the Company entered into a three year $175
million Loan and Security Agreement (the "Loan Agreement") with a financial
company, replacing an existing $37 million line of credit to the Company.
The Loan Agreement permits the Company to borrow up to a maximum of: (i) $115
million in floor plan notes payable to finance vehicle inventory; (ii) a $35
million revolver facility ("Revolver Advances"), limited by the used and parts
inventory borrowing base as defined in the loan agreement; and (iii) a $25
million discretionary facility ("Discretionary Advances"), which the financial
company makes at its absolute sole discretion upon request of the Company.
7
<PAGE>
As of June 30, 1998, the Company had floor plan notes payable, Revolver
Advances, and Discretionary Advances outstanding of $81.6 million, $16.5
million, and $0, respectively.
Floor plan notes payables are due when vehicles are sold, leased, or delivered.
Revolver Advances are due whenever the used vehicle and parts borrowing base as
defined in the Loan Agreement is exceeded. The Loan Agreement grants a
collateral interest in substantially all of the Company's assets and contains
various financial covenants such as minimum interest coverage, minimum working
capital ratios, and maximum debt to equity ratios.
The availability of the Company to draw on the floor plan notes payable,
Revolver Advances, and Discretionary advances for the purpose of acquiring
automobile dealerships, is limited by the amount of vehicle and parts inventory
of the acquired dealership.
The Company also has $12.0 million available under its senior notes facility to
finance acquisitions.
(3) BUSINESS ACQUISITIONS
(a) Beverly Hills BW, Ltd.
In April 1998, the Company acquired substantially all of the operating assets of
Beverly Hills BW, Ltd., a BMW automobile dealership located in West Los Angeles,
California. The acquisition was accounted for using the purchase method of
accounting and the results of operations of Beverly Hills BW, Ltd. has been
included in the accompanying financial statements for the period beginning April
2, 1998, the effective date of acquisition. The $11.7 million purchase price was
financed using the Company's secured lines of credit. The purchase price was
allocated to the assets and liabilities acquired based on their estimated fair
market value at the acquisition date as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Inventory and other assets, net of floor plan financing $ 1,275
Property and equipment 194
Goodwill 10,250
-------
Total purchase price $11,719
=======
</TABLE>
(b) Burgess British Cars, Inc.
In June 1998, the Company acquired substantially all of the operating assets
of Burgess British Cars, Inc., a Honda automobile dealership located in Daly
City, California. The $3.8 million purchase price and $0.2 million of
additional working capital was financed by the proceeds of a $4.0 million loan
from the Chairman of the Company's Board of Directors, to the Company,
pursuant to the terms of a Letter Agreement between the Company and the
Chairman. Pursuant to the terms of the Letter Agreement, the Chairman will be
paid a 3% origination fee on the loan. The annual interest rate on the loan is
8.75%. The principal amount is due at the earlier of June 1, 1999 or upon the
refinancing and/or equity offering of either preferred or common shares in the
Company. The Company believes the origination fee to be paid to the Chairman
is equivalent to that which would be paid under an arm's-length transaction.
The loan is included in other notes payable in the accompanying condensed
consolidated financial statements.
The Burgess British Cars, Inc. acquisition was accounted for using the purchase
method of accounting and its results of operations have been included in the
accompanying financial statements for the period beginning June 19, 1998, the
effective date of the acquisition. The purchase price has been allocated to the
assets and liabilities acquired based on their estimated fair market value at
the acquisition date as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Inventory and other assets, net of floor plan financing $ 215
Property and equipment 130
Goodwill 3,417
------
Total purchase price $3,762
======
</TABLE>
8
<PAGE>
The following unaudited pro forma financial data is presented as if the
acquisitions had occurred on January 1, 1997, for the six months ended June 30
(in thousands):
<TABLE>
<CAPTION>
1998 1997
--------- ----------
<S> <C> <C>
Total sales $371,000 $227,219
Net income (loss) 2,279 (110)
Net income (loss) per share:
Basic and diluted $ 0.16 $ (0.01)
</TABLE>
(4) COMPUTATION OF PER SHARE AMOUNTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, "Earnings Per Share" (SFAS No. 128) which
is effective for fiscal years ending after December 15, 1997. The Company has
adopted SFAS No. 128 in the accompanying financial statements.
For purposes of calculating basic earnings per share for the three and six
months ended June 30, 1998, net income of $1.1 million and $1.8 million is
reduced by cumulative redeemable preference dividends of $70,000 and $140,000,
redeemable preferred stock liquidation preference accretion of $20,000 and
$40,000 and cumulative redeemable preferred stock and redeemable preferred stock
discount amortization of $20,000 and $40,000, respectively. This net income
available to common stockholders of $1.0 million and $1.6 million is then
divided by the weighted average shares outstanding. Weighted average shares
outstanding used for basic earnings per share for the three and six months ended
June 30, 1998 was 14,211,067 and 14,218,400, respectively. To calculate diluted
earnings per share, net income is divided by the sum of the weighted average
shares outstanding for basic earnings per share, the dilutive effect of stock
options of 282,388 and 254,768 shares and the net effect of warrants of 227,216
and 204,992 shares, respectively.
(5) NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 130, "Reporting Comprehensive Income." This statement
establishes standards of reporting and presentation of comprehensive income and
its components in a full set of general-purpose financial statements. This
statement is effective for the fiscal years beginning after December 15, 1997.
The Company has determined that net income and comprehensive income are the same
for the periods presented and therefore no separate disclosure for comprehensive
income is required.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This Standard requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. This statement is effective for financial
statements for periods beginning after December 15, 1997. The Company believes
that its automobile operations constitute its only operating segment and
therefore no separate disclosure under this statement is required.
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position ("SOP")
98-5, "Reporting the Cost of Start-Up Activities", which provides guidance on
financial reporting for enterprise start-up costs. The SOP, which is effective
for fiscal years beginning after December 15, 1998, requires the costs of start-
up activities and related organization costs to be expensed as incurred. The
Company is currently evaluating this SOP and its impact on its financial
reporting and disclosure.
(6) SUBSEQUENT EVENTS
The Company has entered into a definitive agreement, subject to manufacturer
approval, to acquire an automobile dealership located in Northern California for
a cash purchase price of $12.0 million plus new vehicle inventory.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS AND RISK FACTORS
This Quarterly Report and Management's Discussion and Analysis of Results of
Operations and Financial Condition include certain " forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. All statements other than statements of
historical facts included in this document, including statements regarding
potential acquisitions, expected cost savings, planned capital expenditures, the
Company's future financial position, business strategy and other plans and
objectives for future operations are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, such statements are based upon assumptions and
anticipated results that are subject to numerous uncertainties. Actual results
may vary significantly from those anticipated due to many factors, including
industry conditions, future demand for new and used vehicles, the ability to
obtain manufacturer consents to acquisitions, the availability of capital
resources and the willingness of acquisition candidates to accept the Company's
capital stock as currency. These important factors, risks and uncertainties
include, but are not limited to, the cyclical nature of automobile sales, the
intense competition in the automobile retail industry and the Company's ability
to obtain additional sources of capital, negotiate profitable acquisitions and
secure manufacturer approvals for such acquisitions. All subsequent written and
oral forward-looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by such factors.
OVERVIEW
FirstAmerica Automotive, Inc. (the "Company") is one of the largest automobile
retailers in Northern California. As of June 30, 1998, the Company operated 12
automobile dealerships and one multi-brand vehicle repair and service center in
Northern California, 3 dealerships in San Diego County and one in Beverly Hills,
California. The Company sells new and used cars and light trucks, sells
replacement parts, provides vehicle maintenance, warranty and repair services
and arranges related financing and insurance products ("F&I") for its customers.
At its sixteen dealership locations, certain of which represent multiple new
vehicle dealerships, the Company sells 12 domestic and foreign brands, which
consist of BMW, Buick, Dodge, GMC, Honda, Isuzu, Lexus, Mitsubishi, Nissan,
Pontiac, Toyota and Volkswagen.
In addition to its traditional dealership operations, the Company has (i) in
June 1998 opened a multi-brand, full service vehicle maintenance and repair
center in the downtown San Francisco area, (ii) developed a "Used Car Auto
Factory" concept to centralize procurement, reconditioning and wholesale
disposal of used cars, (iii) developed a "Dealer Services" concept to centralize
the procurement of extended warranty service contracts and custom accessories
such as alarms, stereos and chemical treatments, and (iv) obtained authorization
from Nissan Motor Company ("Nissan") to form "Smart Nissan," a program to
combine multiple Nissan dealerships with contiguous markets in the San Francisco
Bay Area (including the Nissan dealerships owned by the Company) into a single
regional dealership group that will have centralized pricing, inventory
management, marketing and other economies of scale.
10
<PAGE>
The following table sets forth selected condensed financial data for the Company
expressed as a percentage of total sales for the periods indicated below.
FIRSTAMERICA AUTOMOTIVE, INC.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------------------------------------
JUNE 30, JUNE 30,
---------------------------------------------------------
1998 1997 1998 1997
------------ ----------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales:
New vehicles 57.2% 59.4% 58.1% 60.3%
Used vehicles 27.5% 24.6% 26.8% 24.1%
Service, parts and other 15.3% 16.0% 15.1% 15.6%
------------ ----------------- ------------ -----------
Total sales 100.0% 100.0% 100.0% 100.0%
Gross profit 15.8% 14.0% 15.5% 13.7%
Selling, general and administrative 13.3% 12.9% 13.2% 12.2%
Combination and related expenses 0% 1.6% 0% 1.2%
------------ ----------------- ------------ -----------
Operating income (loss) 2.5% (0.5)% 2.3% 0.3%
Income (loss) before taxes 1.0% (1.5)% 0.9% (0.6)%
------------ ----------------- ------------ -----------
</TABLE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
SALES. Sales increased by $86.0 million, or 88.6%, to $183.1 million for the
three months ended June 30, 1998 from $97.1 million for the comparable period of
1997, primarily due to sales contributed by dealerships that the Company has
acquired since June 1997. The Company expects sales growth to continue as the
Company executes its acquisition strategy.
New Vehicles. The Company sells twelve domestic and imported brands
ranging from economy to luxury vehicles, as well as sport utility vehicles,
minivans and light trucks. The Company sold 4,441 and 2,704 new vehicles
in the three months ended June 30, 1998 and 1997, respectively, generating
revenues of $104.7 million and $57.9 million, which constituted 57.2% and
59.4% of the Company's total sales, respectively. New vehicle sales
increased by $46.8 million, or 80.8%, due to an increase in unit sales
attributable to dealerships acquired by the Company as well as price
increases which were consistent with manufacturers' price increases.
Used Vehicles. The Company sells a variety of makes and models of used
vehicles and light trucks of varying model years and prices. The Company
sold 4,146 and 2,051 retail and wholesale used vehicles in the three months
ended June 30, 1998 and 1997, respectively, generating revenues of $50.4
million and $23.9 million, which constituted 27.5% and 24.6% of the
Company's total sales, respectively. The $26.5 million or 110.9% increase
in used vehicle revenues is primarily due to a corresponding increase in
used vehicle unit sales from dealerships acquired during 1997 as well as an
increase in used vehicle revenues in existing stores due to the
implementation of the Company's "Used Car Auto Factory."
Service, parts and other revenues. Service, parts and other revenues
includes revenue from the sale of parts, accessories, maintenance and
repair services, and from fees earned on the sale of vehicle financing
notes and warranty service contracts. Finance fees are received for notes
sold to finance companies for customer vehicle financing. Warranty service
contract fees are earned on extended warranty service contracts that are
sold on
11
<PAGE>
behalf of vehicle manufacturers or insurance companies. Service,
parts and other revenue increased 80.6% or $12.5 million, from $15.5
million for the three months ended June 30, 1997 to $28.0 million for the
comparable period in 1998, primarily due to dealerships acquired subsequent
to June 1997.
GROSS PROFIT. Gross profit increased by $15.3 million, or 112.3%, to $28.9
million for the three months ended June 30, 1998 versus the comparable period in
1997. Gross profit margins on new vehicles increased from 6.9% to 8.1%,
primarily due to a higher percentage of luxury vehicle sales. Gross profit
margins on used vehicle retail sales increased from 7.8% to 10.1% for the three
months ended June 30, 1997 and 1998, respectively, primarily due to a higher
percentage of luxury vehicle sales and the Company's emphasis on purchasing for
resale high demand used vehicles through its "Used Car Auto Factory". Service,
parts and other gross profit increased from 44.4% to 46.0% for the three months
ended June 30, 1997 and 1998, respectively, primarily due to higher margins at
dealerships acquired since June 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased 93.5%, or $11.5 million, from $12.3 million to
$23.8 million for the three months ended June 30, 1997 and 1998, respectively.
As a percentage of sales, selling, general and administrative expense increased
from 12.9% to 13.3% for the three months ended June 30, 1997 and 1998,
respectively. The increase was due primarily to expenses incurred for the
establishment of a management structure for executing the Company's acquisition
strategy.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased $0.4
million, from $0.2 million to $0.6 million for the three months ended June 30,
1997 and 1998, respectively, primarily due to additional depreciation and
goodwill amortization related to dealerships acquired since June 1997.
COMBINATION AND RELATED EXPENSES. During the three months ended June 30, 1997,
the Company incurred $1.6 million in certain legal, accounting, consulting and
compensation expenses associated with the combination with the Price Dealerships
and the development of the Company's organization and business plan. The
expenses relating to the Combination were incurred during both the three and six
months ended June 30, 1997. There were no comparable expenses incurred in the
three months ended June 30, 1998.
INTEREST EXPENSE. Floor plan interest expense increased $0.7 million to $1.5
million for the three months ended June 30, 1998 versus the comparable period in
1997. The increase was due to increased floor plan debt in 1998 from the
inventory associated with the acquired dealerships. Interest expense other than
floor plan increased $1.1 million from $0.1 million to $1.2 million for the
three months ended June 30, 1997 and 1998, respectively, primarily due to debt
incurred for the acquisition of additional dealerships.
INCOME TAX EXPENSE. Income tax expense increased to $0.8 million from a tax
benefit of $1.3 million for the three months ended June 30, 1998 versus the
comparable period in the previous year. The Company's effective tax rate for
the first three months of 1998 was 43.0% compared to 87.5% for 1997; the higher
effective rate in the prior year is primarily due to certain non-deductible
stock compensation expenses incurred in 1997.
NET INCOME. Net income increased from a $0.2 million loss to a $1.1 million
profit for the three months ended June 30, 1997 and 1998, respectively,
primarily as a result of the overall increase in gross profit and other items
discussed above, and the non-recurrence in 1998 of $1.6 million in Combination
related expenses offset by the increase in income tax expense.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Sales. Sales increased by $153.6 million, or 80.8%, to $343.7 million for the
six months ended June 30, 1998 from $190.1 million for the comparable period of
1997, primarily due to sales contributed by dealerships that the Company has
acquired since June 1997. The Company expects sales growth to continue as the
Company executes its acquisition strategy.
New Vehicles. The Company sold 8,777 and 5,590 new vehicles in the six
months ended June 30, 1998 and 1997, respectively, generating revenues of
$199.6 million and $114.6 million, which constituted 58.1% and 60.3% of the
Company's total sales, respectively. New vehicle sales increased by $85.0
million, or 74.2%,
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primarily due to an increase in unit sales attributable to dealerships
acquired by the Company as well as increases in average unit prices which
were consistent with manufacturers' price increases.
Used Vehicles. The Company sold 8,096 and 3,834 retail and wholesale used
vehicles in the six months ended June 30, 1998 and 1997, respectively,
generating revenues of $92.1 million and $45.9 million, which constituted
26.8% and 24.1% of the Company's total sales, respectively. The $46.2
million or 100.7% increase in used vehicle revenues is primarily due to a
corresponding increase in used vehicle unit sales from dealerships acquired
subsequent to June 1997.
Service, parts and other. Service, parts and other revenue increased 75.9%
or $22.4 million, from $29.5 million for the first six months of 1997 to
$51.9 million for the comparable period in 1998, primarily due to
dealerships acquired since June 1997.
GROSS PROFIT. Gross profit increased by $27.3 million, or 105.0%, to $53.3
million for the six months ended June 30, 1998 compared to the same period in
1997. Dealerships acquired since June 1997, contributed $22.8 million to the
increase in gross profit, $2.6 million was contributed by the Used Car Auto
Factory and Dealer Services groups in 1998, both concepts started by the Company
in late 1997 and the remainder was primarily due to higher average gross margins
at dealerships owned during both six month periods ended June 30, 1998 and 1997.
Gross profit margins on new vehicles increased from 6.8% to 7.7%, primarily due
to a higher percentage of luxury vehicle sales. Gross profit margins on used
vehicle retail sales increased from 7.2% to 9.8% for the six months ended June
30, 1998 compared to the same period in 1997, primarily due to higher
percentages of luxury vehicle sales as well as the Company's emphasis on
acquiring for resale high demand used vehicles through its "Used Car Auto
Factory". Service, parts and other gross profit increased from 52.6% to 57.1%
for the first six months of 1997 and 1998, respectively, primarily due to higher
margins at dealerships acquired since June 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. During the six months ended June
30, 1998, selling, general and administrative expense increased $21.5 million,
or 94.3%, to $44.4 million, from $22.9 million in the same period in 1997.
Selling, general and administrative expense as a percent of sales increased to
12.9% from 12.0% in the six months ended June 30, 1998 compared to the same
period in the prior year. The increase was due primarily to expenses incurred
for the establishment of a management structure for executing the Company's
acquisition strategy.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased $0.6
million, from $0.3 million to $0.9 million for the six months ended June 30,
1997 and 1998, respectively, primarily due to additional depreciation and
goodwill amortization related to dealerships acquired.
COMBINATION AND RELATED EXPENSES. During the six months ended June 30, 1997,
the Company incurred $2.3 million in certain legal, accounting, consulting and
compensation expenses associated with the combination with the Price Dealerships
and the development of the Company's organization and business plan. The
expenses relating to the Combination were incurred during the six months ended
June 30, 1997. There were no comparable expenses incurred in the six months
ended June 30, 1998.
INTEREST EXPENSE. Floor plan interest expense increased $1.1 million or 66.8%
to $2.7 million for the six months ended June 30, 1998 versus the comparable
period in 1997. The increase was due to increased floor plan debt in 1998 from
the inventory associated with the acquired dealerships. Interest expense other
than floor plan increased $1.9 million due to debt incurred for the acquisition
of dealerships.
INCOME TAX EXPENSE. The income tax benefit of $1.0 million for the first six
months of 1997 versus the $1.4 million expense for the comparable period in 1998
represents a $2.4 million increase. The income tax benefit in the six months
ended June 30, 1997 was due to the loss before income taxes of $1.2 million,
which was incurred due to combination and related expenses of $2.3 million
incurred during the period. The Company's effective tax rate for the first six
months of 1998 was 43.0% compared to 87.5% for 1997; the higher effective rate
in 1997 was primarily due to certain non-deductible stock compensation expenses
incurred in 1997.
NET INCOME. Net income increased from a $0.1 million loss to a $1.8 million
profit for the six months ended June 30, 1997 and 1998, respectively, primarily
as a result of the overall increase in gross profit and other items discussed
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<PAGE>
above, and the non-recurrence in 1998 of $2.3 million in Combination-related
expenses, offset by increased income tax expense.
LIQUIDITY AND CAPITAL RESOURCES
The cash and liquidity requirements of the Company are primarily to finance
acquisitions of new automobile dealerships, service debt and fund working
capital. Historically the Company has relied primarily upon cash flows from
operations, floor plan financing, and other borrowings under its various credit
facilities to finance its operations and the proceeds from its private debt
placement with finance companies to finance its expansion. The availability of
the Company to draw on the floor plan notes payable, Revolver Advances, and
Discretionary advances for the purpose of acquiring automobile dealerships, is
limited by the amount of vehicle and parts inventory of the acquired dealership.
The Company also has $12.0 million available under its senior notes facility to
finance acquisitions. In order to continue to execute the Company's acquisition
strategy, the Company will need to obtain additional financing or capital. The
Company is currently evaluating proposals from several investment banking groups
to assist the Company in raising the additional financing or capital necessary
to finance the Company's planned acquisition strategy.
For the six months ended June 30, 1998, operating activities resulted in net
cash used in operations of $0.1 million, primarily due to net income of $1.8
million, an increase in accounts receivable and contracts in transit of $8.8
million and increase in inventories of $8.1 million, partially offset by
increases in floor plan notes payable, accounts payable and accrued liabilities
of $16.1 million. For the six months ended June 30, 1997, cash used in
operations totaled $1.5 million, primarily due to increases in inventories of
$4.9 million, increases in accounts receivable and contracts in transit of $1.1
million, and decreases in floor plan notes payable of $2.5 million, partially
offset by increases in accounts payable and accrued liabilities of $7.0 million.
Net cash used in investing activities totaled $18.2 million and $6.3 million for
the six months ended June 30, 1998 and 1997, respectively. Investing activities
for the six months ended June 30, 1998 consisted of the acquisition of the
Burgess British Cars, Inc. and Beverly Hills BMW automobile dealerships for a
purchase price totaling $15.5 million, and $2.7 million in capital expenditures
primarily for the build out and renovation of the Company's multi-brand service
and repair center in San Francisco, as well as the improvement of existing
facilities. For the six months ended June 30, 1997, net cash used in investing
activities was $6.3 million, of which $6.1 million was used for the acquisition
of three automobile dealerships in San Diego County and $0.2 million for
improvement of equipment.
Cash provided by financing activities in the six months ended June 30, 1998
totaled $17.6 million, which primarily consisted of borrowings on secured lines
of credit and notes payable which were used to finance acquisitions. Net
financing activities for the six months ended June 30, 1997 totaled $7.6
million, which was primarily used to finance acquisitions.
YEAR 2000 CONVERSION
The Company has assessed the ability of its software and other computer systems
to properly utilize dates beyond December 31, 1999 (the "Year 2000 Conversion").
Management believes that the costs of the modifications and conversions required
will not be material.
Although management believes it will not have material Year 2000 Conversion
issues, its future operations are dependent upon the ability of its vehicle
manufacturers, vendors and suppliers to successfully address the Year 2000
Conversion issue. There can be no assurance that the computer systems of other
companies upon which the Company's own computer system relies or upon which its
business is dependent, will be timely converted, or that failure of another
company to convert will not adversely affect the Company.
SEASONALITY AND QUARTERLY FLUCTUATIONS
Historically, the Company's sales have been lower in the first and fourth
quarters of each calendar year largely due to consumer purchasing patterns
during the holiday season, inclement weather during the winter months, and the
reduced number of business days during the holiday season. As a result,
financial performance for the Company is generally lower during the first and
fourth quarters than during the other quarters of each calendar year.
Management believes that interest rates, variations in automobile manufacturers
incentive plans, levels of consumer debt, consumer buying patterns and
confidence, as well as general economic conditions also contribute to
fluctuations in sales and operating results. The timing of acquisitions may also
cause substantial fluctuations of operating results from quarter to quarter.
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<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No disclosure is required by Registrant.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits filed as a part of this report are listed below.
Exhibit No.
-----------
2.1 Asset Purchase Agreement by and among the Company, Beverly Hills
BW, Ltd., and Ross Gilbert.
2.2 Asset Purchase Agreement by and among the Company, Golden Sierra
Auto Group and Capman.
3.1(1) Amended and Restated Certificate of Incorporation, as amended.
3.2(2) By-Laws
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
(1) Incorporated by reference to Exhibit 3.1 to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, filed on May 14,
1998.
(2) Incorporated by refence to Exhibit 3.2 to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, filed on May 14,
1998.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K under Item 2., Acquisition or
Disposition of Assets, dated June 19, 1998 and filed with the Securities and
Exchange Commission on July 2, 1998.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 14, 1998 FIRSTAMERICA AUTOMOTIVE, INC.
By /s/ THOMAS A. PRICE
-------------------
Thomas A. Price
President, Chief Executive
Officer and Director
(Principal Executive Officer)
By /s/ DEBRA SMITHART
-------------------
Debra Smithart
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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<PAGE>
ASSET PURCHASE AGREEMENT
By and Between
FIRSTAMERICA AUTOMOTIVE, INC.
("Purchaser")
and
BEVERLY HILLS BW, LTD., DBA BEVERLY HILLS BMW
("Seller")
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made and entered effective January ___ ,
1998 (the "Effective Date") by and among FirstAmerica Automotive, Inc., a
Delaware corporation or nominee ("Purchaser"), Beverly Hills BW, Ltd., a
California general partnership, dba Beverly Hills BMW ("Seller"), and Ross
Gilbert ("Owner ").
RECITALS
WHEREAS, Seller owns and operates a BMW automobile dealership (the
"Dealership") commonly known as Beverly Hills BMW, located at 8825 and 8833
Wilshire Boulevard, Beverly Hills, California 90211 (collectively, the
"Premises").
WHEREAS, Owner owns indirectly all of the outstanding partnership interest
of Seller.
WHEREAS, Seller desires to sell to Purchaser and Purchaser desires to
purchase from Seller certain of the assets, properties and business of Seller
utilized in connection with the Dealership.
Now, THEREFORE, in recognition of the foregoing representations, and in
consideration of the covenants set forth herein, the parties hereto agree as
follows:
AGREEMENT
1. DEFINITIONS. The capitalized terms as used in this Agreement shall be
defined as hereinafter set forth in this Section 1, or as otherwise provided in
this Agreement.
1.1 ACQUIRED ASSETS. The term "Acquired Assets" shall be defined
as all of the assets and property to be acquired by Purchaser hereunder, as
described in Section 2.1 hereof.
1.2 CLOSING. The term "Closing" shall be defined as the
consummation of all of the transactions provided for in this Agreement,
including the exchange of the Acquired Assets for the consideration provided for
herein. The Closing shall occur at the offices of Escrow Holder, 4270 Wilshire
Boulevard, Los Angeles, California, 90010 on the Closing Date commencing at
10:00 a.m.
1.3 CLOSING DATE. The "Closing Date" shall be defined as the date
which falls 5 business days following the earliest date on which the conditions
specified in Sections 7 and 8 hereof are satisfied; subject, however, to the
provisions of Section 18 below.
1.4 FRANCHISE. The term "Franchise" shall be defined as the BMW
Franchise currently held by Seller.
1.5 FRANCHISOR. The term "Franchisor" shall be defined as BMW North
America.
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<PAGE>
1.6 OBSOLETE PARTS. The term "Obsolete Parts" shall be defined as
all (i) factory parts which are not listed in the most current manufacturer's
wholesale price book or, if listed therein, are valued at ZERO DOLLARS ($0),
(ii) parts which are not returnable to the manufacturer (as defined by the
Franchisor), (iii) parts indicated as discontinued, and (iv) parts which are
broken or damaged, regardless of whether listed in the most current
manufacturer's wholesale price book.
2. PURCHASE AND SALE OF ASSETS.
2.1 ACQUIRED ASSETS. The assets subject to this Agreement (the
"Acquired Assets") shall consist of all the assets used in connection with the
Franchise, including but not limited to those assets to be listed on Schedule
2.1 to be prepared prior to the Closing Date and attached hereto, all BMW
special tools and all furniture, fixtures and equipment (which special tools,
furniture, fixtures and equipment shall be in good working order, normal wear
and tear excepted, as of the Closing Date), all leasehold improvements at the
Premises used by Seller in operation of the BMW Franchise, all motor vehicles
(new and used) (subject to exclusion of certain used vehicles in accordance with
Section 3.2(c)), parts and accessories (subject to exclusion of Obsolete Parts
in accordance with Section 3.2(d) and excess non-factory parts in accordance
with Section 3.2(e)), tires, work-in-progress, advertising literature, forms,
supplies, customer files and data bases, parts return privileges from the
Franchisor, rights under new car purchase orders and deposits relating thereto,
goodwill, Seller's customer files, all books and records relating to the
Acquired Assets, all telephone numbers of Seller, the tradename "Beverly Hills
BMW", or any derivative thereof, and all trademarks and/or logos related
thereto, the right of occupancy of the Premises, and all contracts, agreements
or commitments which have been approved by Purchaser as the same shall exist on
the Closing Date. The parties agree that Schedule 2.1 shall be prepared in
conjunction with the physical inventory described in Section 3.2(i) hereinbelow.
2.2 PURCHASE. Seller hereby agrees to sell, convey, transfer,
assign and deliver to Purchaser, and Purchaser hereby agrees to purchase and
acquire, on the Closing Date, all of the Acquired Assets.
3. CONSIDERATION FOR ACQUIRED ASSETS.
3.1 PURCHASE PRICE. Subject to the terms and conditions of this
Agreement, the purchase price to be paid by Purchaser for the Acquired Assets
shall be that amount which is equal to the aggregate value of the Acquired
Assets as of the Closing Date determined in accordance with Section 3.2.
3.2 VALUATION OF ACQUIRED ASSETS. Those Acquired Assets which are
listed below shall be valued as provided below in this Section 3:2.
(a) The price for each 1998 new unregistered and undamaged BMW
model vehicle with not more than three hundred (300) miles shall be the sum of
the following:
(i) The wholesale cost of each such vehicle determined
in accordance with the factory invoice, including advertising charges; plus
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<PAGE>
(ii) The wholesale cost of all optional parts and
accessories installed in such vehicle plus the cost of labor (determined at the
internal rate pursuant to the standard factory formula) for installation of the
same; plus
(iii) The cost of pre-delivery expense actually performed
related to specific automobiles transferred at closing, but only to the extent
that such pre-delivery expense is not previously reimbursed to Seller, in which
event the right to such expense reimbursement shall be assigned to Purchaser at
the closing; less
(iv) The sum of all distributor's allowances as of the
Closing Date including, but not limited to, inventory carry-over allowances,
discounts, floor plan assistance, holdbacks, rebates, contests, model changes,
incentives and similar distributor's allowances related to such vehicle to the
extent paid or payable to Seller.
(b) The price for each 1998 unregistered and undamaged BMW
demonstrator vehicle with not more than three thousand (3,000) miles shall be
the value determined in accordance with subsections (a)(i) through (a)(iii)
hereinabove, less the curtailment on each such vehicles as currently taken on
the books of Seller as of the Closing Date.
(c) All vehicles not described in subsections (a) and (b)
above which are to be purchased hereunder shall be valued at a price mutually
agreed upon by Seller and Purchaser; provided, however, that if Seller and
Purchaser are unable to agree on a price with respect to any individual vehicle
prior to the Closing Date, then such vehicle shall be excluded from the Acquired
Assets and not purchased hereunder and shall be removed by Seller within ten
(10) days of the Close of Escrow.
(d) All new undamaged returnable genuine BMW factory parts and
accessories which are in possession of Seller as of the Closing Date and which
are listed in the manufacturer's most current wholesale parts and accessories
price book shall be valued at manufacturer's current wholesale cost in
accordance with the manufacturer's most current wholesale parts and accessories
price book as of the Closing Date; provided, however, that Obsolete Parts shall
be valued at ZERO DOLLARS ($0) and shall be retained by Seller, and removed by
Seller from the Premises not later than ten (10) days following the Closing
Date.
(e) All non-factory parts, accessories and miscellaneous
inventory which are in the possession of Seller as of the Closing Date, shall be
valued at dealer cost, provided, however, that Purchaser shall have no
obligation to purchase in excess of TWENTY THOUSAND DOLLARS ($20,000) of such
items.
(f) All miscellaneous inventories, including gas, oil, grease,
sublet repairs and work in process shall be valued at cost as of the Closing
Date.
(g) All furniture, fixtures, equipment, and BMW special tools
shall be valued at Seller's depreciated book value as of the Closing; provided,
however, that in the event that any item of furniture, fixtures, equipment,
special tools or leasehold improvement is materially damaged, destroyed or
removed from the Dealership between the date of execution of this Agreement and
the Closing Date, the value of said item damaged, destroyed or removed from the
Dealership shall be credited against the Purchase Price if said items are
included in the Purchase Price. The parties acknowledge and agree that
3
<PAGE>
there shall be no addition to the purchase price for leasehold improvements.
(h) The sum of ten million two hundred and fifty thousand
dollars ($10,250,000) which sum shall be allocated as and for goodwill.
(i) As of the close of business on the day immediately
preceding the Closing Date or on such other date as mutually agreed upon by
Purchaser and Seller, a physical inventory to determine the value of the new,
used and demonstrator vehicles, and work-in-progress shall be taken jointly by
the parties. Each party shall bear the expenses associated with its own
personnel in connection with the valuation of the assets. The parties shall
jointly employ an independent inventory service to take a pans and accessories
inventory immediately prior to the Closing. The cost of such inventory shall be
paid one-half by Purchaser and one-half by Seller.
3.3 PAYMENT OF PURCHASE PRICE. The purchase price determined in
accordance with Section 3.2 above to be paid by Purchaser pursuant to this
Agreement shall be paid as follows:
(a) Within three (3) business days of execution of this
Agreement by Purchaser and Seller, Purchaser shall cause the sum of FIVE HUNDRED
THOUSAND DOLLARS ($500,000) (the "Deposit") to be delivered to Escrow Holder as
hereinafter defined. The Deposit shall be held by the Escrow Holder in an
interest bearing account, and shall be applied to the benefit of Purchaser
toward the purchase price of the Dealership upon Closing. If escrow does not
close, and this Agreement is terminated pursuant to Section 18, the Deposit,
together with all accrued interest, shall be disbursed to Purchaser, unless the
provisions of Section 22.9 are applicable, in which case the disposition of the
Deposit shall be governed by the provisions of Section 22.9.
(b) The balance of the purchase price shall be paid in cash on
the Closing Date.
3.4 CLOSING AND POST-CLOSING ADJUSTMENTS. All deposits and expenses
of a nature which are customarily subject to proration in a transaction
involving the purchase and sate of assets of an ongoing business shall be
apportioned between Seller and Purchaser according to the number of days in the
period covered thereby which occurred prior to and including the Closing Date,
and the number of such days subsequent to the Closing Date. Those items subject
to proration hereunder shall include, without limitation, rent and all other
amounts payable with respect to any lease for the Premises, employee
compensation, utilities, personal property taxes, Beverly Hills Gross Receipts
Tax, and customer prepayments. The aggregate amount of any adjustment shall be
determined and paid as of the Closing Date. Any additional proration determined
after the Closing Date to be paid by either party under this Section 3.4 shall
be paid by check delivered within seven (7) days following determination of the
amount of any such adjustment.
3.5 LIABILITIES. Purchaser shall have no obligation for any
liabilities of any kind whatsoever of Seller other than those liabilities which
Purchaser specifically agrees to assume all of which shall be set forth on
Schedule 3.5 attached hereto, including without limitation all contracts,
agreements and commitments of Seller, which Purchaser agrees to assume.
Purchaser shall be responsible solely for that portion of any such obligations,
which first accrue on or subsequent to the Closing Date. Purchaser shall have no
obligation with respect to any liability arising under any such contract,
agreement or
4
<PAGE>
commitment prior to the Closing Date, all of which liability shall remain the
responsibility of Seller. The parties acknowledge and agree that Purchaser is
not assuming any employment agreements, labor agreements, collective bargaining
agreements or other similar contracts.
3.6 TRANSFER TAXES. Purchaser agrees to pay any and all sales,
transfer or other similar taxes which may be imposed or payable on or in
connection with the transfer of the Acquired Assets.
3.7 ALLOCATION OF PURCHASE PRICE. The Purchase Price as provided
for herein shall be allocated as set forth on Schedule 3.7 attached hereto.
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND OWNER. Seller and Owner
hereby jointly and severally represent, warrant and agree with Purchaser as
follows:
4.1 GOOD STANDING. Seller is a partnership duly organized, validly
existing and in good standing under the laws of the State of California and is
entitled to and has the power and authority to own or lease its property and to
carry on its business in the manner and in the places where such property are
now owned, leased or operated and such business is now conducted.
4.2 TITLE TO ASSETS; LIENS AND ENCUMBRANCES. Seller will convey to
Purchaser good and marketable title to the Acquired Assets, free and clear of
all security interests, liens, claims, restrictions, equities and encumbrances
whatsoever, other than liens for taxes not yet due and payable as set forth on
Schedule 4.2 attached hereto. Except as set forth in Schedule 4.2, all of the
tangible Acquired Assets are in good working order and condition, ordinary wear
and tear excepted.
4.3 AUTHORIZATION. The execution and delivery of this Agreement and
each other document, agreement and instrument contemplated hereby, and the
consummation of the transactions contemplated hereby has been duly authorized
and all other action, including all approvals necessary to authorize the
execution and delivery of this Agreement and each other document, agreement and
instrument contemplated hereby, and the consummation of the transactions
contemplated hereby, have also been taken. Except for consent of the Franchisors
and landlords with leases, no consent of any lender, trustee, security holder,
lessor or any other person or entity is required to be obtained by Seller in
connection with the execution, delivery and performance of this Agreement by
Seller and the consummation of the transactions contemplated hereby. This
Agreement constitutes the valid and binding obligation of Seller and Owner
enforceable in accordance with its terms, except as may be limited as applicable
bankruptcy law and equity. Except as to the terms of the Franchise, the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby (a) do not violate or constitute a breach
of or default under any contract, agreement or commitment to which Seller or
Owner is a party, under which they are obligated or to which any of the Acquired
Assets are subject, (b) do not violate any judgment, order, statute, rule or
regulation to which Seller, Owner or any of the Acquired Assets are subject or
the articles of incorporation or bylaws of the Seller, and (c) will not result
in the creation of any lien, charge or encumbrance on any of the Acquired
Assets.
4.4 REPRESENTATIONS AND WARRANTIES ON CLOSING DATE. The
representations and warranties of Seller and Owner contained in this Agreement
shall be true and correct in all material
5
<PAGE>
respects on and as of the Closing Date with the same force and effect as though
such representations and warranties have been made on and as of the Closing
Date.
4.5 LITIGATION. Except as set forth on Schedule 4.5 attached
hereto, Seller has not received service of process for, and to Seller's actual
knowledge there is no pending or threatened suit, action, arbitration, or legal,
administrative, or other proceeding, or governmental investigation against or
affecting any of the Acquired Assets. To the actual knowledge of Seller and
Owner, Seller is not in default with respect to any order, writ, injunction, or
decree of any federal, state, or local court. Subject to Franchisor's rights, to
the best knowledge of Seller, use of the name "Beverly Hills BMW" by Seller does
not infringe upon the rights of any other person and Seller is not aware of any
claim of any nature to the effect that any person other than Seller holds any
rights with respect to such names.
4.6 DEFAULTS. Seller is not in material default, and to the best of
Seller's actual knowledge, no event has occurred which, with the passage of time
will constitute a default, with respect to any obligation or liability to be
assumed by Purchaser hereunder, which are listed on Schedule 3.5 attached
hereto. To the best knowledge of Seller, no other party to any obligation or
liability set forth in Schedule 3.5 is in default with respect to any material
provision thereof.
4.7 ENVIRONMENTAL COMPLIANCE NOTICES. Except as set forth on
Schedule 4.7 Seller has received no written notice advising Seller of any
defects, defaults or non-compliance in connection with the Acquired Assets or
the Premises from any governmental agency dealing with environmental laws,
except notices which have been previously complied with or waived by the
governmental agency.
4.8 COMPLIANCE WITH LAW. To the actual knowledge of Seller, Seller
has complied with, and is not in violation of, applicable federal, state or
local statutes, laws or regulations the violation of which would have a material
adverse effect on the continuing operation of the Dealership.
4.9 FINANCIAL REPORTS. Seller has delivered to Purchaser dealer
financial statements for Seller for the calendar years 1996 and 1997 ("Dealer
Financial Statement"). The income and expenses reflected in the Dealer Financial
Statement have been prepared in accordance with past practices of Seller and are
true and correct in all material respects. Purchaser acknowledges that it has
examined and reviewed the Dealer Financial Statements to its full and complete
satisfaction and represents that it is relying on the results of its own review
and examination thereof in connection to the transaction to be consummated
hereunder.
4.10 UNIONS. Except as set forth on Schedule 4.10 as attached
hereto, Seller is not a party to any arrangement with any union, and no
employees of the Seller are represented by any labor union or covered by any
collective bargaining agreement or, to the knowledge of Seller, is any effort to
establish such representation in progress.
4.11 FRANCHISE NOTICE. Seller and Owner have received no written
notice from Franchisor regarding a proposed appointment of a new BMW Dealership
within a ten (10) mile radius of the Dealership. Further, Seller and Owner have
received no written notice from Franchisor regarding any material adverse action
by Franchisor material to the continuing operation of the Dealership including
any
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adverse change in the allocation of new BMW automobiles.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents,
warrants and agrees with Seller and Owner as follows:
5.1 GOOD STANDING. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is entitled to and has the corporate power and authority to own or lease its
property and to carry on its business in the manner and in the places where such
property are now owned, leased or operated and such business is now conducted.
5.2 AUTHORIZATION. The execution and delivery of this Agreement and
the consummation of transactions contemplated hereby has been duly authorized by
the Board of Directors of the Purchaser and all other corporate action,
including all shareholders' approvals necessary to authorize the execution and
delivery of this Agreement and the transactions contemplated hereby, have also
been taken. This Agreement is a valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms. Except for consent
of the Franchisors, landlords under leases, no consent of any trustee, security
holder or any other person or entity is required to be obtained by Purchaser in
connection with the execution, delivery and performance of this Agreement by
Purchaser and the consummation of the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby (a) do not violate or constitute a breach
of or default under any contract, agreement or commitment to which Purchaser is
a party or under which it is obligated, and (b) do not violate any judgment,
order, statute, rule or regulation to which Purchaser is subject.
5.3 REPRESENTATIONS AND WARRANTIES ON CLOSING DATE. The
representations and warranties of Purchaser contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date.
6. CONDUCT PRIOR TO CLOSING DATE.
6.1 ONGOING OPERATIONS. From the date hereof to the Closing, Seller
will use its best effort to preserve intact the Acquired Assets and to continue
to operate the Dealership as a going concern, including, but not limited to,
maintaining commercially reasonable inventories. Seller will not dispose of any
of the Acquired Assets except in the ordinary course of business consistent with
past practices, and will not, without limiting the foregoing, hold a "going-out-
of-business" or "liquidation" sale.
6.2 APPROVALS. Each of Purchaser and Seller will use its best
efforts to obtain all permits, approvals, authorizations and consents of third
parties necessary or desirable for the consummation of the transactions
contemplated by this Agreement and for the ownership and operation by Purchaser
of the Acquired Assets and the Dealership related thereto. Purchaser and Seller
shall proceed as promptly as practicable after the date hereof to prepare all
materials necessary to obtain the consent of the Franchisors as is necessary for
Purchaser to acquire the Acquired Assets and for consummation of the
transactions contemplated hereby.
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6.3 COVENANT TO COMPLY. Each of Seller, Owner, and Purchaser shall
not take any action or fail to take any action which will make any of their
representations and warranties not true and correct in all material respects on
the Closing Date. Each of Seller, Owner, and Purchaser shall use their best
efforts to satisfy or cause to be satisfied all of the conditions precedent to
the other parties' obligations hereunder. Each party shall give prompt written
notice of any material change in any of the information contained in the
representations and warranties made in Sections 4 and 5 hereof or the schedules
referred to herein which occur prior to the Closing Date; provided, however,
except as otherwise provided in Sections 4 and 5, that any change in the
information contained in the representations and warranties or schedules will
not relieve the other party of any obligations hereunder if such changes result
in a breach of the representations and warranties contained herein.
7. CONDITIONS TO PURCHASER'S OBLIGATIONS TO CLOSE. The obligations of
Purchaser under this Agreement are subject to fulfillment of the conditions set
forth below. Purchaser shall have the right to waive in writing all or part of
any one or more of the following conditions without releasing Seller or Owner
from any liability for any loss or damage sustained by Purchaser by reason of
the breach by Seller or Owner of any covenant, obligation or agreement contained
herein, or by reason of any misrepresentation made by Seller or Owner and upon
such waiver may proceed with the transactions contemplated by this Agreement.
7.1 AGREEMENTS AND CONDITIONS. On or before the Closing Date,
Seller and Owner shall have complied with and duly performed in all material
respects all agreements and conditions on their part to be complied with and
performed pursuant to or in connection with this Agreement on or before the
Closing Date.
7.2 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller and Owner contained in this Agreement, or otherwise made in
writing in connection with the transactions contemplated hereby, shall be true
and correct in all material respects on and as of the Closing Date with the same
force and effect as though such representations and warranties had been made on
and as of the Closing Date and Purchaser shall have received a certificate to
that effect dated the Closing Date and executed by the President of the General
Partner of Seller.
7.3 NO LEGAL PROCEEDINGS. No action or proceeding shall have been
instituted against Owner and/or Seller which has not been dismissed or
threatened to restrain or prohibit the acquisition by Purchaser or the
conveyance by Seller of the Acquired Assets.
7.4 CONSENTS. Purchaser shall have received the written approval of
Franchisor designating Purchaser or its designee as a duly authorized dealer for
the sales and service of such Franchisor's automobiles at 8825 and 8833 Wilshire
Boulevard, Beverly Hills, California 90211, free of any material condition which
is materially adverse to Purchaser and such Franchisor shall have entered into a
customary Dealer Sales and Service Agreement. All permits and licenses necessary
to enable Purchaser to conduct the Franchise and service facility at the
Premises shall have been obtained. All other requisite consents and approvals
shall have been obtained.
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7.5 TAX CLEARANCE. Seller shall have furnished to Purchaser,
certificates from all appropriate federal, state, county and local authorities
that all taxes and contributions payable by Seller have been paid in full. If
all appropriate tax certificates are not available on the Closing Date, Escrow
Holder shall withhold in escrow the estimated amount of maximum unpaid tax
liability reasonably determined by Purchaser which sum shall be held by
Purchaser until such time as all certificates are presented.
7.6 LIST OF EMPLOYEES. Seller shall have furnished to Purchaser a
list of all employees, their rates of pay, including, separately, base pay, and
incentive and commission plans. Seller shall have terminated all employees as of
the Closing Date. In addition thereto, Seller shall have complied with any and
all obligation of Seller under any collective union agreements and/or collective
bargaining agreements.
7.7 BULK SALE. Seller shall have furnished in a timely manner all
affidavits and lists of creditors and such other instruments or documents as
Escrow Holder shall require for Seller and Purchaser to comply with all
applicable bulk sales laws.
7.8 LEASE OF REAL PROPERTY. Seller shall have assigned to Purchaser
the right to occupy the Premises commonly known as 8825 Wilshire Boulevard,
Beverly Hills, California 90211, 8833 Wilshire Boulevard, Beverly Hills,
California 90211 and the Storage Lot located at Robertson and Wilshire
Boulevard, Beverly Hills, California 90211 (collectively referred to as
"Dealership Properties"). Such leases for the Dealership Properties shall be in
form and substance as set forth in Section 11 herein below.
8. CONDITIONS OF SELLER'S OBLIGATIONS TO CLOSE. The obligations of Seller
under this Agreement are subject to fulfillment of the conditions set forth
below. Seller shall have the right to waive in writing all or part of any one or
more of the following conditions without, however, releasing Purchaser from any
liability for any loss or damage sustained by Seller by reason of the breach by
Purchaser of any covenant, obligation or agreement contained herein, or by
reason of any misrepresentation made by Purchaser and upon such waiver may
proceed with the transactions contemplated by this Agreement.
8.1 AGREEMENTS AND CONDITIONS. On or before the Closing Date,
Purchaser shall have complied with and duly performed in all material respects
all of the agreements and conditions on its part required to be complied with or
performed pursuant to this Agreement on or before the Closing Date.
8.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. The
representations and warranties of Purchaser contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date and Seller shall have received a certificate
to that effect dated the Closing Date and executed by the President or a Vice
President of Purchaser.
8.3 LEASE OF REAL PROPERTY. Seller shall have assigned to Purchaser
the right to occupy the Dealership Properties. Such leases for the Dealership
Properties shall be in form and substance as set forth in Section 11 herein
below.
8.4 NO LEGAL PROCEEDINGS. No action or proceeding shall have been
instituted or threatened against Purchaser to restrain or prohibit the
acquisition by Purchaser or the conveyance by
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Seller of the Acquired Assets.
9. DELIVERIES OF SELLER ON THE CLOSING DATE. Seller agrees on the Closing
Date to deliver to Purchaser:
9.1 TITLE TO ACQUIRED ASSETS. All conveyances, covenants,
warranties, deeds, assignments, bills of sale, motor vehicle titles,
confirmations, powers of attorney, approvals, consents and any and all further
instruments as may be reasonably necessary, expedient or proper in order to
complete any and all conveyances, transfers and assignments herein provided for
and to convey to Purchaser such title to the Acquired Assets as Seller is
obligated hereunder to convey.
9.2 CERTIFICATE OF SECRETARY. Certificate of the Secretary of the
Seller setting forth a copy of the resolutions adopted by Seller's Board of
Directors and shareholders authorizing and approving the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby.
9.3 CERTIFICATE. Certificate of the President of the General
Partner of Seller referred to in Section 7.2.
9.4 CONSENTS. All consents, approvals, authorizations or orders of
any person or entity or court or governmental agency required or necessary for
the consummation of the transactions contemplated hereby, provided that Seller
shall not be obligated to deliver the consent of the Franchisor.
10. DELIVERIES OF PURCHASER ON THE CLOSING DATE. Purchaser agrees on the
Closing Date to deliver or cause to be delivered:
10.1 CONSIDERATION. The mounts to be delivered pursuant to Section
3.3 hereof.
10.2 CERTIFICATE OF SECRETARY. Certificate of the Secretary of the
Purchaser setting forth a copy of the resolutions adopted by Purchaser's Board
of Directors and shareholders authorizing and approving the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby.
10.3 CERTIFICATE. The Certificate of the President or a Vice
President of the Purchaser referred to in Section 8.2.
11. LEASES. The parties acknowledge that the Dealership currently operates
at the Dealership Properties. The lease for the property commonly known as 8833
Wilshire Boulevard, Beverly Hills, California shall be modified to provide for a
term of ten (10) years from and after the Closing Date. The rent under such
lease shall be the sum of FIFTY NINE THOUSAND DOLLARS ($59,000) per month for
the first six (6) years. Thereafter, the rent shall increase to SIXTY NINE
THOUSAND DOLLARS ($69,000) per month for the balance of the term. The parties
hereto acknowledge and agree that the lease for the property commonly known as
8825 Wilshire Boulevard, Beverly Hills, California shall provide for a term of
ten (10) years from and after the Closing Date. The rent under such lease shall
be as currently set forth in the existing lease. The rent during the remainder
of the ten (10) year term shall not be in
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excess of the current rent. The parties hereto further acknowledge and agree
that the leases for the properties commonly known as 8825 and 8833 Wilshire
Boulevard, Beverly Hills, California shall be in form and substance reasonably
satisfactory to Purchaser and its counsel. The leases for the Dealership
Properties shall be either direct leases to the Purchaser or assigned to
Purchaser in a form and substance reasonably satisfactory to Purchaser and its
counsel. Such leases shall be attached hereto as Schedule 11 and incorporated
herein by this reference.
12. ESCROW. The parties, upon execution of this Agreement shall open an
escrow with Wilshire Escrow Company 4270 Wilshire Boulevard, Los Angeles,
California 90010, Larry Shuffle, Escrow Officer ("Escrow Holder"). The parties
shall forthwith provide to Escrow Holder any and all documentation necessary for
Escrow Holder to publish such notices as may be required by the bulk sale laws
of the State of California. Any and all costs of such escrow shall be paid one-
half by Purchaser and one-half by Seller.
13. COVENANTS AFTER CLOSING DATE.
13.1 TRANSFER OF ACQUIRED ASSETS. Seller agrees from and after the
Closing Date, upon the request of Purchaser, to do, execute, acknowledge and
deliver, or to cause to be done, executed, acknowledged and delivered, all such
further acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may be required for the assigning, transferring, conveying, and
confirming to Purchaser, or to its successors and assigns, or for the aiding,
assisting, collecting and reducing to possession of, any or all of the Acquired
Assets as provided herein.
13.2 COOPERATION. Seller will cooperate and use its reasonable
efforts to have its officers and employees cooperate with Purchaser at
Purchaser's request, on and after the Closing Date, in furnishing information,
evidence, testimony and other assistance in connection with any actions,
proceedings, arrangements or disputes involving Purchaser and based upon
contracts, arrangements, commitments or acts of Seller which were in effect or
occurred on or prior to the Closing Date. From and after the Closing Date,
Seller will permit Purchaser and its representatives to have access to Seller's
books and records relating to the Acquired Assets for periods prior to the
Closing Date upon notice and during normal business hours. From and after the
Closing Date, Purchaser will permit Seller and its representatives to have
access to Seller's books and retained by Purchaser for the period prior to the
Closing Date upon notice during normal business hours. Seller shall assist
Purchaser after the Closing related to audits required in connection with any
public offering contemplated by Purchaser; provided Seller shall not be required
to expend funds or institute litigation. Purchaser shall keep any information
delivered to Purchaser hereunder confidential; provided, however, Purchaser
shall have the right as required by law to use such final information in
connection with financial reporting or filing of any required documents with the
Securities Exchange Commission or other similar or necessary use.
14. INDEMNIFICATION.
14.1 INDEMNIFICATION BY SELLER AND OWNER. Seller and Owner agree to
defend, indemnify and hold Purchaser harmless from and against any and all
losses, costs, damages, claims and expenses (including reasonable attorneys'
fees) which Purchaser may sustain at any time by reason of (a) any debt,
liability or obligation of Seller and/or Owner which were not assumed by
Purchaser, (b) any
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liability or obligation of any kind relating to the operations of the Acquired
Assets, the Dealership and/or the Premises prior to the Closing Date, (c) the
existence or presence of hazardous materials or toxic substances (as said terms
may be defined by any applicable laws, statutes or ordinances) located at, on,
under or emanating from the Premises related to the prior use of the Premises as
an automobile dealership as of the Closing Date, or (d) the breach or inaccuracy
of, or failure to comply with, any of the warranties, representations, covenants
or agreements of Seller or Owner contained in this Agreement or in any agreement
or document delivered pursuant hereto or in connection herewith or with the
closing of the transactions contemplated hereby.
The parties acknowledge and agree that Purchaser shall have the right to
repair automobiles sold and/or serviced by Seller prior to the Closing Date to
correct any customer complaints associated therewith, and Purchaser shall have
the fight of reimbursement therefore from Seller and/or Owner pursuant to the
terms of this section.
14.2 INDEMNIFICATION BY PURCHASER. Purchaser agrees to indemnify and
hold harmless Seller from and against any and all losses, cost, damages, claims
and expenses (including reasonable attorneys' fees) which Seller may sustain at
any time by reason of (a) any debt, liability or obligation of Purchaser, (b)
any liability or obligation of any kind relating to Purchaser's operation of the
Acquired Assets, the Dealership and/or the Premises after the Closing Date, (c)
the existence or presence of hazardous materials or toxic substances (as said
terms may be defined by any applicable laws, statutes or ordinances) located at,
on, under or emanating from the Premises after the Closing Date, or (d) the
breach or inaccuracy of, or failure to comply with, any of the warranties,
representations, covenants or agreements of Purchaser contained in this
Agreement or in any agreement or document delivered pursuant hereto or in
connection herewith or with the closing of the transactions contemplated hereby.
14.3 DEFENSE. Any party who receives notice of a claim for which it
will seek indemnification shall promptly notify the indemnifying party in
writing of such claim. The indemnifying party shall have the right to assume the
defense of such action at its cost with counsel reasonably satisfactory to the
indemnified party. The indemnified party shall have the right to participate in
such defense with its own counsel at its cost.
14.4 INDEMNIFICATION COSTS. Except for warranty obligations of
Seller pursuant to Section 14.5 below, each party shall not be deemed to have
sustained any costs for which it is entitled to indemnification from the other
party pursuant to this Agreement or any Ancillary Agreement until such time as
the aggregate costs actually incurred by said party exceed TWENTY THOUSAND
DOLLARS ($20,000) in the aggregate, in which event, the responsible party shall
be liable for all costs, including the original TWENTY THOUSAND DOLLARS
($20,000).
14.5 SERVICE/REPAIR WARRANTIES. Notwithstanding any other provision
in this Agreement to the contrary, Seller will be fully liable for and will
indemnify and hold Purchaser harmless from any cost in connection with or
arising out of the Seller's warranty of service or repairs performed or made by
Seller on or prior to the Closing, if and to the extent Seller would have been
liable for such rework had the claim been made prior to the Closing under
Seller's limited service and parts warranty and such cost of repair exceeds ONE
HUNDRED DOLLARS ($100) per automobile, and, provided further, that if the cost
with respect thereto is estimated to be in excess of FIVE HUNDRED DOLLARS
($500), Purchaser
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will provide notice to Seller in writing of such work prior to starting such
work.
14.6 TIME LIMIT OF INDEMNITY. An indemnitee shall not be entitled to
indemnification under this Section 14 unless and to the extent that indemnitee
asserts a claim for indemnification in writing to the indemnitor during the
applicable "Claims Period". "Claims Period" means:
(a) for real or personal title matters, a period extending in
perpetuity;
(b) for environmental matters, a period extending in
perpetuity;
(c) for tax matters, a period ending on the date five (5)
years after the Closing; and
(d) for all other matters not expressly specified in
Subsections (a), (b) and (c) above, a period ending on the date two (2) years
after the Closing Date.
14.7 DISCLAIMER OF WARRANTIES. Except as otherwise provided in this
Agreement, the new vehicles, used vehicles, fixed assets and inventories shall
be sold to Purchaser "As Is" without any warranty whatsoever. Except as
otherwise provided in this Agreement, Owners disclaim all other warranties,
including, without limitation, (a) the value, nature, quality or condition of
these assets, (b) the income to be derived from these assets, (c) the
suitability of these assets for any and all activities and uses which Purchaser
may conduct thereof, (d) the compliance of or by these assets or its operation
with any laws, rules, ordinances or regulations of any applicable governmental
authority or body, (e) the merchantability, marketability, profitability or
fitness for a particular purpose of these assets, (f) the manner, quality, state
of repair or lack of repair of these assets, or (g) any other matter with
respect to these assets, specifically, that Owners have not made, do not make,
and specifically disclaim any representations regarding compliance with any
environmental protection, pollution or land use laws, rules, regulations, orders
or requirements, including solid waste, as defined by the U.S. Environmental
Protection Agency Regulations at 40 C.F.R., Part 261, or the disposal or
existence, in or on the property, or any hazardous substance, as defined by the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, and Regulations promulgated thereunder.
15. SURVIVAL OF REPRESENTATIONS. The parties hereto each agree that all
representations, warranties and agreements contained herein shall survive the
execution and delivery of this Agreement, the closing hereunder and any
investigation made by any party hereto for a period of twenty-four (24) months
following the Closing.
16. NO BROKER. Except for the obligation of Seller to Robertson Stephens &
Co., which obligation shall the sole responsibility of Seller, Purchaser on the
one hand, and Seller and Owner on the other, represent to the other that no
broker or finder has been connected with the transactions contemplated by this
Agreement. In the event of a claim by any broker or finder based upon his
representing or being retained by Seller or Owner on the one hand, or by
Purchaser on the other, Seller, Owner or Purchaser, as the case may be, agrees
to indemnify and save harmless the other in respect of such claim.
17. USE OF THE NAME. Seller agrees that from and after the Closing Date,
Purchaser shall transfer all rights, as Seller has, to the name "Beverly Hills
BMW" or any derivative thereof or similar
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name in connection with the operation of the Dealership acquired hereunder, and
that Seller shall not subsequent to the Closing, use such name.
18. TERMINATION. If the Closing Date shall not have occurred on or prior
to that date which is ninety (90) days after the Effective Date, any party that
is not in default of its performance of its obligations under this Agreement may
terminate this Agreement by giving written notice to the other party; provided,
however, that if the transaction contemplated by this Agreement has not closed
within ninety (90) days of the Effective Date due solely as a result of
Purchaser not yet receiving the required consents from the Franchisor and/or
Landlord as provided in sections 7.4 and 7.8 hereof, then either Purchaser or
Seller may extend the Closing Date an additional sixty (60) days as necessary to
obtain such consents.
19. RISK OF LOSS AND INSURANCE PROCEEDS. Seller shall give Purchaser
notice of the occurrence of damage or destruction of, or the commencement of
condemnation proceedings affecting any portion of the Premises. In the event
that all or any material portion of the Premises is condemned, or destroyed or
damaged by fire or other casualty prior to the Closing and the cost to repair or
restore any loss or damage caused thereby is greater than FIVE HUNDRED THOUSAND
DOLLARS ($500,000), then Purchaser may, at its option to be exercised within
fifteen (15) days of Seller's notice of the occurrence of the damage or
destruction or the commencement of the condemnation proceedings, either
terminate this Agreement or consummate-the purchase for the full consideration
as required by the terms hereof. If Purchaser elects to terminate this Agreement
or fails to give Seller notice within such fifteen (15) days period that
Purchaser will proceed with the purchase, then this Agreement shall terminate at
the end of such fifteen (15) day period and the Deposit shall be returned to
Purchaser less cost and expenses, including legal fees incurred in collection of
the proceeds and neither party shall have any further rights or obligations
hereunder. If (a) a portion of the Premises is condemned or destroyed or damaged
by fire or other casualty prior to the Closing and the cost to repair or restore
any loss or damage caused thereby is equal to or less than FIVE HUNDRED THOUSAND
DOLLARS ($500,000); or (b) Purchaser elects within the aforesaid fifteen (15)
day period to proceed with the purchase, then this Agreement shall not terminate
and upon the Closing, there shall be a credit against the Purchase Price due
hereunder equal to the amount of any net insurance proceeds or condemnation
awards collected by Seller as a result of any such damage or destruction or
condemnation, plus the amount of any insurance deductible, less any sums
expended by Seller toward the restoration or repair of the premises (but in no
event shall the mount of such credit exceed the Purchase Price); provided,
however, in the event the insurance or condemnation proceeds are less than the
actual amount necessary to replace such damage, Purchase shall receive a credit
against the Purchase Price on the Closing in the amount of such difference. If
the proceeds or awards have not been collected as of the Closing, then such
proceeds or awards shall be assigned to Purchaser, except to the extent needed
to reimburse Seller for sums expended to collect such proceeds or repair or
restore the Premises, and Purchase shall not receive any credit against the
Purchase Price with respect to such proceeds or awards; provided, that if the
amount of proceeds or awards subsequently received by Purchaser exceeds the
Purchase Price, then Purchaser shall pay to Seller any such excess within
ten(10) days after Purchaser's receipt of such proceeds or awards. The
provisions of this Section 19 shall survive the Closing.
20. CONFIDENTIALITY. In the event this Agreement is terminated for any
reason other than the default of Seller, Purchaser shall deliver to the Seller,
at no expense to Purchaser, without representation or warranty of any kind, all
of the documents and papers which were supplied by the Seller to Purchaser
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or its agents, including, without limitation, financial statements, tax returns,
appraisals; inspections, investigations, studies, tests, surveys, and reports
concerning the Assets, but excluding any documents or other papers which are
proprietary property or trade secrets of Purchaser. Unless and until the Closing
occurs, none of the parties to this Agreement shall disclose, publish or
communicate either directly or indirectly, any of the terms, conditions or the
subject or content of the parties' negotiations concerning purchase of the
Dealership, except (a) in response to any lawful process requiting disclosure of
the same as reasonably required by law or public reporting requirements, or (b)
to prospective sources of financing, to mortgage brokers, franchisers,
investment bankers, investors or purchasers, attorneys, accountants,
consultants, experts and professionals engaged by Purchaser in connection with
its due diligence investigation. The parties each agree that it shall at all
times keep the contents of the negotiations confidential (subject to the
exceptions stated in the preceding sentence) and that no publicity or press
release with respect to any proposed transaction shall be made by either party
without the prior written consent of either party.
21. NOTICES. All notices, requests or demands to a party hereunder shall
be in writing and shall be given or served upon the other party by personal
service, by certified return receipt requested or registered mail, postage
prepaid, or by Federal Express or other nationally recognized commercial
courier, charges prepaid, addressed as set forth below. Any such notice, demand,
request or other communication shall be deemed to have been given upon the
earlier of personal delivery thereof, three (3) business days after having been
mailed as provided above, or one (1) business day after delivery through a
commercial courier, as the case may be. Notices may be given by facsimile and
shall be effective upon the transmission of such facsimile notice provided that
the facsimile notice is transmitted on a business day and a copy of the
facsimile notice together with evidence of its successful transmission
indicating the date and time of transmission is sent on the day of transmission
by recognized overnight carrier for delivery on the immediately succeeding
business day. Each party shall be entitled to modify its address by notice given
in accordance with this section.
To Purchaser: FirstAmerica Automotive, Inc.
485 Serramonte Boulevard
Colma, CA 94014
Fax No.: (650) 756-3945
With a copy to: W. Bruce Bercovich, Esq.
Kay & Merkle
100 The Embarcadero, Penthouse
San Francisco, California 94105
Fax No.: (415) 512-9277
Phone No.: (415) 357-1200
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To Owner: Ross Gilbert
Beverly Mercedes Place
9242 Beverly Blvd., Suite 281
Beverly Hills, CA 90210
Phone No.: (310) 271-4597
To Seller: Beverly Hills BW, Ltd.
c/o Ross Gilbert
Beverly Mercedes Place
9242 Beverly Blvd., Suite 281
Beverly Hills, CA 90210
Phone No.: (310) 271-4597
With a copy to: Norman Hoffman, Esq.
16133 Ventura Blvd., Suite "A"
Encino, CA 91436
Fax No.: (818) 379-4017
Phone No.: (818) 986-8080
22. MISCELLANEOUS.
22.1 ENTIRE AGREEMENT. This Agreement, including the exhibits and
schedules hereto, sets forth the entire agreement and understanding between the
parties as to the subject matter hereof and merges and supersedes all prior
discussions, agreements and understandings of every kind and nature between them
and no party hereto shall be bound by any condition, definition, warranty or
representation other than as expressly provided for in this Agreement or as may
be on a date subsequent to the date hereof duly set forth in writing signed by
the party hereto which is to be bound thereby. This Agreement shall not be
changed, modified or amended except by a writing signed by the party to be
charged and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.
22.2 GOVERNING LAW. This Agreement and its validity, construction
and performance shall be governed in all respects by the laws of the State of
California, without giving effect to principles of conflict of laws.
22.3 SEVERABILITY. If any provision of this Agreement or the
application of any provision hereof to any person or circumstance is held
invalid, the remainder of this Agreement and the application of such provision
to other persons or circumstances shall not be affected unless the provision
held invalid shall substantially impair the benefits of the remaining portions
of this Agreement.
22.4 BENEFIT OF PARTIES. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
heirs, legal representatives and assigns.
22.5 NECESSARY DOCUMENTS. Each of the parties does hereby agree to
do any act and to execute any other or further documents reasonably necessary or
convenient to the carrying out of the
16
<PAGE>
provisions of this Agreement.
22.6 HEADINGS. The headings in the sections of this Agreement are
inserted for convenience of reference only and shall not constitute a part
hereof.
22.7 ATTORNEYS' FEES. In the event that any action or proceeding is
brought to enforce or interpret any provision, covenant or condition contained
in this Agreement on the part of Purchaser, Seller or Owner, the prevailing
party in such action or proceeding (whether after trial or appeal) shall be
entitled to recover from the party not prevailing its expenses therein,
including reasonable attorneys' fees and allowable costs.
22.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto.
22.9 TERMINATION AND REMEDIES.
(a) LIQUIDATED DAMAGES. If Purchaser breaches this Agreement,
and the transaction contemplated by this Agreement fails to close by reason
thereof, Seller shall be entitled to terminate this Agreement and retain the
amount of the Deposit plus any accrued interest thereon (the "Specified Sum") as
liquidated damages. SELLER AND PURCHASER ACKNOWLEDGE THAT SELLER'S DAMAGES WOULD
BE DIFFICULT TO DETERMINE, AND THAT THE SPECIFIED SUM IS A REASONABLE ESTIMATE
OF SELLER'S DAMAGES. SELLER AND PURCHASER FURTHER AGREE THAT THIS SECTION IS
INTENDED TO AND DOES LIQUIDATE THE AMOUNT OF DAMAGES DUE SELLER, AND SHALL BE
SELLER'S EXCLUSIVE REMEDY AGAINST PURCHASER, BOTH AT LAW AND IN EQUITY ARISING
FROM OR RELATED TO A BREACH BY PURCHASER OF ITS OBLIGATIONS TO CONSUMMATE THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
/s/
___________________ ----------------------------
Seller's Initials Purchaser's Initials
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
PURCHASER: SELLER:
FirstAmerica Automotive, Inc., Beverly Hills BW, Ltd.,
a Delaware corporation a California general partnership
By: /s/ Thomas Price By: RGBW, Inc., a California corporation
-------------------------------
Thomas A. Price, President
By: /s/ Ross Gilbert
-------------------------------------
Ross Gilbert, President
RGMB Corporation, a California
corporation
By: /s/ Ross Gilbert
-------------------------------------
Ross Gilbert, President
OWNER:
/s/ Ross Gilbert
----------------------------------------
Ross Gilbert
18
<PAGE>
LIST OF SCHEDULES
SCHEDULE 2.1 Acquired Assets
SCHEDULE 3.5 Liabilities
SCHEDULE 3.7 Allocation of Purchase Price
SCHEDULE 4.2 Title to Assets; Liens and Encumbrances
SCHEDULE 4.5 Litigation
SCHEDULE 4.10 Unions
SCHEDULE 11 Lease
19
<PAGE>
[LOGO OF BMW APPEARS HERE]
BMW OF NORTH AMERICA, INC.
DEALER AGREEMENT
This DEALER AGREEMENT is effective as of the 20th day of April,
---- -----
1998, by and between BMW of North America, Inc., a Delaware Corporation having
its principal place of business at Woodcliff Lake, New Jersey 07675 ("BMW NA")
and
DEALER NAME: FAA Beverly Hills, Inc.
-------------------------------------------------------------------
Dealer Location: Beverly Hills, California , a
------------------------------------------------------------
BUSINESS TYPE: Corporation
--------------------------------------------------------------,
(if a corporation or partnership) organized or incorporated under the laws of
the
STATE OF: California and
-------------------------------------------
DOING BUSINESS AS: Beverly Hills BMW
--------------------------------------------------------------
having its principal place of business at
ADDRESS: 8825 and 8833 Wilshire Blvd. , in
-------------------------------------------------------------------
CITY/TOWN: Beverly Hills , in the
--------------------------------------------------------------
COUNTY OF: Los Angeles , in the
--------------------------------------------------------------
STATE OF: California , (as "Dealer").
-------------------------------------------------------
All terms defined in the DEALER STANDARD PROVISIONS (Form 93/B) are incorporated
herein by reference.
<PAGE>
PURPOSE OF AGREEMENT
The purpose of this Agreement is to authorize Dealer to operate a BMW automobile
dealership and to set forth the responsibilities of both BMW NA and Dealer in
providing BMW Products and services to the consuming public.
The United States automotive market requires a fluid relationship between BMW NA
and authorized BMW dealers who represent BMW Products. Mutual compliance with
the terms of this Agreement will promote the interests of both BMW NA and Dealer
by providing each party an opportunity to earn a reasonable return on its
investment through developing and retaining satisfied customers and by building
a spirit of cooperation between BMW NA and authorized BMW dealers (collectively
the "BMW Dealers") which will increase the value and customer perception of BMW
trademarks.
BMW NA and Dealer have entered into this Agreement with confidence in each
others integrity, ability and expressed intention to deal fairly with the other
party and the consuming public. Dealer is relying upon BMW NA's commitment to
distribute quality BMW Products which meet the needs and expectations of the BMW
customers in Dealers primary market and to provide Dealer with a broad range of
support activities to assist Dealer in its retail operations. BMW NA is relying
upon Dealers commitment to perform and carry out the responsibilities of an
authorized BMW dealer, as set forth in this Agreement. Each party recognizes
that it must rely upon the efforts of the other party in performing successfully
under this Agreement.
IN CONSIDERATION OF the foregoing and the mutual covenants herein contained, the
parties hereto agree as follows:
<PAGE>
A. APPOINTMENT OF DEALER
BMW NA appoints Dealer as a dealer of BMW Products. Subject to the terms of this
Agreement, Dealer is granted the non-exclusive right to buy BMW Products. Dealer
accepts such appointment and agrees to be bound by this Agreement.
While dealer recognizes that its performance will be primarily measured based
upon its activities in its Primary Market Area, Dealer agrees that this
appointment does not confer upon it the exclusive right to deal in BMW Products
in any specific geographic area within the 50 United States, nor does it limit
the persons within the 50 United States to whom Dealer may sell BMW Products for
use therein.
Dealer agrees that it will not sell BMW Products for resale or use outside the
50 United States. Dealer further agrees to abide by any Export Policy
established by BMW NA.
Dealer acknowledges that BMW NA reserves the right to appoint additional
dealers, whether located near Dealer's location or elsewhere, as BMW NA in its
sole discretion deems necessary or appropriate. BMW NA agrees that it will not
explore additional representation without first conferring individually with the
BMW Dealer(s) surrounding the proposed location to determine whether other
alternatives to additional representation are satisfactory to BMW NA. If a
decision is made to proceed with establishment of additional representation, BMW
NA will provide such BMW Dealer(s) no less than thirty (30) days written notice
of such decision.
<PAGE>
B. DEALER STANDARD PROVISIONS AND
DEALER OPERATING REQUIREMENTS
The accompanying DEALER STANDARD PROVISIONS (Form 93/B), DEALER OPERATING
REQUIREMENTS, DEALER FACILITY GUIDELINES, and all currently effective Addenda
issued to Dealer by BMW NA, all of which may be amended, cancelled or superseded
from time to time, are hereby incorporated into this Dealer Agreement
("Incorporated Documents"). Unless the context otherwise indicates, the term
"Agreement" shall mean this document, the Incorporated Documents, and the
documents referred to therein. Dealer hereby acknowledges receipt of this
Agreement and agrees to become familiar with its terms.
While Dealer is not contractually required to comply with the BMW DEALER
OPERATING SYSTEM, Dealer agrees to consider conforming its operations to the
guidelines and recommendations of the BMW Dealer Operating System.
<PAGE>
C. DEALER OWNERSHIP AND MANAGEMENT
This is a PERSONAL SERVICES AGREEMENT. BMW NA is entering into this Agreement in
reliance upon the qualifications, abilities and integrity of the Dealer Operator
and upon the representation of the Dealer's Owner(s) that the Dealer Operator
will have full managerial authority for operations and activities of Dealer. In
order to induce BMW NA to enter into this Agreement, Dealer states that:
(I) DEALER'S OWNERS. The beneficial owners, record owners and partners, if any
- --------------------
of Dealer are (include Record Owners if different from Beneficial):
<TABLE>
<CAPTION>
NAME % RECORD OR BENEFICIAL
<S> <C> <C>
FirstAmerica, Automotive, Inc. 100%
(Shareholders:
Donald V. Strough 10.49
Thomas A. Price 39.93
Steven Hallock 3.19
Fred Cziska 4.57
Al Babbington 4.16
John Driebe 1.36
Trust Co. of The West 20.14
Management Options 3.02
Embarcadero Automotive, LLC. 3.92
Raintree Capital, LLC. 3.92
Brown, Gibbons, Lang, LLC. 2.01
BB Investments 2.26
H. Matthews Travis .13
Public Shareholders .90
-----
100%)
</TABLE>
Additional Names Attached []
<PAGE>
C. DEALER OWNERSHIP AND MANAGEMENT - CONTINUED
(II) DEALER'S OFFICERS. The following persons are Dealer's Officers:
- ----------------------
NAME TITLE
Thomas A. Price President
Donald V. Strough Vice President
Steven S. Hallock Treasurer / Secretary
(III) DEALER'S CORPORATE DIRECTORS. If Dealer is a corporation, the following
- -----------------------------------
are its Corporate Directors:
NAME TITLE
Thomas A. Price CEO
Donald V. Strough Chairman
Steven S. Hallock
(IV) DEALER OPERATOR. The following person shall be in complete charge of
- ---------------------
Dealer's BMW Operations with authority to make all operating decisions on behalf
of Dealer with respect to Dealer's BMW Operations and is the person upon whom
BMW NA can rely to act on Dealer's behalf:
Name: Robert Reehtwig
------------------------------------------------------------------------
(V) GENERAL MANAGER. The following is Dealer's General Manager (if none, enter
- --------------------
"NONE"):
Name: Stephan Jones
------------------------------------------------------------------------
<PAGE>
C. DEALER OWNERSHIP AND MANAGEMENT - CONTINUED
(VI) SUCCESSOR. The Dealer's Owners have nominated the following individual(s)
- ---------------
as proposed Dealer Owner(s) of a Successor Dealer to be established if this
Agreement is terminated because of the death or permanent disability of any of
the Dealers Owners (if none, enter "NONE"):
Name: None
----------------------------------------------------------------
Name: None
----------------------------------------------------------------
Because of the importance that BMW NA places on the statements and
representations of the Dealer's Owners and the qualifications of the Dealer
Operator, Dealer agrees that there will be no change in the (a) identity of the
Dealer's Owners (i above);(b) the Dealer Operator (iv above); or (c) Dealer's
name, identity, business organization or structure without the prior written
consent of BMW NA.
To enable BMW NA to maintain effectively the BMW NA dealer network, Dealer
further agrees to provide BMW NA with forty-five (45) days prior written notice
of any proposed change in the ownership of Dealer, which would change the
majority interest or control of Dealer, or of any proposed disposition of
Dealer's BMW assets. Any such change in ownership or disposition of Dealer's BMW
assets shall not be effective without the prior written consent of BMW NA which
consent shall not be unreasonably withheld. BMW NA shall respond to Dealer's
notification within forty-five (45) days after Dealer has furnished to BMW NA
all applications and information reasonably requested to evaluate the proposal.
Without limiting other considerations in determining whether BMW NA will provide
consent, this Agreement may not be transferred, assigned or assumed until all
indebtedness of Dealer to BMW NA, its subsidiaries or affiliates has been fully
satisfied and unless the transferee, assignee or party assuming this Agreement
agrees and commits to fulfill and complete all of the obligations under this
Agreement and the Improvement Addendum (if applicable).
<PAGE>
C. DEALER OWNERSHIP AND MANAGEMENT - CONTINUED
Dealer recognizes that BMW NA has a vital interest in ensuring that qualified
personnel are employed by BMW Dealers. Therefore, Dealer agrees to employ
personnel who meet the qualifications for each position. BMW NA agrees that
Dealer has the right to decide reasonably all matters concerning management and
personnel.
Dealer has designated herein certain individuals as officers, directors,
managers and/or individuals with responsibility for Dealer's BMW Operations.
Dealer agrees to notify BMW NA in writing of any change in the designated
individuals (ii, iii and v above) and recognizes that such designation shall not
relieve Dealer of its responsibility for performance under this Agreement.
Dealer agrees that BMW NA may rely upon the Dealer Operator and General Manager
(if applicable) to act on Dealer's behalf and that such reliance will not alter
Dealer's responsibilities under this Agreement.
<PAGE>
D. DEALER'S FACILITIES
Dealer agrees that Dealer's Facilities shall satisfy all applicable provisions
of this Agreement, including reasonable space, facility and BMW Corporate
Identification requirements in the Dealer Operating Requirements Addendum and/or
Dealer Facilities Guidelines. BMW NA recognizes the investment Dealer has in its
facilities and hereby approves the location of the following Dealer's Facilities
for the exclusive purpose of:
1) A showroom and sales facility for BMW Vehicles at:
Address: 8825 Wilshire Blvd. Beverly Hills, CA
-----------------------------------------------------------
2) Service and Pans facilities for BMW Vehicles at:
Address: 8833 Wilshire Blvd. Beverly Hills, CA
-----------------------------------------------------------
3) Facilities for the display and sale of used BMW Vehicles at:
Address: 8833 Wilshire Blvd. Beverly Hills, CA
-----------------------------------------------------------
4) Other facilities (indicate the nature of the facility; e.g., storage
facility):
Address: ____________________________________________________________
Unless otherwise provided herein, Dealer shall conduct Dealer's BMW Operations
and keep BMW Products exclusively at Dealer's Facilities designated above.
In the event that Dealer desires to (i) change its principal place of business
from that first set forth in this Agreement; (ii) change any location of
Dealer's Facilities; (iii) establish any additional locations for either
operating its business or storage of BMW Products; (iv) make any major
structural or design change in Dealer's Facilities; or (v) change the usage or
function of any locations or facility approved herein or otherwise utilize such
locations or facilities for any functions other than the approved functions,
Dealer must obtain the prior written approval of BMW NA for any such change or
establishment.
<PAGE>
D. DEALER'S FACILITIES - CONTINUED
In the event Dealer desires to establish or add any additional automobile
franchise, line, make or dealership at Dealer's Facilities simultaneously with
Dealer's BMW Operations, Dealer agrees to provide BMW NA thirty (30) days prior
written notice of such establishment or addition. At the time notice is
provided, Dealer shall demonstrate in writing to BMW NA that Dealer will
continue to comply with the Dealer Operating Requirements Addendum and will not
adversely impact the representation or sale of BMW Products. If Dealer is unable
to comply, Dealer shall not pursue such establishment or addition, but may
submit a detailed plan of compliance with the Dealer Operating Requirements and
Dealer Operating Requirements Addendum to BMW NA. If BMW NA approves the
detailed plan of compliance, Dealer may proceed with the establishment or
addition. Dealer understands that BMW NA may, at its sole option, reject the
plan or require issuance or modification of an Improvement Addendum in the event
the plan is approved. Such approval shall not be unreasonably withheld.
<PAGE>
E. EXCLUSION OF WARRANTIES
EXCEPT AS SPECIFICALLY PROVIDED FOR IN THE NEW CAR LIMITED WARRANTY, THE LIMITED
WARRANTY ON EMISSION CONTROLS, THE LIMITED WARRANTY AGAINST RUST PERFORATION,
THE LIMITED WARRANTY ON ORIGINAL BMW PARTS AND THE LIMITED WARRANTY ON ORIGINAL
PARTS SOLD OVER THE COUNTER; ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE
EXCLUDED. THE EXCLUSION ALSO APPLIES TO INCIDENTAL, CONSEQUENTIAL, SPECIAL OR
INDIRECT DAMAGES FOR ANY BREACH OF EXPRESS OR IMPLIED WARRANTY, INCLUDING THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND/OR FITNESS, IF ANY, APPLICABLE TO BMW
PRODUCTS.
<PAGE>
F. BMW DEALER FORUM
BMW NA and Dealer agree that it is in their mutual interest to have an
independent group of BMW dealer representatives serve on the BMW Dealer Forum
("DEALER FORUM"). The DEALER FORUM shall represent BMW Dealers and will
communicate the position of BMW Dealers to BMW NA on various common issues. BMW
NA and the DEALER FORUM shall establish a mechanism to foster open and frequent
communication on substantive issues affecting BMW NA and BMW Dealers.
Each BMW dealer is entitled and encouraged to serve on the DEALER FORUM or on a
committee of the DEALER FORUM pursuant to its by-laws and each BMW dealer is
expected to support and participate in the DEALER FORUM.
The DEALER FORUM shall adopt by-laws as BMW Dealers deem reasonable and
necessary. The DEALER FORUM may establish committees to study various aspects of
the retail environment and the BMW NA - BMW Dealers' relationship.
Before any material change may be made to this Agreement, BMW NA agrees to
notify the DEALER FORUM and consider BMW Dealers' position regarding the
proposed change.
<PAGE>
G. TERM
This Agreement shall continue in full force and effect and shall govern all
relations and transactions between the parties commencing on the effective date
hereof and continuing as follows:
O If Dealer has fulfilled all of its obligations hereunder and no
Improvement Addendum is currently in force, this Agreement shall expire
five years from the effective date hereof, unless terminated earlier in
accordance with the applicable provisions of this Agreement. In such event
BMW NA will renew this Agreement or offer Dealer an opportunity to enter
into a superseding Agreement.
O If Dealer has outstanding obligations as of the effective date of this
Agreement and/or an Improvement Addendum is in force, this Agreement shall
expire on the earlier of three years from the effective date hereof or
sixty (60) days following the earliest "Compliance Date" specified in said
Addendum, unless otherwise terminated in accordance with the applicable
provisions of this Agreement.
<PAGE>
H. ALTERNATE DISPUTE
BMW NA and Dealer agree to minimize disputes between them. However, in the event
that disputes arise, BMW NA and Dealer agree that they will attempt to resolve
all matters between them before any formal action is taken to seek any
administrative or judicial adjudication or governmental review.
A BMW BOARD ("BOARD") will act as the Administrator of all disputes between BMW
NA and Dealer arising out of this Agreement. The BOARD will consist of three
representatives who will be selected by BMW NA and three representatives of BMW
Dealers who will be selected by the DEALER FORUM. The BOARD will determine
eligibility requirements, develop procedures to ensure a fair and equitable
decision ("ADR PROCEDURES") and select individuals to participate in a DISPUTE
RESOLUTION PANEL ("PANEL") to hear an eligible dispute. The PANEL shall consist
of at least one BMW NA employee, one BMW dealer and one independent person
selected by the BOARD.
The BOARD shall also monitor the dispute resolution process, report to BMW NA
and the DEALER FORUM annually on the effectiveness of this process and, when
required, make recommendations for changes in this process.
BMW NA and Dealer agree that the process outlined in this Article H and
developed by the BOARD in the ADR PROCEDURES will be mandatory. The PANEL's
recommendation will be non-binding, unless the parties agree to be bound by the
decision of the PANEL. The purpose of the PANEL will be to recommend a
resolution and work with the parties to reach a fair and equitable solution to
their dispute in a cost-effective, efficient manner and to avoid formal
adjudication or government intervention.
<PAGE>
H. ALTERNATE DISPUTE RESOLUTION - CONTINUED
If either party to this Agreement initiates any action in court or an
administrative agency prior to issuance of a PANEL recommendation on a dispute,
that party shall pay all costs, fees and expenses, including attorneys fees, of
the other party which arise out of the enforcement of this Article H.
<PAGE>
I. RIGHT OF FIRST REFUSAL
BMW NA recognizes the investment which Dealer has committed to remain a BMW
dealer. Dealer recognizes the importance to BMW NA of continuing dealership
operations from approved locations to provide for effective sale and service of
BMW Products. Accordingly, whenever Dealer intends to dispose of Dealer's BMW
assets or to change majority ownership from that listed in Article C (i), BMW NA
shall have the first right to purchase Dealer's BMW assets or ownership
interests pursuant to this Article. Dealer agrees to disclose to the prospective
buyer that any sale or disposition shall be subject to the terms of this Dealer
Agreement.
BMW NA will advise Dealer if it will exercise the right of first refusal within
forty-five (45) days after Dealer has furnished all applications and information
in accordance with Article C. If BMW NA exercises the right, BMW NA will assume
the proposed buyers rights and obligations under the written agreement the
proposed buyer negotiated with Dealer (the "Buy/Sell Agreement"). The purchase
price shall be that set forth in the Buy/Sell Agreement.
In the event BMW NA exercises its right of first refusal, BMW NA may assign the
Buy/Sell Agreement to any party. BMW NA shall remain responsible to guarantee
the purchase price to be paid by the assignee.
Dealer shall transfer the assets and any applicable real estate free and clear
of all liens and encumbrances. Any property shall be transferred by Warranty
Deed, where possible, conveying marketable title. Deeds will be in the proper
form for recording. Possession will be deemed transferred when the deed is
delivered. Dealer will furnish copies of, and will assign where required, all
agreements, licenses, easements, permits or other documents necessary for the
conduct of Dealer's BMW Operations.
If it exercises its right under this Article, BMW NA will reimburse Dealer for
all acceptable expenses, excluding brokerage commissions, incurred by Dealer in
connection with the development of the Buy/Sell Agreement. Dealer will supply
BMW NA with reasonable documentation to support all those expenses and all
copies of materials generated during the negotiation and development of the
Buy/Sell Agreement in anticipation of the sale (including environmental reports,
accounting reviews, among others.) Any dispute regarding reimbursement shall be
presented for review under Article H.
<PAGE>
This Article shall not apply in the event that Dealer proposes to change
majority ownership, dispose of its assets or otherwise enter into a proposed
Buy/Sell Agreement with a member of Dealer's immediate family (spouse, child,
brother, sister, parent, grandchild, or spouse of child); to an individual who
is listed on the Successor Addendum; to an individual who is currently employed
by Dealer and has been actively employed by Dealer for at least three
consecutive years in the BMW Operations and is otherwise qualified as a Dealer
Operator; or to an individual who is currently listed as a Dealer's Owner in
Article C and has been so listed for the past three consecutive years and is
otherwise qualified as a Dealer Operator.
<PAGE>
J. CUSTOMER SATISFACTION
BMW NA and Dealer agree to conduct their respective businesses to promote and
support the image and reputation of BMW NA, BMW Products and BMW Dealers. BMW
Products must be perceived as the finest available. BMW NA and BMW Dealers must
be recognized as providing the best service in the industry.
Dealer, as the direct link to the BMW customer, is responsible for satisfying
customers in all matters, except those directly related to product design and
manufacturing. Dealer will take reasonable steps to ensure that each customer is
satisfied with BMW Products, and with the services and the practices of Dealer.
Dealer will recommend to BMW NA methods of reasonably satisfying customers. BMW
NA will support Dealer's customer satisfaction efforts through counseling,
training opportunities and providing survey results.
When requested by BMW NA, Dealer shall submit a plan detailing its customer
satisfaction programs. That plan shall include continuous reinforcement to all
dealership personnel of the importance of customer satisfaction, necessary
training for dealership personnel and methods of conveying to customers that
Dealer is committed to their satisfaction.
Following consultation with and notice from BMW NA or its authorized
representative, Dealer shall remedy to the satisfaction of BMW NA any practice
or method of operation which would have a detrimental effect upon customer
satisfaction or would impair the reputation or image of BMW NA, BMW Products or
Dealer.
<PAGE>
K. EXECUTION OF AGREEMENT
This Agreement shall not become effective until signed by a duly authorized
officer of Dealer, if a corporation; or by one of the general partners of
Dealer, if a partnership; or by the named individual if a sole proprietorship;
and countersigned by authorized representatives of BMW NA.
<PAGE>
L. MODIFICATION OF AGREEMENT
No representative of BMW NA shall have the authority to waive any of the
provisions of this Agreement or to make any amendment or modification of or any
other change in, addition to, or deletion of any portion of this Agreement or to
make any other agreement which imposes any obligation on either BMW NA or Dealer
which is not specifically imposed by this Agreement or which renews or extends
this Agreement; unless such waiver, amendment, modification, change, addition,
deletion or agreement is reduced to writing and signed by two authorized
representatives of BMW NA and by the authorized representative of Dealer as set
forth in Article K of this Agreement.
BMW OF NORTH AMERICA, INC.
BY: /S/ BY: /S/
--------------------------------- --------------------------------
TITLE: Senior Vice President. General TITLE: President. FAA Beverly Hills.
------------------------------ -----------------------------
Manager, Western Region Inc.
-----------
FEDERAL TAX ID # ___________________
BY: /S/
---------------------------------
TITLE: Business Development Manager ATTEST: (If Dealer is a Corporation)
------------------------------
Western Region
/S/
------------------------------------
Secretary
WITNESS: (If Partnership or
Proprietorship)
____________________________________
Name
____________________________________
Address
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered this 17th day of July
1997 (the "Contract Date"), by and among FirstAmerica Automotive, Inc., a
Delaware corporation or nominee ("Purchaser"), Golden Sierra Auto Group, a
California corporation, dba Capitol Nissan ("Seller"), and, as limited by
Section 15 hereof, CAPMAN, Inc., a California corporation ("Capman"), and is
made with reference to the following facts:
R E C I T A L S
WHEREAS, Seller owns and operates a Nissan automobile dealership (the
"Dealership") commonly known as Capitol Nissan, located at 1120 Capitol
Expressway Auto Mall, San Jose, California 95136 (the "Premises").
WHEREAS, Seller desires to sell to Purchaser and Purchaser desires to
purchase from Seller certain of the assets, properties and business of Seller
utilized in connection with the Dealership.
NOW, THEREFORE, in recognition of the foregoing representations, and in
consideration of the covenants set forth herein, the parties hereto agree as
follows:
A G R E E M E N T
1. DEFINITIONS. The capitalized terms as used in this Agreement shall be
defined as hereinafter set forth in this Section 1, or as otherwise provided in
this Agreement.
1.1 ACQUIRED ASSETS. The term "Acquired Assets" shall be defined as
all of the assets and property to be acquired by Purchaser hereunder, as
described in Section 2.1 hereof.
1.2 CLOSING. The term "Closing" shall be defined as the consummation
of all of the transactions provided for in this Agreement, including the
exchange of the Acquired Assets for the consideration provided for herein. The
Closing shall occur at the offices of Kay & Merkle, 100 The Embarcadero,
Penthouse, San Francisco, California, on the Closing Date commencing at 10:00
a.m.
1.3 CLOSING DATE. The "Closing Date" shall be defined as the date
which falls 5 business days following the earliest date on which the conditions
specified in Sections 7 and 8 hereof are satisfied; subject, however, to the
provisions of Section 18 below.
1.4 FRANCHISE. The term "Franchise" shall be defined as the Nissan
Franchise currently held by Seller.
1.5 FRANCHISER. The term "Franchiser" shall be defined as Nissan
Motor Corporation.
1
<PAGE>
1.6 OBSOLETE PARTS. The term "Obsolete Parts" shall be, defined as
all (i) factory parts which are not listed in the most current manufacturer's
wholesale price book or, if listed therein, are valued at ZERO DOLLARS ($0),
(ii) parts which are not returnable to the manufacturer (as defined by the
Franchiser, (iii) factory and non-factory parts which have been in stock more
than one (1) year and/or parts which are in excess of a one (1) year supply,
(iv) parts indicated as discontinued, and (v) parts which are broken or damaged,
regardless of whether listed in the most current manufacturer's wholesale price
book.
2. PURCHASE AND SALE OF ASSETS.
2.1 ACQUIRED ASSETS. The assets subject to this Agreement shall
consist of all the assets located at the Premises and related to or used in
connection with the Franchise, including but not limited to those assets to be
listed on Schedule 2.1 to be prepared prior to the Closing Date and attached
hereto, Nissan special tools, furniture, fixtures and equipment, which special
tools, furniture, fixtures and equipment shall be in substantially the same
condition at Closing as at the expiration of the Due Diligence Period, and
leasehold improvements located at the Premises and used by Seller in operation
of the Nissan Franchise, motor vehicles (new and used) (subject to exclusion of
certain used vehicles in accordance with Section 3.2(c)), parts and accessories
(subject to exclusion of Obsolete Parts in accordance with Section 3.2(d) and
excess non-factory parts in accordance with Section 3.2(c)), tires, work-in-
progress, advertising literature, forms and supplies for the Dealership, parts
return privileges from the Franchiser, rights under new car purchase orders and
deposits relating thereto, goodwill, telephone number of Seller, the name
"Capitol Nissan" or any derivative thereof, the right of occupancy of the
Premises and all contracts, agreements or commitments which have been approved
by Purchaser as the same shall exist on the Closing Date. The parties agree that
Schedule 2.1 shall be prepared in conjunction with the physical inventory
described in Section 3.2(j) hereinbelow.
2.2 PURCHASE. Seller hereby agrees to sell, convey, transfer, assign
and deliver to Purchaser, and Purchaser hereby agrees to purchase and acquire,
on the Closing Date, all of the Acquired Assets. Any assets which are not
Acquired Assets, shall be retained by Seller.
3. CONSIDERATION FOR ACQUIRED ASSETS.
3.1 PURCHASE PRICE. Subject to the terms and conditions of this
Agreement, the purchase price to be paid by Purchaser for the Acquired Assets
shall be that amount which is equal to the aggregate value of the Acquired
Assets as of the Closing Date determined in accordance with Section 3.2.
3.2 VALUATION OF ACQUIRED ASSETS. Those Acquired Assets which are
listed below shall be valued as provided below in this Section 3.2.
(a) The price for each 1997 new unregistered and undamaged
Nissan model vehicle with not more than three hundred (300) miles shall be the
sum of the following:
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(i) The wholesale cost of each such vehicle determined in
accordance with the factory invoice, including advertising charges; plus
(ii) The wholesale cost of all optional parts and
accessories installed in such vehicle plus the cost of labor (determined at the
internal rate pursuant to the standard factory formula) for installation of the
same; less
(iii) The sum of all distributor's allowances ("Allowances")
as of the Closing Date including, but not limited to, inventory carry-over
allowances, discounts, holdbacks, rebates, contests, model change incentives and
similar distributor's allowances related to such vehicle. Purchaser shall also
receive a credit against the Purchase Price equal to the number of days of
unexpired Floor Plan Assistance, if any, as of the Closing for each vehicle
purchased.
(b) The price for each 1997 unregistered and undamaged Nissan
demonstrator vehicle with not more than seven thousand five hundred (7,500)
miles purchased hereunder shall be the value determined in accordance with
subsections (a)(i) through (a)(iii) hereinabove, less the sum of 20c per mile
for each said vehicle;
(c) Notwithstanding paragraphs (a) and (b) hereinabove,
Purchaser shall have no obligation to purchase new vehicles in inventory with a
supply of each line of automobiles (i.e. Maxima) in excess of a 60 day supply
based on the average monthly sales for those three months immediately preceding
the Closing Date, provided that this paragraph (c) shall apply only in the event
and to the extent Seller is able to return any vehicle in excess of the sixty
(60) day supply without (i) having to repay to the Franchiser any Allowances or
Floor Plan Assistance; (ii) receiving a debit against Allowances owing or future
Allowances upon such return, (iii) losing credit for such vehicle in the 1997
Dealer Challenge, as hereinafter defined, or (iv) suffering any other financial
detriment (other than the loss of the sale to Purchaser) upon such return
(collectively "Return Loss").
(d) Notwithstanding paragraphs (a), (b) and (c) hereinabove,
Seller shall have all 1997 Quests in rental service as of March 31, 1997.
Purchaser shall have no obligation to purchase any 1997 Quests that not have
been placed in rental service prior to March 31, 1997, with the exception of
1997 Quests delivered and invoiced by Nissan Corporation after March 31, 1997.
The purchase price for all 1997 Quests in rental service with not more than 300
miles shall be valued in accordance with paragraph 3.2(a)(i) through 3.2(a)(iii)
provided, however, that Purchaser shall have the right to all incentives
including market share funds related to such vehicles.
(e) All vehicles not described in subsections (a), (b), (c) and
(d) above which are to be purchased hereunder shall be valued at a price
mutually agreed upon by Seller and Purchaser; provided, however, that if Seller
and Purchaser are unable to agree on a price with respect to any individual
vehicle prior to the Closing Date, then such vehicle shall be excluded from the
Acquired Assets and not purchased hereunder.
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(f) All new undamaged returnable genuine Nissan factory parts
and accessories which are in possession of Seller as of the Closing Date and
which are listed in the manufacturer's most current wholesale parts and
accessories price book shall be valued at dealer cost in accordance with the
manufacturer's most current wholesale parts and accessories price book as of the
Closing Date; provided, however, that Obsolete Parts shall be valued at ZERO
DOLLARS ($0) and shall be retained by Seller, and removed by Seller from the
Premises not later than ten (10) days following the Closing Date.
(g) All non-factory parts, accessories and miscellaneous
inventory which are in the possession of Seller as of the Closing Date, shall be
valued at dealer cost, provided, however, that Purchaser shall have no
obligation to purchase in excess of TWENTY THOUSAND DOLLARS ($20,000) of such
items.
(h) All work-in-progress shall be valued at retail.
(i) All furniture, fixtures, equipment, leasehold improvements
and special tools shall be valued at $500,000 provided, however, that in the
event that any item of furniture, fixtures, equipment, special tools or
leasehold improvement is materially damaged, destroyed or removed from the
Dealership between the date of execution of this Agreement and the Closing Date,
the value of said item damaged, destroyed or removed from the Dealership shall
be credited against the Purchase Price.
(j) As of the close of business on the day immediately preceding
the Closing Date or on such other date as mutually agreed upon by Purchaser and
Seller, a physical inventory to determine the value of the new, used and
demonstrator vehicles, and work-in-progress shall be taken jointly by the
parties. Each party shall bear the expenses associated with its own personnel in
connection with the valuation of the assets. The parties shall jointly employ an
independent inventory service to take a parts and accessories inventory
immediately prior to the Closing. The cost of such inventory shall be paid one-
half by Purchaser and one-half by Seller.
3.3 PAYMENT OF PURCHASE PRICE. The purchase price determined in
accordance with Section 3.2 above to be paid by Purchaser pursuant to this
Agreement shall be paid as follows:
(a) Upon execution hereof, Purchaser shall cause the sum of
FIFTY THOUSAND DOLLARS ($50,000) (the "Deposit") to be delivered to Escrow
Holder as hereinafter defined. The Deposit shall be held by the Escrow Holder as
an earnest money deposit toward the purchase price of the Dealership. The
Deposit shall be held by Escrow Holder in an interest bearing account. At the
Closing, the Deposit, including accrued interest, shall be applied and credited
toward the payment of the Purchase Price. If escrow does not close, and this
Agreement is terminated in a manner governed by Section 7, the Deposit,
including accrued interest, will be disbursed to Purchaser. If the escrow does
not close and Section 7 does not apply, the Deposit together with the interest
accrued thereon shall be promptly returned to Purchaser unless the provisions of
Section 22.9 are applicable, in which case the disposition of
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the Deposit together with the interest accrued thereon shall be governed by the
provisions of Section 22.9.
(b) The balance of the purchase price shall be paid in cash on
the Closing Date.
(c) In addition to the cash payment as provided for hereinabove,
Purchaser shall grant to Capman, Inc., a California corporation, an option to
acquire 20,000 shares of the capital stock of FirstAmerica Automotive, Inc., a
Nevada corporation, pursuant to the Stock Option Plan described in Section 8.7
hereof.
3.4 CLOSING AND POST-CLOSING ADJUSTMENTS. All expenses of a nature
which are customarily subject to proration in a transaction involving the
purchase and sale of assets of an ongoing business shall be apportioned between
Seller and Purchaser according to the number of days in the period covered
thereby which occurred prior to and including the Closing Date, and the number
of such days subsequent to the Closing Date. Those items subject to proration
hereunder shall include, without limitation, personal property taxes, and
customer prepayments. The aggregate amount of any adjustment shall be determined
and paid as of the Closing Date. In addition to Purchase Price, Purchaser shall
pay to Seller the sum of ONE HUNDRED FIFTY DOLLARS ($150) per automobile sold by
Seller, which automobiles qualify for the 1997 Dealer Challenge described on
Schedule 3.4 hereof (the "1997 Dealer Challenge"), provided that Purchaser
qualifies for such program and actually receives such funds from Franchiser. The
parties acknowledge and agree that such sums shall not be due and owing until
such time as such funds are received by Purchaser from Franchiser. Purchaser
shall exercise reasonable good faith efforts to qualify for the 1997 Dealer
Challenge.
3.5 LIABILITIES. Purchaser shall have no obligation for any
liabilities of any kind whatsoever of Seller other than those liabilities which
Purchaser specifically agrees to assume all of which shall be set forth on
Schedule 3.5 to be attached hereto ten (10) days prior to the expiration of the
Due Diligence Period, including without limitation all contracts, agreements and
commitments of Seller, which Purchaser agrees to assume. Purchaser shall be
responsible solely for that portion of any such obligations, which first accrue
on or subsequent to the Closing Date. Purchaser shall have no obligation with
respect to any liability arising under any such contract, agreement or
commitment prior to the Closing Date, all of which liability shall remain the
responsibility of Seller. The parties acknowledge and agree that Purchaser is
not assuming any employment agreements, labor agreements, collective bargaining
agreements or other similar contracts.
3.6 TRANSFER TAXES. Purchaser agrees to pay any and all sales,
transfer or other similar taxes which may be imposed or payable on or in
connection with the transfer of the Acquired Assets.
3.7 ALLOCATION OF PURCHASE PRICE. The Purchase Price as provided for
herein shall be allocated as set forth on Schedule 3.7 attached hereto which
shall agreed upon and attached hereto at or prior to Closing.
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4. REPRESENTATIONS AND WARRANTIES OF SELLER. Except as set forth on the
schedules attached hereto (the "Disclosure Schedules"), Seller and Capman hereby
jointly and severally represent, warrant and agree with Purchaser as follows:
4.1 GOOD STANDING. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and is
entitled to and has the corporate power and authority to own or lease its
property and to carry on its business in the manner and in the places where such
property are now owned, leased or operated and such business is now conducted.
4.2 TITLE TO ASSETS; LIENS AND ENCUMBRANCES. Seller will convey to
Purchaser good and marketable title to the Acquired Assets, free and clear of
all security interests, liens, claims, restrictions, equities and encumbrances
whatsoever, other than liens for taxes not yet due and payable. PURCHASER
SPECIFICALLY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY PROVIDED IN THIS
SECTION 4, SELLER IS SELLING AND PURCHASER IS PURCHASING THE ACQUIRED ASSETS ON
AN "AS IS WITH ALL FAULTS" BASIS AND THAT PURCHASER IS NOT RELYING ON ANY
REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, FROM
SELLER, ITS AGENTS, OR BROKERS AS TO ANY MATTERS CONCERNING THE ACQUIRED ASSETS,
INCLUDING, WITHOUT LIMITATION: (1) the quality, nature, adequacy and physical
condition of the Acquired Assets, (2) except as otherwise provided in the Real
Property Agreement, as hereinafter defined, the presence of Hazardous Materials
on, under or about the Dealership or the adjoining or neighboring property, (3)
the contents, adequacy or completeness of the due diligence materials from third
parties delivered to Purchaser prior to the expiration of the Due Diligence
Period and listed on Schedule 4.2 to be attached prior to the expiration of the
------------
Due Diligence Period, and (4) the economics of the operation of the Dealership.
4.3 AUTHORIZATION. The execution and delivery of this Agreement and
each other document, agreement and instrument contemplated hereby, and the
consummation of the transactions contemplated hereby has been duly authorized by
the Board of Directors of the Seller and all other corporate action, including
all shareholders' approvals necessary to authorize the execution and delivery of
this Agreement and each other document, agreement and instrument contemplated
hereby, and the consummation of the transactions contemplated hereby, have also
been taken. Except for consent of the Franchiser, no consent of any lender,
trustee, security holder, lessor or any other person or entity is required to be
obtained by Seller in connection with the execution, delivery and performance of
this Agreement by Seller and the consummation of the transactions contemplated
hereby. This Agreement constitutes the valid and binding obligation of Seller
and Capman enforceable in accordance with its terms, except as may be limited as
applicable bankruptcy law and equity. Except as to the terms of the Franchise,
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby (a) do not violate or constitute a
breach of or default under any contract, agreement or commitment to which Seller
or Capman is a party, under which they are obligated or to which any of the
Acquired Assets are subject, (b) do not violate any judgment, order, statute,
rule or regulation to which Seller, Capman or any of the Acquired Assets are
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subject or the articles of incorporation or bylaws of the Seller, and (c) will
not result in the creation of any lien, charge or encumbrance on any of the
Acquired Assets.
4.4 REPRESENTATIONS AND WARRANTIES ON CLOSING DATE. The
representations and warranties of Seller and Capman contained in this Agreement
shall be true and correct in all material respects on and as of the Closing Date
with the same force and effect as though such representations and warranties
have been made on and as of the Closing Date.
4.5 LITIGATION. Seller has not received service of process for, and
to the best of Seller's knowledge there is no pending or threatened suit,
action, arbitration, or legal, administrative, or other proceeding, or
governmental investigation against or affecting any of the Acquired Assets. To
the best knowledge of Seller, Seller is not in default with respect to any
order, writ, injunction, or decree of any federal, state, or local court. To the
best knowledge of Seller, use of the name "Capitol Nissan" by Seller does not
infringe upon the rights of any other person and Seller is not aware of any
claim of any nature to the effect that any person other than Seller holds any
rights with respect to such names.
4.6 DEFAULTS. Seller is not in default, and to the best of Seller's
knowledge, no event has occurred which, with the passage of time will constitute
a default, with respect to any obligation or liability to be assumed by
Purchaser hereunder, which are listed on Schedule 3.5 attached hereto, To the
best knowledge of Seller, no other party to any obligation or liability set
forth in Schedule 3.5 is in default with respect to any provision thereof.
4.7 ENVIRONMENTAL COMPLIANCE NOTICES. Seller has received no written
notice advising Seller of any defects, defaults or non-compliance in connection
with the Acquired Assets or the Premises from any governmental agency dealing
with environmental laws, except notices which have been previously complied with
or waived by the governmental agency.
4.8 COMPLIANCE WITH LAW. To the best of Seller's knowledge, Seller
has complied with, and is not in violation of, applicable federal, state or
local statutes, laws or regulations the violation of which would have a material
adverse effect on the financial condition of the Dealership.
4.9 FINANCIAL REPORTS. Seller has delivered to Purchaser dealer
financial statements for Seller for the calendar years 1995 and 1996 ("Dealer
Financial Statement"). The income and expenses reflected in the Dealer Financial
Statement has been prepared in accordance with past practices of Seller and, to
the best of Seller's knowledge, are true and correct in all material respects.
4.10 UNIONS. Seller is not a party to any arrangement with any union,
and no employees of the Seller are represented by any labor union or covered by
any collective bargaining agreement or, to the best of Seller's knowledge of
Seller, is any effort to establish such representation in progress.
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When used herein the term "to the best of Seller's knowledge" shall
mean knowledge of Mickey Ollis, Dennis R. Boyle, and Ole Skifter without any
independent investigation. In the event Purchaser discovers a breach of
representation or warranty prior to Closing, Purchaser's sole remedy for such
breach shall be to terminate this Agreement and seek actual damages against
Seller in the amount of Purchaser's damages not to exceed the sum of FIFTY
THOUSAND DOLLARS ($50,000).
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents,
warrants and agrees with Seller and Owner as follows:
5.1 GOOD STANDING. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
entitled to and has the corporate power and authority to own or lease its
property and to carry on its business in the manner and in the places where such
property are now owned, leased or operated and such business is now conducted.
5.2 AUTHORIZATION. The execution and delivery of this Agreement and
the consummation of transactions contemplated hereby has been duly authorized by
the Board of Directors of the Purchaser and all other corporate action,
including all shareholders' approvals necessary to authorize the execution and
delivery of this Agreement and the transactions contemplated hereby, have also
been taken. This Agreement is a valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms. Except for consent
of the Franchiser, landlords under leases, and lenders, no consent of any
trustee, security holder or any other person or entity is required to be
obtained by Purchaser in connection with the execution, delivery and performance
of this Agreement by Purchaser and the consummation of the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby (a) do not violate
or constitute a breach of or default under any contract, agreement or commitment
to which Purchaser is a party or under which it is obligated, and (b) do not
violate any judgment, order, statute, rule or regulation to which Purchaser is
subject.
5.3 REPRESENTATIONS AND WARRANTIES ON CLOSING DATE. The
representations and warranties of Purchaser contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date.
6. SELLER'S COVENANTS.
6.1 ONGOING OPERATIONS. From the date hereof to the Closing, Seller
will use its best effort to preserve intact the Acquired Assets and to continue
to operate the Dealership as a going concern, including, but not limited to,
maintaining commercially reasonable inventories and receivables; provided,
however, Seller shall not be required to expend sums in excess of FIFTEEN
THOUSAND DOLLARS ($15,000) or institute litigation in exercising such best
efforts. Seller will not dispose of any of the Acquired Assets except in the
ordinary course of business consistent with past practices, and will not,
without limiting the foregoing, hold a "going-out-of-business" or "liquidation"
sale; provided that Seller shall have the right to exercise
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normal and customary selling and marketing activities consistent with customary
practices of an ongoing dealership.
6.2 APPROVAL. Each of Purchaser and Seller will use its best efforts
to obtain all permits, approvals, authorizations and consents of third parties
necessary or desirable for the consummation of the transactions contemplated by
this Agreement and for the ownership and operation by Purchaser of Acquired
Assets and the Dealership related thereto; provided, however, Seller shall not
be required to expend sums in excess of FIFTEEN THOUSAND DOLLARS ($15,000) or
institute litigation in exercising such best efforts, Purchaser and Seller shall
proceed as promptly as practicable after the date hereof to prepare all
materials necessary to obtain the consent of the Franchiser as is necessary for
Purchaser to acquire the Acquired Assets and for consummation of the
transactions contemplated hereby.
6.3 COVENANT TO COMPLY. Seller shall not take any action or fail to
take any action which will make any of their representations and warranties not
true and correct in all material respects on the Closing Date. Seller shall use
its best efforts to satisfy or cause to be satisfied all of the conditions
precedent to Purchaser's obligations hereunder; provided, however, Seller shall
not be required to expend sums in excess of FIFTEEN THOUSAND DOLLARS ($15,000)
or institute litigation in exercising such best efforts. Seller shall give
Purchaser prompt written notice of any material change in any of the information
contained in the representations and warranties made in Section 4 hereof or the
schedules referred to herein which occur prior to the Closing Date.
6.4 ENTRY AND INDEMNITY. In connection with any entry by Purchaser,
or its agents, employees or contractors onto the Property, Purchaser shall give
Seller reasonable advance notice of such entry and shall conduct such entry and
any inspections in connection therewith so as to minimize, to the greatest
extent possible, interference to Seller's Dealership operation. Without
limiting the foregoing, prior to any entry to perform any on-site testing,
Purchaser shall give Seller notice thereof, including the identity of the
company or persons who will perform such testing and the proposed scope of the
testing. Seller shall approve or disapprove the proposed testing within three
(3) business days after receipt of such notice. If Purchaser or its agents,
employees or contractors take any sample from the Property in connection with
any such approved testing, at Seller's request, Purchaser shall provide to
Seller a portion of such sample being tested to allow Seller, if it so chooses,
to perform its own testing. Seller or its representative may be present to
observe any testing or other inspection performed on the Property. Upon
Seller's request, Purchaser shall promptly deliver to Seller copies of any
reports relating to any testing or other inspection of the Property performed by
Purchaser or its agents, employees or
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contractors. Purchaser shall maintain, and shall assure that its contractors
maintain, public liability and property damage insurance in amounts and in form
and substance adequate to insure against all liability of Purchaser and its
agents, employees or contractors, arising out of any entry or inspections of the
Property pursuant to the provisions hereof, and Purchaser shall provide Seller
with evidence of such insurance coverage upon request by Seller. Purchaser shall
indemnify and hold Seller harmless from and against any costs, damages,
liabilities, losses, expenses, lions or claims (including, without limitations
reasonable attorneys' fees) arising out of or relating to any entry on the
Property by Purchaser, its agents, employees or contractors in the course of
performing the inspections, testings or inquiries provided for in this
Agreement. The foregoing indemnity shall survive beyond the Closing, or, if the
sale is not consummated, beyond the termination of this Agreement.
6.5 POST CLOSING ACCESS. Following the Closing, Purchaser shall, upon
forty-eight (48) hours prior written notice, be granted access during normal
business hours to Seller's books and records relating to customer files (e.g.,
deal jackets and service repair orders). Any copies of such materials shall be
provided at Purchaser's expense.
7. CONDITIONS TO PURCHASER'S OBLIGATIONS TO CLOSE. The obligations of
Purchaser under this Agreement are subject to fulfillment of the conditions set
forth below. Purchaser shall have the right to waive in writing all or part of
any one or more of the following conditions and upon such waiver may proceed
with the transactions contemplated by this Agreement, and hereby releases Seller
from any and all loss, damage, costs (including attorney's fees), causes of
action and/or claims with respect to such failure of condition unless such
failure of condition is caused by a breach of Seller, in which event the terms
of Section 22.9 shall govern Purchaser's right to damages for such breach.
7.1 AGREEMENTS AND CONDITIONS. On or before the Closing Date, Seller
shall have complied with and duly performed in all material respects all
agreements and conditions on their part to be complied with and performed
pursuant to or in connection with this Agreement on or before the Closing Date.
7.2 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller and Capman contained in this Agreement, of otherwise made
in writing in connection with the transactions contemplated hereby, shall be
true and correct in all material respects on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date and Purchaser shall have received a
certificate to that effect dated the Closing Date and executed by the Vice
President of Seller.
7.3 NO LEGAL PROCEEDINGS. No action or proceeding shall have been
instituted or threatened to restrain or prohibit the acquisition by Purchaser or
the conveyance by Seller of the Acquired Assets or which might result in any
material adverse change in the business, prospects or financial or other
condition of the Acquired Assets.
7.4 CONSENTS. Purchaser shall have received the written approval of
Franchiser designating Purchaser or its designee as a duly authorized dealer for
the sales and service of such Franchiser's automobiles at 1120 Capitol
Expressway Auto Mall, San Jose, California 95136, free of any material condition
which is materially adverse to Purchaser and such Franchiser shall have entered
into a customary Dealer Sales and Service Agreement.
7.5 DUE DILIGENCE. Purchaser shall for a period of thirty (30) days
from the date of execution of this Agreement (the "Due Diligence Period") have
the right to review the books and records of the Dealership relating to the
Acquired Assets, the physical condition of the Dealership property and any other
items reasonably necessary or appropriate to evaluate the Dealership. Such
review shall be done at times and locations as mutually agreed between
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Purchaser and Seller provided that Purchaser shall use all reasonable efforts to
have such review of books and records at locations away from the Dealership.
Seller shall cooperate and provide such information reasonably necessary for
Purchaser to conduct such due diligence review during such thirty (30) day
period. Purchaser's failure to approve of the physical condition of the
Dealership and the review of the books and records relating to the Acquired
Assets by written notice (the "Notice of Intent to Proceed") to Seller prior to
the expiration of the Due Diligence Period, which Notice of Intention to Proceed
shall unequivocally set forth Purchaser's approval of the physical condition of
the Acquired Assets, the review of the books and records relating to the
Acquired Assets, and Purchaser's election to proceed with the transaction
strictly in accordance with the terms of this Agreement, shall constitute
Purchaser's election to terminate this Agreement in which event neither party
shall have any right or liability to the other except as set forth herein. Upon
Purchaser's timely delivery of the Notice of Intent to Proceed, the Deposit
shall be non-refundable except as otherwise set forth herein.
7.6 ENVIRONMENTAL ASSESSMENT. During the thirty (30) day period after
the. execution of this Agreement (the "Testing Period"), Purchaser and Seller
shall conduct an environmental assessment (the "Environmental Assessment") of
the real property at the Dealership (the "Real Property"). Expenses of any
environmental consultant engaged by Purchaser and Seller to conduct the
Environmental Assessment shall be paid by Purchaser. Purchaser may terminate all
of its obligations under this Agreement by written notice to Seller on or before
the expiration of the Testing Period, if Purchaser determines that a release or
threatened release of a hazardous substance has occurred on the Real Property.
Failure to timely notify Seller under this Section 7.7 is deemed to constitute a
waiver of Purchaser's right to terminate this Agreement under this Section 7.7.
7.7 PHYSICAL AUDIT. On or before the Closing Date the valuation of
the Acquired Assets pursuant to the physical audit specified in Section 3.2
shall be completed and approved by Purchaser and Seller.
7.8 TAX CLEARANCE. Purchaser shall have obtained certificates from
the California Franchise Tax Board, the California Employment Development
Department, and the County of Santa Clara that all taxes and contributions
payable by Seller have been paid in full. If such certificates are not available
on the Closing Date, Escrow Holder shall withhold in escrow the estimated amount
of maximum unpaid tax liability reasonably determined by Purchaser which sum
shall be held by Purchaser until such time as all certificates are presented.
7.9 LIST OF EMPLOYEES. Seller shall furnish to Purchaser a list of
all employees names and positions. Seller shall have terminated all employees as
of the Closing Date.
7.10 BULK SALE. Seller shall furnish, in an appropriate time to
comply, all affidavits and lists of creditors and such other instruments or
documents as Escrow Holder shall require for Seller and Purchaser to comply with
all applicable bulk sales laws.
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7.11 PURCHASE OF REAL PROPERTY. Purchaser or nominee of Purchaser
shall have acquired the real property commonly known as 1120 Capitol Expressway
Auto Mall, San Jose, California 95136.
8. CONDITIONS OF SELLER'S OBLIGATIONS TO CLOSE. The obligations of Seller
under this Agreement are subject to fulfillment of the conditions set forth
below. Seller shall have the right to waive in writing all or part of any one or
more of the following conditions without, however, releasing Purchaser from any
liability for any loss or damage sustained by Seller by reason of the breach by
Purchaser of any covenant, obligation or agreement contained herein, or by
reason of any misrepresentation made by Purchaser and upon such waiver may
proceed with the transactions contemplated by this Agreement.
8.1 AGREEMENTS AND CONDITIONS. On or before the Closing Date,
Purchaser shall have complied with and duly performed in all material respects
all of the agreements and conditions on its part required to be complied with or
performed pursuant to this Agreement on or before the Closing Date.
8.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. The representations
and warranties of Purchaser contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the same
force and effect as though such representations and warranties had been made on
and as of the Closing Date and Seller shall have received a certificate to that
effect dated the Closing Date and executed by the President or a Vice President
of Purchaser.
8.3 PHYSICAL AUDIT. On or before the Closing Date the valuation of
the Acquired Assets pursuant to Section 3.2 shall be completed and approved by
Seller.
8.4 PURCHASE OF REAL PROPERTY. On or before the expiration of the Due
Diligence Period, Purchase and Seller shall have entered into the Real Property
Agreement and Purchaser or nominee shall acquire the real property commonly
known as 1120 Capitol Expressway Auto Mall, San Jose, California 95136 in
accordance therewith on or before Closing.
8.5 NO LEGAL PROCEEDINGS. No action or proceeding shall have been
instituted or threatened to restrain or prohibit the acquisition by Purchaser or
the conveyance by Seller of the Acquired Assets or which might result in any
material adverse change in the business, prospects or financial or other
condition of the Acquired Assets.
8.6 CONSENTS. Purchaser shall have received the written approval of
Franchiser designating Purchaser or its designee as a duly authorized dealer for
the sales and service of such Franchiser's automobiles at 1120 Capitol
Expressway Auto Mall, San Jose, California 95136, free of any material condition
which is materially adverse to Purchaser and such Franchiser shall have entered
into a customary Dealer Sales and Service Agreement.
8.7 WARRANT TO PURCHASE COMMON STOCK. On or before expiration of the
Due Diligence Period, Seller and Purchaser shall have entered into a Warrant to
Purchase
12
<PAGE>
Common Stock allowing Seller the option to purchase 20,000 share of Purchaser's
Common Stock.
9. DELIVERIES OF SELLER ON THE CLOSING DATE. Seller agrees on the Closing
Date to deliver to Purchaser:
9.1 TITLE TO ACQUIRED ASSETS. All conveyances, covenants, warranties,
deeds, assignments, bills of sale, motor vehicle titles, confirmations, powers
of attorney, approvals, consents and any and all further instruments as may be
reasonably necessary, expedient or proper in order to complete any and all
conveyances, transfers and assignments herein provided for and to convey to
Purchaser such title to the Acquired Assets as Seller is obligated hereunder to
convey.
9.2 CERTIFICATE OF SECRETARY. Certificate of the Secretary of the
Seller setting forth a copy of the resolutions adopted by Seller's Board of
Directors and shareholders authorizing and approving the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby.
9.3 CERTIFICATE. Certificate of the Vice President of Seller referred
to in Section 7.2.
10. DELIVERIES OF PURCHASER ON THE CLOSING DATE. Purchaser agrees on the
Closing Date to deliver or cause to be delivered.
10.1 CONSIDERATION. The amounts to be delivered pursuant to Section
3.3 hereof.
10.2 CERTIFICATE OF SECRETARY. Certificate of the Secretary of the
Purchaser setting forth a copy of the resolutions adopted by Purchaser's Board
of Directors and shareholders authorizing and approving the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby.
10.3 CERTIFICATE. The Certificate of the President or a Vice President
of the Purchaser referred to in Section 8.2.
11. REAL PROPERTY. Purchaser or nominee of Purchaser shall enter into an
Agreement of Purchase and Sale (the "Real Property Agreement") with Amesbury
Group, a California Limited Partnership, for the property commonly known as 1120
Capitol Expressway Auto Mall, San Jose, California 95136 (the "Property"). The
purchase price for the Property shall be the sum of SIX MILLION TWO HUNDRED
FIFTY THOUSAND DOLLARS ($6,250,000) payable in cash at close of escrow. The
Closing of the purchase of the Property shall be simultaneous with the Closing
and acquisition of the Dealership pursuant to this Agreement. Such Agreement of
Purchase and Sale shall provide that Purchaser shall have 45 days from execution
of the Agreement to obtain a loan secured by a first Deed of Trust on the
Property for such acquisition with commercially reasonable rates and terms. Such
Agreement of Purchase and Sale shall further provide that all closing costs
shall be paid as is customary in Santa Clara
13
<PAGE>
County, and shall contain a hazardous substances indemnity in favor of
Purchaser. The parties shall enter into a Purchase and Sale Agreement in the
form attached hereto as Schedule 11 and incorporated herein by this reference.
12. ESCROW. The parties, upon execution of this Agreement shall open an
escrow with a mutually acceptable escrow company ("Escrow Holder"). The parties
shall forthwith provide to Escrow Holder any and all documentation necessary for
Escrow Holder to publish such notices as may be required by the bulk sale laws
of the State of California. Any and all costs of such escrow shall be paid one-
half by Purchaser and one-half by Seller.
13. COVENANTS AFTER CLOSING DATE.
13.1 TRANSFER OF ACQUIRED ASSETS. Seller agrees from and after the
Closing Date, upon the request of Purchaser, to do, execute, acknowledge and
deliver, or to cause to be done, executed, acknowledged and delivered, all such
further acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may be required for the assigning, transferring, conveying, and
confirming to Purchaser, or to its successors and assigns, or for the aiding,
assisting, collecting and reducing to possession of, any or all of the Acquired
Assets as provided herein.
13.2 COOPERATION. Seller will cooperate and use its reasonable efforts
to have its officers and employees cooperate with Purchaser at Purchaser's
request, on and after the Closing Date, in furnishing information, evidence,
testimony and other assistance in connection with any actions, proceedings,
arrangements or disputes involving Purchaser and based upon contracts,
arrangements, commitments or acts of Seller which were in effect or occurred on
or prior to the Closing Date. From and after the Closing Date, Seller will
permit Purchaser and its representatives to have access to Setter's books and
records relating to the Acquired Assets for periods prior to the Closing Date
upon notice and during normal business hours. Seller shall assist Purchaser
after the Closing related to audits required in connection with any public
offering contemplated by Purchaser, provided Seller shall not be required to
expend funds (including internal labor costs) or institute litigation. Purchaser
shall keep any information delivered to Purchaser hereunder confidential;
provided, however, Purchaser shall have the right as required by law to use such
final information in connection with financial reporting or filing of any
required documents with the Securities Exchange Commission or other similar or
necessary use.
14. INDEMNIFICATION.
14.1 INDEMNIFICATION BY SELLER AND CAPMAN. Seller and Capman agree to
indemnify and hold harmless Purchaser from and against any and all losses,
costs, damages, claims and expenses (including reasonable attorneys' fees) which
Purchaser may sustain at any time by reason of (a) any debt, liability or
obligation of Seller except obligations assumed by Purchaser, (b) any liability
or obligation of any kind relating to the operations of the Acquired Assets or
Dealership prior to the Closing Date, or (c) the breach or inaccuracy of or
failure to comply with, or the existence of any facts resulting in the
inaccuracy of, any of the warranties, representations, covenants or agreements
of Seller contained in this Agreement. The parties
14
<PAGE>
acknowledge and agree that Purchaser shall have the right to repair automobiles
sold and/or serviced by Seller to correct miscellaneous customer complaints that
Purchaser determines in Purchaser's reasonable judgment are an obligation of
Seller, with Seller's prior written approval; provided, that the total of
repairs for any one automobile shall not exceed the sum of ONE THOUSAND DOLLARS
($1,000).
14.2 INDEMNIFICATION BY PURCHASER. Purchaser agrees to indemnify and
hold harmless Seller from and against any and all losses, cost, damages, claims
and expenses (including reasonable attorneys' fees) which Seller may sustain at
any time by reason of (a) any debt, liability or obligation of Purchaser, (b)
any liability or obligation of any kind relating to the operations of the
Acquired Assets or Dealership after the Closing Date, or (c) the breach or
inaccuracy of or failure to comply with, or the existence of any facts resulting
in the inaccuracy of, any of the warranties, representations, covenants or
agreements of Purchaser contained in this Agreement.
14.3 DEFENSE. Any party who receives notice of a claim for which it
will seek indemnification shall promptly notify the indemnifying party in
writing of such claim. The indemnifying party shall have the right to assume the
defense of such action at its cost with counsel reasonably satisfactory to the
indemnified party. The indemnified party shall have the right to participate in
such defense with its own counsel at its cost.
15. SURVIVAL OF REPRESENTATIONS. The parties hereto each agree that all
representations and warranties and indemnities contained herein shall survive
the execution and delivery of this Agreement for a period of twelve (12) months
following the Closing (the "Limitations Period"). Purchaser must provide Seller
written notice of any claims prior to the expiration of the Limitations Period.
Purchaser acknowledges and agrees that in executing this Agreement Capman's
liability shall be limited to claims made by Purchaser during the Limitations
Period for a breach of a representation and warranty set forth in Section 4
hereof or for Purchaser's right to indemnity pursuant to Section 14.1 hereof.
16. NO BROKER. Purchaser on the one hand, and Seller on the other,
represent to the other that no broker or finder has been connected with the
transactions contemplated by this Agreement. In the event of a claim by any
broker or finder based upon his representing or being retained by Seller on the
one hand, or by Purchaser on the other, Seller or Purchaser, as the case may be,
agrees to indemnify and save harmless the other in respect of such claim.
17. USE OF THE NAME. Seller agrees that from and after the Closing Date,
Purchaser shall have the right to the name "Capitol Nissan" or any derivative
thereof or similar name in connection with the operation of the, Dealership
acquired hereunder, and that Seller shall not subsequent to the Closing, use
such name.
18. TERMINATION. If the Closing Date shall not have occurred on or prior
to September 15, 1997 (the "Termination Date") or if Purchaser shall receive
disapproval from the Franchiser prior thereto, any party that is not in default
in the performance of its obligations under this Agreement may, thereafter,
terminate this Agreement by giving written notice to the other party; provided,
however, Purchaser may extend the Termination Date for a period of thirty
15
<PAGE>
(30) days from the Termination Date ("First Extension Period") by causing the
sum of Fifty Thousand Dollars and 00/100 ($50,000) to be delivered to Escrow
Holder prior to the Termination Date (the "First Extension Period Deposit"). The
First Extension Period Deposit shall follow the Deposit in accordance with and
pursuant to the terms of Section 3.3 hereof. Purchaser may extend the First
Extension Period an additional period of thirty (30) days ("Second Extension
Period") by causing the sum of Fifty Thousand Dollars and 00/100 ($50,000) to be
delivered to Escrow Holder prior to the expiration of the First Extension Period
(the "Second Extension Period Deposit"). The Second Extension Period Deposit
shall follow the Deposit in accordance with and pursuant to the terms of Section
3.3 hereof.
19. CONFIDENTIALITY. In the event this Agreement is terminated for any
reason other than the default of Seller, Purchaser shall deliver to the Seller,
at no expense to Purchaser, without representation or warranty of any kind, all
of the documents and papers which were supplied by the Seller to Purchaser or
its agents, including, without limitation, financial statements, tax returns,
appraisals, inspections, investigations, studies, tests, surveys, and reports
concerning the Assets, but excluding any documents or other papers which are
proprietary property or trade secrets of Purchaser. Unless and until the Closing
occurs, none of the parties to this Agreement shall disclose, publish or
communicate either directly or indirectly, any of the terms, conditions or the
subject or content of the parties' negotiations concerning purchase of the
Dealership, except (a) in response to any lawful process requiring disclosure of
the same as reasonably required by law or public reporting requirements, or (b)
to prospective sources of financing, to mortgage brokers, franchisers,
investment bankers, investors or purchasers, attorneys, accountants,
consultants, experts and professionals engaged by Purchaser in connection with
its due diligence investigation. The parties each agree that it shall at all
times keep the contents of the negotiations confidential (subject to the
exceptions stated in the preceding sentence) and that no publicity or press
release with respect to any proposed transaction shall be made by either party
without the prior written consent of either party.
20. RISK OF LOSS AND INSURANCE PROCEEDS. Seller shall give Purchaser
notice of the occurrence of damage or destruction of, or the commencement of
condemnati on proceedings affecting any portion of the Premises. In the event
that all or any material portion of the Premises is condemned, or destroyed or
damaged by fire or other casualty prior to the Closing and the cost to repair or
restore any loss or damage caused thereby is greater than FIVE HUNDRED THOUSAND
DOLLARS ($500,000), then Purchaser may, at its option to be exercised within
fifteen (15) days of Seller's notice of the occurrence of the damage or
destruction or the commencement of the condemnation proceedings, either
terminate this Agreement or consummate the purchase for the full consideration
as required by the terms hereof. If Purchaser elects to terminate this
Agreement or fails to give Seller notice within such fifteen (15) day period
that Purchaser will proceed with the purchase, then this Agreement shall
terminate at the end of such fifteen (15) day period and the Deposit shall be
returned to Purchaser and neither party shall any have further rights or
obligations hereunder. If (a) a portion of the Premises is condemned or
destroyed or damaged by fire or other casualty prior to the Closing and the cost
to repair or restore any loss or damage caused thereby is equal to or less than
FIVE HUNDRED THOUSAND DOLLARS ($500,000); or (b) Purchaser elects within the
aforesaid fifteen (15) day period to proceed with the purchase, then this
Agreement shall not terminate and
16
<PAGE>
upon the Closing, there shall be a credit against the Purchase Price due
hereunder equal to the amount of any insurance proceeds or condemnation awards
collected by Seller as a result of any such damage or destruction or
condemnation, plus the amount of any insurance deductible, less any sums
expended by Seller toward the restoration or repair of the Premises (but in no
event shall the amount of such credit exceed the Purchase Price); provided,
however, in the event the insurance or condemnation proceeds are less dm the
actual amount necessary to replace such damage, Purchaser shall receive a credit
against the Purchase Price on the Closing in the amount of such difference. If
the proceeds or awards have not been collected as of the Closing, then such
proceeds or awards shall be assigned to Purchaser, except to the extent needed
to reimburse Seller for sums expended to collect such proceeds or repair or
restore the Premises, and Purchaser shall not receive any credit against the
Purchase Price with respect to such proceeds or awards; provided, that if the
amount of proceeds or awards subsequently received by Purchaser exceeds the
Purchase Price, then Purchaser shall pay to Seller any such excess within ten
(10) days after Purchaser's receipt of such proceeds or awards. The provisions
of this Section 20 shall survive the Closing.
21. NOTICES. All notices, requests or demands to a party hereunder shall
be in writing and shall be given or served upon the other party by personal
service, by certified return receipt requested or registered mail, postage
prepaid, or by Federal Express or other nationally recognized commercial
courier, charges prepaid, addressed as set forth below. Any such notice, demand,
request or other communication shall be deemed to have been given upon the
earlier of personal delivery thereof, three (3) business days after having been
mailed as provided above, or one (1) business day after delivery through a
commercial courier, as the case may be. Notices may be given by facsimile and
shall be effective upon the transmission of such facsimile notice provided that
the facsimile notice is transmitted on a business day and a copy of the
facsimile notice together with evidence of its successful transmission
indicating the date and time of transmission is sent on the day of transmission
by recognized overnight carrier for delivery on the immediately succeeding
business day. Each party shall be entitled to modify its address by notice given
in accordance with this Section 19.
To Purchaser: FirstAmerica Automotive, Inc.
c/o Kay & Merkle
100 The Embarcadero, Penthouse
San Francisco, California 94105
Fax No.: 415-512-9277
With a copy to: W. Bruce Bercovich, Esq.
Kay & Merkle
100 The Embarcadero, Penthouse
San Francisco, California 94105
Fax No.: 415-512-9277
To Seller: Golden Sierra Auto Group, Inc.
dba Capitol Nissan
1120 Capital Expressway Auto Mall
17
<PAGE>
San Jose, California 95136
Fax No.: 408-297-1161
To Capman: Capitol Management Group, Inc.
675 North First Street
Suite 800
San Jose, CA 95112
Fax No.: 408-297-1161
With a copy to: William Myers, Esq.
Morrison & Foerster
755 Page Mill Road
Palo Alto, California 94304
Fax No.: 415-494-0792
22. MISCELLANEOUS.
22.1 ENTIRE AGREEMENT. This Agreement, including the exhibits and
schedules hereto, sets forth the entire agreement and understanding between the
parties as to the subject matter hereof and merges and supersedes all prior
discussions, agreements and understandings of every kind and nature between them
and no party hereto shall be bound by any condition, definition, warranty or
representation other than as expressly provided for in this Agreement or as may
be on a date subsequent to the date hereof duly set forth in writing signed by
the party hereto which is to be bound thereby. This Agreement shall not be
changed, modified or amended except by a writing signed by the party to be
charged and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.
22.2 GOVERNING LAW. This Agreement and its validity, construction and
performance shall be governed in all respects by the laws of the State of
California, without giving effect to principles of conflict of laws.
22.3 SEVERABILITY. If any provision of this Agreement or the
application of any provision hereof to any person or circumstance is held
invalid, the remainder of this Agreement and the application of such provision
to other persons or circumstances shall not be affected unless the provision
held invalid shall substantially impair the benefits of the remaining portions
of this Agreement.
22.4 BENEFIT OF PARTIES. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
heirs, legal representatives and assigns. Purchaser shall not assign this
Agreement to any unaffiliated entity which is not controlled by, in control of ,
or under common control with Purchaser.
18
<PAGE>
22.5 NECESSARY DOCUMENTS. Each of the parties does hereby agree to do
any act and to execute any other or further documents reasonably necessary or
convenient to the carrying out of the provisions of this Agreement.
22.6 HEADINGS. The headings in the sections of this Agreement are
inserted for convenience of reference only and shall not constitute a part
hereof.
22.7 ATTORNEYS' FEES. In the event that any action or proceeding is
brought to enforce or interpret any provision, covenant or condition contained
in this Agreement on the part of Purchaser, Seller or Capman, the prevailing
party in such action or proceeding (whether after trial or appeal) shall be
entitled to recover from the party not prevailing its expenses therein,
including reasonable attorneys' fees and allowable costs.
22.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto.
22.9 TERMINATION AND REMEDIES.
(a) LIQUIDATED DAMAGES. If Purchaser breaches this Agreement,
and the transaction contemplated by this Agreement fails to close by reason
thereof, Seller shall be entitled to terminate this Agreement and retain
the amount of the Deposit plus any accrued interest thereon (the "Specified
Sum") as liquidated damages. SELLER AND PURCHASER ACKNOWLEDGE THAT SUM IS A
REASONABLE ESTIMATE OF SELLER'S DAMAGES. SELLER AND PURCHASER FURTHER AGREE
THAT THIS SECTION IS INTENDED TO AND DOES LIQUIDATE THE AMOUNT OF DAMAGES
DUE SELLER, AND SHALL BE SELLER'S EXCLUSIVE REMEDY AGAINST PURCHASER, BOTH
AT LAW AND IN EQUITY ARISING FROM OR RELATED TO A BREACH BY PURCHASER OF
ITS OBLIGATIONS TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.
Buyer __________ Seller DRB
----------
22.10 BREACH BY SELLER. In the event that the Closing fails to occur
as a result of a default of Seller, Purchaser may, as its sole and exclusive
remedy, elect to either: (a) enforce the terms of this Agreement by action for
specific performance, but with no reduction in the Purchase Price; provided,
however, that no action for specific performance shall compel Seller to commence
litigation or cure or deal with any matters outside of its reasonable control or
expend funds except as provided for in the Agreement as to such matters; or (b)
terminate this Agreement in which event the Purchaser shall have the right to
immediate return of its deposit and damages from Seller or Capman in an amount
to the actual damage suffered by Purchaser but in no event in excess of the
amount of FIFTY THOUSAND DOLLARS ($50,000).
19
<PAGE>
22.11 ACCEPTANCE OF AGREEMENT BY PURCHASER. This Agreement shall be
null and void unless it is accepted by Purchaser and two fully executed copies
hereof are returned to Seller on or before 5:00 p.m. (P.D.T.) on July 19, 1997.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
<TABLE>
<CAPTION>
PURCHASER: SELLER:
<S> <C>
FirstAmerica Automotive, Inc. Golden Sierra Auto Group,
a Nevada corporation a California corporation, dba Capitol Nissan
By: /s/ Thomas A. Price By: /s/ Dennis R. Boyle
------------------------------ ------------------------
Name: Thomas A. Price Name: Dennis R. Boyle
--------------------------- Its: Vice- President
Its: President
--------------------------- CAPMAN:
CAPMAN, Inc.,
a California corporation
By: /s/ Dennis R. Boyle
------------------------
Name: Dennis R. Boyle
Its: President
</TABLE>
20
<PAGE>
LIST OF SCHEDULES
SCHEDULE 2.1 Acquired Assets
SCHEDULE 3.4 1997 Dealer Challenge
SCHEDULE 3.5 Liabilities
SCHEDULE 3.7 Allocation of Purchase Price
SCHEDULE 4.2 Due Diligence Materials
SCHEDULE 8.7 Warrant to Purchase Common Stock
SCHEDULE 11 Purchase and Sale Agreement
<PAGE>
SCHEDULE 3.4
[LOGO OF NISSAN APPEARS HERE]
================================================================================
NORTHWEST REGION DEALER INCENTIVE PROGRAM
"1997 DEALER CHALLENGE"
OFFICIAL PROGRAM RULES
DISTRICTS: 1,3,4,5,6,7,8,9,10,11,12
PROGRAM PERIOD: JANUARY 1, 1997 - DECEMBER 31, 1997
================================================================================
ELIGIBLE PARTICIPANTS
---------------------
All authorized Nissan Dealers located within the above named Districts are
eligible to participate. ALL DEALERS MUST ATTAIN THEIR 1997
JANUARY/FEBRUARY/MARCH WHOLESALE OBJECTIVE TO PARTICIPATE IN THE "1997 DEALER
CHALLENGE" PROGRAM.
ENROLLMENT
----------
Each participating dealership will be required to enroll in the "1997 DEALER
CHALLENGE" by completing the attached Official "1997 DEALER CHALLENGE"
Enrollment Form. The attached enrollment form must be received by the
regional office no later than March 14, 1997.
ELIGIBLE MODELS
---------------
All new, unused, unregistered 1996, 1997, 1997.5 and 1998 models.
OBJECTIVES
----------
1997 JAN/FEB/MARCH WHOLESALE OBJECTIVE (January 1, 1997 - March 31, 1997)
Dealers will be assigned a 1997 January/February/March Wholesale Objective for
the period of January 1, 1997 - March 31, 1997. To participate in the "1997
DEALER CHALLENGE" dealers must achieve the 1997 January/February/March Wholesale
Objective.
1997 CALENDER YEAR OBJECTIVE (January 1, 1997 - December 31, 1997)
Dealers will be assigned a 1997 Calendar Year Retail Sales Objective for the
period of January 1, 1997 - December 31, 1997. Achievement of the 1997 Calendar
Year Retail Sales Objective and attainment of the 1997 January/February/March
Wholesale Objective will pay $50 retroactive on each eligible unit sold during
January 1, 1997 - December 31, 1997.
1997 Q1 "FAST START" OBJECTIVE (January 1, 1997 - April 1, 1997)
Dealers will be assigned a 1997 Q1 "Fast Start" Retail Sales Objective for the
period of January 1, 1997 - April 1, 1997. Achievement of the 1997 Q1 "Fast
Start" Objective and attainment of the 1997 January/February/March Wholesale
Objective will pay an additional $100 retroactive on each eligible unit sold
during January 1, 1997 - December 31, 1997. ONLY DEALERS WHO ATTAIN THEIR
"1997 CALENDER YEAR OBJECTIVE" WILL BE ELIGIBLE TO RECEIVE THE "1997 Q1 `FAST
START' AWARD".
<PAGE>
[LOGO OF NISSAN APPEARS HERE]
================================================================================
OFFICIAL
"1997 DEALER CHALLENGE"
ENROLLMENT FORM
================================================================================
YES!
I accept the CHALLENGE and will participate in the "1997 DEALER CHALLENGE"
Program.
1997 JANUARY/FEBRUARY/MARCH WHOLESALE OBJECTIVE: 349 61
1997 CALENDER YEAR OBJECTIVE: 1311 107
1997 Q1 "FAST START" OBJECTIVE: 328
DEALER NAME: CAPITOL NISSAN
DEALER CODE: 2789
AUTHORIZED SIGNATURE:
_____________________________
(Dealer Principal/Executive Mgr)
NO!
I do not wish to participate in the "1997 DEALER CHALLENGE" Program.
DEALER NAME:
DEALER CODE:
AUTHORIZED SIGNATURE:
(Dealer Principal/Executive Mgr)
PLEASE COMPLETE THIS FORM BY MARCH 14, 1997 and fax it to:
(510) 426-2911
Attention: Tracy Grover
<PAGE>
SCHEDULE 8.7
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE COMMON STOCK
<TABLE>
Warrant #_______
<S> <C>
Corporation: FirstAmerica Automotive, Inc., a Delaware corporation
(the "Company")
Initial Exercise Price: $______________
Issue Date: _______________
Expiration Date: The ___________ anniversary of the date hereof
</TABLE>
THIS WARRANT CERTIFIES THAT, for good and valuable consideration,
___________________ ("Holder") is entitled to purchase ____________________ paid
and nonassessable shares of the Common Stock (the "Shares") of the Company at
the initial exercise price of $__________ per Share (the "Warrant Price"), as
adjusted pursuant to Article 2 of this Warrant, subject to the provisions and
upon the terms and conditions set forth in this Warrant.
ARTICLE I.
EXERCISE
--------
1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
------------------
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to principal office of the Company. Unless Holder is exercising the conversion
right set forth in Section 1.2, Holder shall also deliver to the Company a check
for the aggregate Warrant Price for the Shares being purchase.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
----------------
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate Fair
Market Value of the Shares issuable upon exercise of this Warrant minus the
aggregate Warrant Price of such Shares by (b) the
1
<PAGE>
Fair Market of one Share. The Fair Market Value of the Shares shall be
determined pursuant to Section 1.3.
1.3. Fair Market Value. If the Shares are traded in a public market, the
-----------------
Fair Market Value of the Shares shall be the closing price of the Shares
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine Fair Market Value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable
investment banking firm to undertake such valuation. If the valuation of such
investment banking firm is greater than that determined by the Board of
Directors, then all fees and expenses of such investment banking firm shall be
paid by the Company. In all other circumstances, such fees and expenses shall
be paid by Holder.
1.4. Delivery of Certificate and New Warrant. Promptly after Holder
---------------------------------------
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.5. Replacement of Warrants. On receipt of evidence reasonable
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company,
and, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company, at its expenses, shall execute and deliver, in lieu of this
Warrant, a new warrant of like tenor.
1.6. Merger or Consolidation of the Company.
--------------------------------------
1.6.1. "Acquisition." For the purpose of this Warrant, "Acquisition"
-----------
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.6.2. Assumption of Warrant. Upon the closing of any Acquisition, the
---------------------
successor entity shall assume the obligations of this Warrant, and this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Share were outstanding on the record date for the Acquisition
and subsequent closing. The Warrant price shall be adjusted accordingly.
1.6.3. Purchase Right. Notwithstanding the foregoing, at the election
--------------
of Holder, the Company shall purchase the unexercised portion of this Warrant
for cash upon the closing of any Acquisition for an amount equal to (a) the fair
market value of any consideration of the Shares had Holder exercised the
unexercised portion of this Warrant
2
<PAGE>
the number of Shares issuable upon exercise of this Warrant shall be adjusted
upward in such a manner that the aggregate Warrant price of this Warrant is
unchanged.
2.5. Fractional Shares. No fractional shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder an amount computed by
multiplying the fractional interest by the Fair Market Value of a full Share.
2.6. Certificate as to Adjustments. Upon each adjustment of the Warrant
Price, the Company, at its expense, shall promptly compute such adjustment and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE III.
------------
REPRESENTATIONS AND COVENANTS OF THE COMPANY
--------------------------------------------
3.1. Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws.
3.2. Notice of Certain Events. If the Company proposes at any time (a)
------------------------
to declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series or
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merger or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets or to liquidate,
dissolve or wind up, or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the Company's securities
for cash, then in connection with each such event, the Company shall give Holder
(1) prompt prior written notice of the date on which a record will be taken for
such dividend, distribution, or subscription rights (and specifying the date on
which the holders of common stock will be entitled thereto) or for determining
rights to vote, if any, in respect of the matters referred to in (c) and (d)
above; (2) in the case of the maters referred to in (c) and (d) above, prompt
prior written notice of the date when the same will take place (and specifying
the date on which the holders of common stock will be entitled to exchange their
common stock for securities or other property deliverable upon the occurrence of
such event); and (3) in the case of the matter referred to in (e) above, the
same notice as is given to the holders of such registration rights.
4
<PAGE>
3.3. Information Rights. So long as the Holder holds this Warrant and/or
------------------
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notice or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within sixty (60) days after the end of the first three quarters of each
fiscal year, the Company's quarterly, unaudited financial statements. The
Company's delivery obligations under this section shall terminate upon the
Company becoming subject to the periodic reporting requirements of Section 12(g)
or 15(d) of the Securities Exchange Act of 1934, as amended.
3.4. Automatic Exercise. If, as of the last day of the term hereof, this
------------------
Warrant has not been fully exercised, then as of such date this Warrant shall be
automatically converted, in full, in accordance with Section 1.2, without any
action or notice by the Holder.
3.5. Registration Under Securities Act of 1933, as amended. The Company
-----------------------------------------------------
agrees that the Shares shall be deemed "registrable securities" or otherwise
entitled to "piggy back" registration rights in accordance with the terms of the
following agreement between the Company and its investors (the "Agreement")
_____________________. The Company agrees that no amendments will be made to
the Agreement which would have an adverse impact on Holder's registration rights
thereunder without the consent of Holders. By acceptance of this Warrant,
Holder shall be deemed to be a party to the Agreement, unless Holder elects not
to become or to cease being a party thereto.
ARTICLE IV.
-----------
MISCELLANEOUS
-------------
4.1. Term; Notice of Expiration. This Warrant is exercisable, in whole or
--------------------------
in part, at any time and from time to time on or before the Expiration Date set
forth above.
4.2. Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED.
5
<PAGE>
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
-------------------------------------------
Shares issuable upon exercise of this Warrant may not be transferred or assigned
in whole or in part without compliance with applicable federal and state
securities laws by the transferor and the transferee (including, without
limitation, the delivery of investment representation letters and legal opinions
reasonably satisfactory to the Company, as reasonably requested by the Company).
The Company shall not require Holder to provide an opinion of counsel if the
transfer is to an affiliate of Holder or if there is no material question as to
the availability of current information as referenced in Rule 144(c), Holder
represents that it has complied with Rule 144(d) and (e) in reasonable detail,
the selling broker represents that it has complied with Rule 144(f), and the
Company is provided with a copy of Holder's notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.3, Holder
------------------
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant by giving the Company notice of the portion of the Warrant being
transferred setting forth the name, address and taxpayer identification number
of the transferee(s) and surrendering this Warrant to the Company for reissuance
to the transferee(s) (and Holder, if applicable). Unless the Company is subject
to the periodic reporting requirements of Section 12(g) or 15(d) of the
Securities Exchange Act of 1934, as amended, the Company shall have the right to
refuse to transfer any portion of this Warrant or the Shares to any person who
directly competes with the Company and/or its subsidiaries.
4.5 Notices. All notices and other communications from the Company to the
-------
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished by the Company or the
Holder, as the case may be, in writing by the Company or the Holder from time to
time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys' Fees. In the event of any dispute between the parties
---------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
FIRSTAMERICA AUTOMOTIVE, INC.
By: _________________________
6
<PAGE>
Name:
------------------------------
(Print)
Title:
------------------------------
7
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _______ Shares of the Common
Stock of FirstAmerica Automotive, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such Shares in
full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares in the manner specified in the Warrant. This conversion is exercised
with respect to ____________________ of the Shares covered by the Warrant.
[STRIKE PARAGRAPH 1 THAT DOES NOT APPLY.]
2. Please issue a certificate or certificates representing said Shares in
the name of the undersigned or in such other name as is specified below:
---------------------------
(Name)
---------------------------
---------------------------
(Address)
3. The undersigned represents it is acquiring the Shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
---------------------------
(Signature)
Date:
-------------------
<PAGE>
SCHEDULE 11
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT ("Agreement") dated as of July 17, 1997,
is by and between AMESBURY GROUP, a California general partnership ("Seller"),
and BAY AUTOMOTIVE PROPERTIES, a California limited liability company or nominee
("Buyer"), and is made with reference to the following facts:
RECITALS
A. Seller is the owner of that certain real property commonly known as
1120 Capitol Expressway Auto Mall, San Jose, California 95136 (the "Real
Property") which is more particularly described on Exhibit A attached hereto.
---------
B. Concurrently herewith, Seller and Buyer have entered into that certain
Asset Purchase Agreement dated as of July 17, 1997 in the form of Exhibit B
---------
hereto (the "Asset Purchase Agreement") whereby Golden Sierra Auto Group, a
California corporation, dba Capitol Nissan ("Golden Sierra"), is to sell to
Buyer certain of the assets, properties and business of Golden Sierra utilized
in connection with Golden Sierra's Nissan automobile dealership.
C. By this Agreement, Seller desires to sell Seller's rights, title and
interest in and to the Real Property and certain personal property and Buyer
desires to purchase all of Seller's rights, title and interest in and to the
Real Property and such personal property on the terms and conditions herein set
forth.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
AGREEMENT
---------
ARTICLE I
PURCHASE AND SALE OF PROPERTY
Section 1.1 SALE. Seller hereby agrees to sell to Buyer, and Buyer agrees
to purchase from Seller, subject to the terms, covenants and conditions set
forth herein, the Property, together with any and all easements and other
appurtenances thereto owned by Seller, located in the City of San Jose, together
with the personal property owned by Seller ("the "Personal Property"), if any,
located on the Real Property and used exclusively in the operation or
maintenance of the Real Property, as the same may be further described in any
list which is in Seller's possession and is furnished to Buyer within the Due
Diligence Period, as defined in Section 3.1 hereof. The Real Property and the
Personal Property are collectively referred to herein as the "Property." The
Real Property shall include, without limitation, the land described on Exhibit A
attached
1
<PAGE>
EXHIBIT C
PRO-FORMA TITLE POLICY
[To Follow]
2
<PAGE>
EXHIBIT D
GENERAL ASSIGNMENT
THIS GENERAL ASSIGNMENT (the "Assignment") dated as of ________________,
1997, is between AMESBURY GROUP, a California general partnership ("Assignor"),
and BAY AUTOMOTIVE PROPERTIES, a California limited liability company
("Assignee").
A. Assignor and Assignee have entered into that certain Purchase and Sale
Agreement dated as of July 17, 1997 (the "Agreement"), pursuant to which
Assignee agreed to purchase the Property from Assignor and Assignor agreed to
sell the Property to Assignee, on the terms and conditions contained therein.
Unless otherwise set forth herein, all initially capitalized terms shall have
the meaning set forth in the Agreement. Pursuant to the Agreement, Assignor has
agreed to assign to Assignee all of its right, title, and interest in and to all
current licenses, permits, certificates of occupancy, approvals and entitlements
issued or granted in connection with the Real Property as well as any and all
development rights and any other intangible rights, interests or privileges
relating to, or used in connection with the Real Property and all transferable
warranties or sureties relating to the Real Property or Personal Property
(collectively, the "Intangible Property").
B. Assignor has entered into the contracts listed on Exhibit D-1 hereto
relating to the Property (the "Contracts").
C. Assignor desires to assign to Assignee its interest in the Contracts and
the Intangible Property, and Assignee desires to accept the assignment thereof
and assume the obligations thereunder, on the terms and conditions below.
ACCORDINGLY, the parties hereby agree as follows:
1. Assignment. As of the date on which the Property is conveyed to
----------
Assignee pursuant to the Agreement (the "Closing Date"), Assignor hereby assigns
without recourse or warranty of enforceability all of its right, title and
interest in and to the Contracts and the Intangible Rights.
2. Assignor's Indemnity. Except as otherwise set forth herein, or in
--------------------
the Agreement, Assignor hereby agrees to indemnify Assignee against and hold
Assignee harmless from any and all liabilities, losses, damages, claims, costs
or expenses, including, without limitation, reasonable attorneys' fees and costs
(collectively, "Claims"), originating prior to the Closing Date and arising out
of Assignor's obligations under the Contracts.
3. Assumption. Concurrently with the conveyance of Assignor's interest
----------
in the Property to Assignee, Assignee hereby assumes all of Assignor's
<PAGE>
obligations under the Contracts and the General Intangibles, and agrees to
indemnify Assignor against and hold Assignor harmless from any and all Claims
originating on or subsequent to the Closing Date and arising out of Assignee's
obligations under the Contracts.
4. Miscellaneous.
-------------
(a) In the event of any dispute between Assignor and Assignee
arising our of the obligations of Assignor under this Assignment or concerning
the meaning or interpretation of any provision contained herein, the losing
party shall pay the prevailing party's costs and expenses of such dispute,
including, without limitation, reasonable attorneys' fees and costs.
(b) This Assignment shall be binding on and inure to the benefit
of the parties hereto and their respective successors and assigns.
(c) This Assignment may be executed in any number of
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Assignment is entered into as of the
date first above written.
ASSIGNOR: AMESBURY GROUP,
a California general partnership
By: ______________________________
Its: ______________________________
ASSIGNEE: BAY AUTOMOTIVE PROPERTIES,
a California limited liability company
By: ______________________________
Its: ______________________________
By: ______________________________
Its: ______________________________
<PAGE>
EXHIBIT E
GRANT DEED
[To Follow]
<PAGE>
EXHIBIT F
BILL OF SALE
For value received, the undersigned Vendor hereby sells, assigns and transfers
to BAY AUTOMOTIVE PROPERTIES, a California limited liability company, as Vendee,
all right, title, and interest of the Vendor in and to the following property:
that certain Personal Property, as that term is defined in that certain Purchase
and Sale Agreement between Vendor and Vendee dated as of July 17, 1997.
WITNESSETH the hand and seal of the Vendor this _______ of July, 1997
VENDOR:
AMESBURY GROUP,
a California general partnership
By: ________________________________
Its: ________________________________
By: ________________________________
Its: ________________________________
<PAGE>
EXHIBIT G
ENVIRONMENTAL REPORT
[To Follow]
<PAGE>
EXHIBIT H
GUADALUPE REPORT
[To Follow]
<PAGE>
EXHIBIT I
ASSESSMENT LEIN
<TABLE>
<CAPTION>
JULY 11, 96 IMPROVEMENT DISTRICT NO. 94-216SJ (CAPITOL EXPRESSWAY AUTO MALL)
216AS ASSESSMENT SPREAD
CONSTRUCTION CONSTRUCTION CONSTRUCTION
AREA FRONTAGE CONTINGENCY TOTAL
ASSMT. NO. APN PROPERTY OWNER (Acres) (Feet) (By Area) (By Const.)
- ---------- ----------- ------------------------------------ --------- -------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
1 459-03-002 AMESBURY GROUP (NISSAN) 0.65 17,154.76 1,199.46 18,354.22
2 459-03-003 AMESBURY GROUP (NISSAN) 0.67 17,682.59 1,236.37 18,918.96
3 459-03-004 AMESBURY GROUP (NISSAN) 3,587 94,667.84 6,619.20 101,287.04
4 459-04-003 KLEINMAN, SIMON & PHYLLIS (FORD) 4.5 118,783.67 8,303.98 127,087.65
5 459-04-004 ROBERT LEWIS (VOLKSWAGON) 4.62 121,930.70 8,525.42 130,456.12
6 459-04-006 KLEINMAN, SIMON & PHYLLIS (FORD) 2,091 15,345.88 1,072.98 16,418.87
7 459-04-005 A. & K. KERLEY (LINCOLN MERCURY) 3,287 86,222.43 6,028.69 92,251.12
8-a 459-04-007 M. & E. CARL (CHEVROLET) 5,717 150,882.65 10,549.75 161,432.40
8-b 459-04-007 M. & E. CARL (CHEVROLET) 3,746 27,491.94 1,922.24 29,414.18
9 459-05-019 TOYOTA MOTOR DISTRIBUTORS 4,662 123,039.17 8,602.93 131,642.09
10 459-05-018 W. KUNI (BUICK) 3,922 103,509.14 7,237.38 110,746.52
11 459-05-017 GMAC 2,928 77,275.56 5,403.12 82,678.68
12 459-05-016 T. STEVENS (HONDA) 4,941 130,402.51 9,117.77 139,520.28
13 459-27-014 EASTSIDE UNION HIGH SCH. DIST. 6.6 249,186.72 17,423.19 266,609.91
14 459-27-010 PATRICIA RUBINO (VACANT) 6,066 133,701.50 9,348.44 143,049.94
15 459-27-003 PATRICIA RUBINO (MITSUBISHI) 3,785 99,893.45 6,864.57 106,678.02
16-a 459-27-009 PATRICIA RUBINO (AUTO SERVICE) 1,181 31,168.87 2,179.33 33,348.20
16-b 459-27-009 PATRICIA RUBINO (AUTO SERVICE) 2.67 19,595.16 1,370.10 20,965.26
17 459-27-002 TOYOTA MOTOR DISTRIBUTORS 0.67 17,682.59 1,236.37 18,918.96
18 459-06-015 L. NORMANDIN (CHRYSLER PLYMOUTH) 5,796 152,967.61 10,696.53 163,663.14
19 459-06-044 JOSEPH & DOROTHY RUBINO (MAZDA) 2.65 69,938.61 4,890.12 74,828.73
20 459-06-043 JOSEPH & DOROTHY RUBINO (OLDSMOBILE) 5,325 140,537.01 9,826.38 150,363.39
21 459-06-038 HARTZHEIM ENTERPRISES LLC (DODGE) 5 131,959.64 9,226.65 141,195.29
--------- -------------- ------------- ------------ -------------
84,044 2,131,000.00 149,000.00 2,280,000.00
75,537 2,131,000.00 149,000.00
*50% of cost for new signal at Capito Auto Mall Plaza assessed to parcel 13 only.
*70% of construction cost assessed to all parcels except parcels 6, 8b and 16b.
*30% of construction cost assessed to all parcels including parcels 6, 8b and 16b.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LAND & D&C D&C D&C DISTRICT
ACQUISITION MANAGEMENT MANAGEMENT MANAGEMENT FINANCING ASSESSMENT ANNUAL
CONTINGENCY TOTAL TOTAL ASSESSMENT
(By Const.) (By Const.) (By Const.) (25 YEARS)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6,143.03 450.81 6,593.83 8,057.34 33,005.39 2,832.21 NISSAN
6,332.04 464.68 6,796.72 8,305.26 34,020.94 2,819.35 NISSAN
33,900.06 2,487.75 36,307.01 44,464.12 182,138.98 15,629.44 NISSAN
42,528.65 3,120.96 45,649.61 55,701.59 228,498.85 19,607.60 FORD
43,662.75 3,204.18 46,668.94 57,269.10 234,592.16 20,130.47 VOLKSWAGON
5,495.28 403.27 6,698.65 7,207.74 29,525.15 2,533.57 FORD
30,875.80 2,285.62 33,141.62 40,497.43 165,690.17 14,235.12 LINCOLN MERCURY
54,030.29 3,965.01 57,995.30 70,867.41 290,295.10 24,910.37 CHEVROLET
9,844.72 722.45 10,567.18 12,912.57 52,893.93 4,538.86 CHEVROLET
44,059.68 3,233.31 47,293.00 57,789.72 236,724.81 20,313.48 TOYOTA
37,066.08 2,720.00 38,786.17 48,616.76 199,149.45 17,000.12 BUICK
27,871.98 2,030.70 29,702.66 36,295.22 148,676.59 12,758.01 VACANT
46,696.46 3,426.61 50,123.27 61,248.10 250,691.74 21,529.16 HONDA
89,232.47 8,648.31 95,780.78 117,039.41 479,430.11 41,140.15 NEW AUTO MALL PLAZA
47,877.61 3,513.51 51,391.32 62,787.67 257,236.83 22,073.81 VACANT
35,771.32 2,625.07 38,396.40 46,918.51 192,192.93 16,492.17 MITSUBISHI
11,161.41 819.08 11,980.49 14,639.57 59,966.26 5,145.91 AUTO SERVICE
7,016.93 514.94 7,531.86 9,203.57 37,700.69 3,235.12 AUTO SERVICE
8,332.04 464.68 6,796.72 8,305.26 34,020.94 2,919.35 TOYOTA
54,776.90 4,019.80 58,796.70 71,846.68 294,308.53 25,254.80 CHRYSLER PLYMOUTH
25,044.65 1,837.90 26,882.65 32,849.16 134,560.44 11,546.70 MAZDA
50,325.57 3,693.14 54,018.71 66,009.21 270,390.31 23,202.33 OLDSMOBILE
47,254.06 3,467.73 50,721.70 81,979.54 253,087.62 21,786.23 DODGE
- ------------------------------------------------------------------------------------
763,100.00 56,000.00 819,100.00 1,000,900.00 4,100,000.00
763,100.00 56,000.00 1,000,900.00
</TABLE>
<PAGE>
NOTICE TO TRANSFEREE (BUYER): You are required by law to retain this
certificate until the end of the fifth tax year following the tax year in which
the transfer takes place and make the Certificate available to the Internal
Revenue Service if requested to do so during that period.
<PAGE>
LIST OF EXHIBITS
Schedule 1 Listing of Due Diligence Materials
Exhibit A Description of Property
Exhibit B Asset Purchase Agreement
Exhibit C Pro-Forma Title Policy
Exhibit D General Assignment
Exhibit E Grant Deed
Exhibit F Form of Bill of Sale
Exhibit G Environmental Report
Exhibit H Guadalupe Report
Exhibit I Assessment Lien
Exhibit J Certificate of Transferor Other Than an Individual (FIRPTA
Affidavit)
<PAGE>
EXHIBIT 11.1
FIRSTAMERICA AUTOMOTIVE, INC.
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------------ --------------------------------
JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1997
----------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C>
Net income per income statement $ 1,084 $ (179) $ 1,819 $ (145)
Less:
Cumulative redeemable preference dividends (70) (140)
Redeemable preferred stock liquidation
preference accretion (20) (40)
Cumulative and redeemable preferred stock (20) (40)
discount amortization
================= ================= =============== ============
Net income applicable to common stockholders $ 974 $ (179) $ 1,599 $ (145)
================= ================= =============== ============
Basic Earnings Per Share:
Weighted average common shares outstanding 14,211,067 7,841,092 14,218,400 7,841,092
Net income per common share, basic $ 0.07 $ (0.02) $ 0.11 $ (0.02)
Diluted Earnings Per Share:
Weighted average common shares outstanding 14,211,067 7,841,092 14,218,400 7,841,092
Net effect of dilutive stock options 282,388 - 254,768 -
Net effect of warrants 227,216 - 204,992 -
----------------- ----------------- --------------- ------------
Total 14,720,671 7,841,092 14,678,160 7,841,092
Net income per common share, diluted $ 0.07 $ (0.02) $ 0.11 $ (0.02)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 2,187 2,924
<SECURITIES> 0 0
<RECEIVABLES> 28,970 20,102
<ALLOWANCES> (408) (320)
<INVENTORY> 89,776 77,594
<CURRENT-ASSETS> 126,183 104,545
<PP&E> 12,242 9,214
<DEPRECIATION> (2,570) (2,133)
<TOTAL-ASSETS> 162,021 124,002
<CURRENT-LIABILITIES> 125,268 88,732
<BONDS> 0 0
3,519 3,439
0 0
<COMMON> 0 0
<OTHER-SE> 8,162 6,563
<TOTAL-LIABILITY-AND-EQUITY> 162,021 124,002
<SALES> 343,668 190,074
<TOTAL-REVENUES> 343,668 190,074
<CGS> 290,339 164,025
<TOTAL-COSTS> 290,339 164,025
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,732 1,745
<INCOME-PRETAX> 3,192 (1,170)
<INCOME-TAX> (1,373) (1,025)
<INCOME-CONTINUING> 1,819 (145)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,819 (145)
<EPS-PRIMARY> .11 (0.02)
<EPS-DILUTED> .11 (0.02)
</TABLE>
