-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V1pm0hrrIIqXfAeIN0DeBizOojrIhlCtriDW3xmHTSzVvB/D2Op3ZYS8ZbIj+BBb eAHbk5nbmQc9wkGbUXp5ew== 0000950168-98-002267.txt : 19980710 0000950168-98-002267.hdr.sgml : 19980710 ACCESSION NUMBER: 0000950168-98-002267 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19980709 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980709 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SONIC AUTOMOTIVE INC CENTRAL INDEX KEY: 0001043509 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO DEALERS & GASOLINE STATIONS [5500] IRS NUMBER: 562010790 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-13395 FILM NUMBER: 98663537 BUSINESS ADDRESS: STREET 1: 5401 EAST INDEPENDENCE BLVD STREET 2: PO BOX 18747 CITY: CHARLOTTE STATE: NC ZIP: 28026 BUSINESS PHONE: 7045323354 MAIL ADDRESS: STREET 1: 5401 EAST INDEPENDENCE BLVD CITY: CHARLOTTE STATE: NC ZIP: 28212 8-K 1 SONIC AUTOMOTIVE, INC. 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): July 9, 1998 SONIC AUTOMOTIVE, INC. (Exact name of Registrant as Specified in Charter) Delaware 1-13395 56-2010790 - ---------------------------- ------------ ------------------- (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 5401 East Independence Boulevard P.O. Box 18747 Charlotte, North Carolina 28218 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (704) 532-3320 -------------- - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) ITEM 5. OTHER EVENTS. (A) DEBT OFFERING. On July 9, 1998, the Company issued a press release that is attached to this report on Form 8-K as Exhibit 99.1. (B) PENDING ACQUISITIONS. The Company has entered into agreements regarding the Company's acquisition, as described in this Section (B), of certain automobile dealership businesses and assets (collectively, but excluding the Hatfield Acquisition (as defined below), the "Pending Acquisitions"). The operations being acquired in the Pending Acquisitions generally consist of selling new and used cars and light trucks, selling replacement parts, providing vehicle maintenance, warranty, paint, collision and repair services, and arranging customer financing and insurance. None of the Pending Acquisitions have been consummated as of the date of this filing. The Pending Acquisitions are anticipated to be consummated, subject to certain closing conditions (including but not limited to the receipt of consents to the acquisitions from the relevant automobile manufacturers that provide vehicle inventories to the businesses being acquired), in the third quarter of 1998. The estimated aggregate purchase price payable by the Company for the Hatfield Acquisition, the Pending Acquisitions and the Higginbotham Acquisition (as defined in Section (C) below) is approximately $110.1 million. Of this aggregate purchase price, approximately $75.0 million will be paid in cash and the balance will be paid by the Company through the issuance to the respective sellers of shares of the Company's Class A Convertible Preferred Stock, par value $.10 per share, having an aggregate liquidation value of approximately $35.1 million. The Company will fund the cash portion of the purchase price payable at closing of each of the Hatfield Acquisition, the Pending Acquisitions and the Higginbotham Acquisition by increasing the Company's long-term debt borrowings. Certain of the Pending Acquisitions will require the Company to pay contingent purchase prices based on the future performance of the acquired businesses, which are expected to be funded with cash from future operations or from long-term debt borrowings. The total amount of consideration to be paid by the Company in each of the Hatfield Acquisition, the Pending Acquisitions and the Higginbotham Acquisition was determined through arms'-length negotiations with each of the respective sellers. Certain audited financial statements for the Hatfield Acquisition, the Economy Acquisition and the Casa Ford Acquisition (each as defined below) that are a part of the Pending Acquisitions are attached to this report on Form 8-K as Exhibits 99.2, 99.3 and 99.4, respectively. (I) THE HATFIELD ACQUISITION. The Company has entered into an Asset Purchase Agreement dated as of February 4, 1998 (the "Hatfield Purchase Agreement") between the Company, as buyer, Hatfield Jeep Eagle, Inc., Hatfield Lincoln Mercury, Inc., Trader Bud's Westside Dodge, Inc., Toyota West, Inc., and Hatfield Hyundai, Inc., as sellers, and Bud C. Hatfield, Dan E. Hatfield and Dan E. Hatfield, as trustee of The Bud C. Hatfield, Sr. Special Irrevocable Trust, as shareholders of the sellers, as amended by Amendment No. 1 and Supplement to Asset Purchase Agreement dated as of May 28, 1998 ("Amendment No. 1") by and among the parties to the Hatfield Purchase Agreement (the "Hatfield Acquisition"). The Hatfield Purchase Agreement and Amendment No. 1 are attached to this report on Form 8-K as Exhibits 99.5 and 99.6, respectively. The Company closed the Hatfield Acquisition on July 9, 1998 (the date of this filing), except that the acquisition of the Toyota West dealership was closed in escrow pending the approval of Toyota to the acquisition of this dealership. Pursuant to the terms of the Hatfield Purchase Agreement, the Company acquired substantially all of the assets and assumed certain liabilities of six individual automobile dealerships located in Columbus, Ohio selling Chrysler/Plymouth, Dodge, Hyundai, Isuzu, Jeep, KIA, Lincoln/Mercury, Subaru, Toyota and Volkswagen brands of vehicles. The Company intends 1 to continue the existing operations at each of the dealerships being acquired in the Hatfield Acquisition. The Company has obtained consents from all of the applicable manufacturers to the Hatfield Acquisition, except from Chrysler and Toyota. The Company expects to obtain the consent of Chrysler in the near future. The Company also expects to receive the consent of Toyota in the near future, at which point the escrow of the Toyota West dealership will be released. There can be no assurance that the consents of Chrysler and/or Toyota will be obtained. Any manufacturer who does not consent to the Hatfield Acquisition may seek to terminate its franchise agreement, although relevant state franchising laws impose limitations on a manufacturer's ability to terminate a franchise. (II) THE MONTGOMERY ACQUISITION. The Company has also entered into an Agreement and Plan of Merger dated as of February 10, 1998 (the "Montgomery Purchase Agreement") among the Company, Frank E. McGough, Jr., Capitol Chevrolet, Inc. and Capitol Imports, Ltd. (the "Montgomery Acquisition"). The Montgomery Purchase Agreement is attached to this report on Form 8-K as Exhibit 99.7. Pursuant to the Montgomery Purchase Agreement, the Company will acquire all the outstanding stock of two automobile dealerships operating Chevrolet, KIA, Mitsubishi and Hyundai franchises, each of which is located in Montgomery, Alabama. The Company intends to continue operating each of the acquired automobile dealerships following consummation of the Montgomery Acquisition. (III) THE ECONOMY HONDA ACQUISITION. The Company has also entered into a Stock Purchase Agreement dated as of March 16, 1998 (the "Economy Honda Purchase Agreement"), between the Company, Freeman Smith, Melvin Q. Smith, and James M. Holland (the "Economy Acquisition"). The Economy Honda Purchase Agreement is attached to this report on Form 8-K as Exhibit 99.8. Pursuant to the Economy Honda Purchase Agreement, the Company will acquire all of the outstanding capital stock of Economy Cars, Inc., which owns and operates a Honda automobile dealership located in Chattanooga, Tennessee. The Company intends to continue operating the Honda dealership following consummation of the Economy Acquisition. 2 (IV) THE CENTURY ACQUISITION. The Company has also entered into an Asset Purchase Agreement dated April 10, 1998 (the "Century Purchase Agreement") by and among the Company, Century Auto Sales, Inc., A. Foster McKissick, III and Murray P. McKissick (the "Century Acquisition"). The Century Purchase Agreement is attached to this report on Form 8-K as Exhibit 99.9. Pursuant to the Century Purchase Agreement, the Company will acquire substantially all of the assets, other than the real property and improvements thereon, and assume certain liabilities of a BMW dealership in located in Greenville, South Carolina and a satellite sales location in Spartanburg, South Carolina. The Company intends to continue operating the BMW dealership and the satellite sales location following consummation of the acquisition. As part of the same acquisition, the Company has also entered into a Contract to Purchase and Sell Real Property dated as of April 10, 1998 (the "Century Real Property Agreement") by and between the Company, Century Auto Sales, Inc. and Fairway Investments, LLC. The Century Real Property Agreement is attached to this report on Form 8-K as Exhibit 99.10. Pursuant to the Century Real Property Agreement, the Company will purchase the Greenville and Spartanburg real property upon which the BMW dealership and satellite sales location are located. The aggregate purchase price for such real property will be the appraised value of the two parcels, with a minimum price of $4.4 million and a maximum price of $5.2 million. (V) THE HERITAGE ACQUISITION. The Company has also entered into an Asset Purchase Agreement dated April 10, 1998 (the "Heritage Purchase Agreement") by and among the Company, Fairway Management Company d/b/a Heritage Lincoln-Mercury-Jaguar, and Fairway Ford, Inc. (the "Heritage Acquisition"). The Heritage Purchase Agreement is attached to this report on Form 8-K as Exhibit 99.11. Pursuant to the Heritage Purchase Agreement, the Company will acquire substantially all of the assets and assume certain liabilities of a Lincoln-Mercury-Jaguar dealership located in Greenville, South Carolina. The Company intends to continue operating the Lincoln-Mercury-Jaguar dealership following consummation of the Heritage Acquisition. The seller in the Heritage Acquisition is affiliated with the seller in the Century Acquisition. Jaguar has refused to approve the Company's acquisition of the Jaguar dealership in the Heritage Acquisition. Consequently, the Company does not expect to be able to acquire this Jaguar franchise, which would result in a purchase price adjustment that has not yet been determined. 3 As part of the same acquisition, the Company has also entered into a Contract to Purchase and Sell Real Property dated as of April 10, 1998 (the "Heritage Real Property Agreement") by and between the Company and Fairway Ford, Inc. The Heritage Purchase Agreement is attached to this report on Form 8-K as Exhibit 99.12. Pursuant to the Heritage Real Property Agreement, the Company will purchase the real property upon which the Lincoln-Mercury-Jaguar dealership is located. The purchase price for such real property will be its appraised value and will be payable in cash at the closing. (VI) THE CASA FORD ACQUISITION. The Company has also entered into a Stock Purchase Agreement dated as of April 30, 1998 (the "Casa Ford Purchase Agreement") by and among the Company, Aldo B. Paret and Casa Ford of Houston, Inc. ("Casa Ford"). The Casa Ford Purchase Agreement is attached to this report on Form 8-K as Exhibit 99.13. Pursuant to the terms of the Casa Ford Purchase Agreement, the Company will acquire all of the outstanding capital stock of Casa Ford, which owns and operates a Ford dealership located in the Houston, Texas area (the "Casa Ford Acquisition"). The Company intends to continue operating Casa Ford following consummation of the Casa Ford acquisition. (VII) CONSENTS TO PENDING ACQUISITIONS. The Pending Acquisitions are all expected to be consummated, subject to certain closing conditions, in the third quarter of 1998, although there can be no assurance that any of the Pending Acquisitions will be consummated. The Company has obtained manufacturer consent to all of the Pending Acquisitions other than from BMW, Honda, Jaguar and Mitsubishi. The Company currently expects to receive the remaining consents prior to the closing of the relevant acquisitions, other than from Jaguar and from BMW. There can be no assurance that such consents will be obtained. Any manufacturer who does not consent to any Pending Acquisition may seek to terminate its franchise agreement, although relevant state franchising laws impose limitations on a manufacturer's ability to terminate a franchise. The Company received a notice from BMW that it was exercising its right of first refusal with regard to the dealerships that are a part of the Century Acquisition pursuant to BMW's franchise agreement with the seller. However, the Company believes that this right of first refusal is subject to another agreement between BMW and the seller that required notice of BMW's intention to exercise its right of first refusal within 30 days of BMW being notified of the sale of the dealerships. BMW's notice was delivered to the Company after the expiration of this 30 day time period. Consequently, the Company believes that BMW failed to timely exercise its right of first refusal. The Company is currently negotiating with BMW for its consent with respect to the Century Acquisition, and the Company believes that it will be successful in entering into a favorable arrangement with BMW. (C) RECENT DEVELOPMENTS. The Company has entered into an Asset Purchase Agreement dated as of July 7, 1998 (the "Higginbotham Purchase Agreement") by and among the Company, HMC Finance Corporation, Inc., Halifax Ford-Mercury, Inc., Higginbotham Automobiles, Inc., Higginbotham Chevrolet-Oldsmobile, Inc., Sunrise Auto World, Inc. and Dennis D. Higginbotham (the "Higginbotham Acquisition"). The Higginbotham Purchase Agreement is attached to this report on Form 8-K as Exhibit 99.14. Pursuant to the Higginbotham Purchase Agreement, the Company will acquire substantially all of the assets of three Daytona Beach, Florida dealerships selling Acura, Chevrolet, Ford, Mercedes, Mercury and Oldsmobile brands of vehicles, and related assets. The Company has not yet sought to obtain manufacturer consents for the dealerships being acquired in the Higginbotham Acquisition. The Company also anticipates purchasing the real property on which the acquired dealerships are located pursuant to a separate agreement. 4 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. - ------------------------------------------- (c) EXHIBITS. Exhibit Number Description -------------- ------------------------------------ 99.1 Press Release dated July 9, 1998. 99.2 Combined Financial Statements of the Hatfield Automotive Group as of December 31, 1996 and 1997 and for each of the three years in the period ended December 31, 1997 (Audited) and as of March 31, 1998 and for the three months then ended (Unaudited). 99.3 Financial Statements of Economy Cars, Inc. as of December 31, 1997 and for the year then ended (Audited) and as of March 31, 1998 and for the three months then ended (Unaudited). 99.4 Financial Statements of Casa Ford of Houston, Inc. as of December 31, 1997 and for the year then ended (Audited) and as of March 31, 1998 and for the three months then ended (Unaudited). 99.5* Asset Purchase Agreement dated as of February 4, 1998 between Sonic Automotive, Inc., as buyer, Hatfield Jeep Eagle, Inc., Hatfield Lincoln Mercury, Inc., Trader Bud's Westside Dodge, Inc., Toyota West, Inc., and Hatfield 5 Hyundai, Inc., as sellers, and Bud C. Hatfield, Dan E. Hatfield and Dan E. Hatfield, as trustee of The Bud C. Hatfield, Sr. Special Irrevocable Trust, as shareholders of the sellers (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (the "March 31, 1998 Form 10-Q")). 99.6 Amendment No. 1 and Supplement to Asset Purchase Agreement dated as of May 28, 1998 by and among Sonic Automotive, Inc., Hatfield Jeep Eagle, Inc., Hatfield Lincoln Mercury, Inc., Westside Dodge, Inc., Toyota West, Inc., Hatfield Hyundai, Inc., Bud C. Hatfield, Dan E. Hatfield and Dan E. Hatfield as trustee of The Bud C. Hatfield, Sr. Special Irrevocable Trust. 99.7* Agreement and Plan of Merger dated as of February 10, 1998 among Sonic Automotive, Inc., as buyer, and Capitol Chevrolet, Inc., Capitol Imports, Ltd. and Frank E. McGough, Jr., as sellers (incorporated by reference to Exhibit 10.4 to the March 31, 1998 Form 10-Q). 99.8* Stock Purchase Agreement dated as of March 16, 1998 between Sonic Automotive, Inc., as buyer, and Freeman Smith, as stockholder and the other stockholders named therein (incorporated by reference to Exhibit 10.5 to the March 31, 1998 Form 10-Q). 99.9 Asset Purchase Agreement dated April 10, 1998 by and among Sonic Automotive, Inc., Century Auto Sales, Inc., and A. Foster McKissick, III and Murray P. McKissick. 99.10 Contract to Purchase and Sell Real Property dated as of April 10, 1998 by and between the Company, Century Auto Sales, Inc. and Fairway Investments, LLC. 99.11 Asset Purchase Agreement dated April 10, 1998 by and among the Company, Fairway Management Company d/b/a Heritage Lincoln-Mercury-Jaguar, and Fairway Ford, Inc. 99.12 Contract to Purchase and Sell Real Property dated as of April 10, 1998 by and between the Company and Fairway Ford, Inc. 99.13 Stock Purchase Agreement dated as of April 30, 1998 by and among the Company, Aldo B. Paret and Casa Ford of Houston, Inc. 99.14 Asset Purchase Agreement dated as of July 7, 1998 by and among the Company, HMC Finance Corporation, Inc., Halifax Ford-Mercury, Inc., Higginbotham 6 Automobiles, Inc., Higginbotham Chevrolet-Oldsmobile, Inc., Sunrise Auto World, Inc. and Dennis D. Higginbotham. *Filed Previously 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 hereunto duly authorized. SONIC AUTOMOTIVE, INC. Date: July 9, 1998 By: /s/ Theodore M. Wright -------------------------- Theodore M. Wright Chief Financial Officer, Vice President-Finance, Treasurer, Secretary and Director 7 EX-99 2 EXHIBIT 99.1 Exhibit 99.1 [Sonic Automotive, Inc. Letterhead] SONIC AUTOMOTIVE ANNOUNCES PROPOSED PRIVATE PLACEMENT CONTACT: Theodore M. Wright (704) 532-3320 -- For Immediate Release CHARLOTTE, NC (July 9, 1998) -- Sonic Automotive, Inc. (NYSE:SAH) announced that it intends to offer approximately $125 million of its Senior Subordinated Notes due 2008. The offering will be made by means of an offering memorandum to qualified institutional buyers pursuant to Rule 144A promulgated under the Securities Act of 1933, as amended, and is expected to close in late July. Sonic Automotive will use the net proceeds from the offering to pay all indebtedness outstanding under its existing revolving credit facility and certain indebtedness under its floor plan facility and to finance certain acquisitions. Amounts repaid under the revolving credit facility and the floor plan facility may be reborrowed for general corporate purposes. The securities to be offered in the private placement will not be registered under the Securities Act of 1933, as amended, or applicable state securities laws, and may not be offered or sold absent registration under the Securities Act and applicable state securities laws or applicable exemptions from registration requirements. [Stamp stating "SAH Listed NYSE" at bottom of page.] 8 EX-99 3 EXHIBIT 99.2 INDEPENDENT AUDITORS' REPORT TO THE STOCKHOLDERS OF HATFIELD AUTOMOTIVE GROUP Columbus, Ohio We have audited the accompanying combined balance sheets of Hatfield Automotive Group (the "Company"), which are under common ownership and management, as of December 31, 1996 and 1997, and the related combined statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the combined financial position of the Company as of December 31, 1996 and 1997, and the combined results of its operations and its combined cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Charlotte, North Carolina May 22, 1998 1 HATFIELD AUTOMOTIVE GROUP COMBINED BALANCE SHEETS December 31, 1996 and 1997 and March 31, 1998
December 31, --------------------------------- March 31, 1996 1997 1998 --------------- --------------- -------------- (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents ............................ $ 11,630,711 $ 12,238,729 $14,990,300 Accounts receivable (no allowance necessary) ......... 3,014,936 3,391,406 3,360,011 Inventories (Note 3) ................................. 30,855,389 34,563,796 34,394,629 Other current assets (Note 6) ........................ 5,526,214 6,592,010 6,609,433 ------------ ------------ ----------- Total current assets ............................... 51,027,250 56,785,941 59,354,373 PROPERTY AND EQUIPMENT, NET (Note 4) .................. 817,960 1,064,104 1,003,451 GOODWILL, NET (Notes 1 and 2) ......................... -- 983,333 977,083 ------------ ------------ ----------- TOTAL ASSETS .......................................... $ 51,845,210 $ 58,833,378 $61,334,907 ============ ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable -- floor plan (Note 3) ................. $ 28,941,767 $ 33,705,904 $33,456,104 Trade accounts payable ............................... 3,182,685 2,035,848 2,659,920 Other accrued liabilities ............................ 1,543,879 1,461,131 1,130,944 Payable to stockholder's -- current (Note 6) ......... 5,986,706 7,162,864 7,196,334 ------------ ------------ ----------- Total current liabilities .......................... 39,655,037 44,365,747 44,443,302 ------------ ------------ ----------- PAYABLE TO STOCKHOLDERS -- NON-CURRENT (Note 6) ............................................. 6,815,121 8,176,482 10,569,130 COMMITMENTS AND CONTINGENCIES (Notes 6 and 8) STOCKHOLDERS' EQUITY (Note 5): Common stock of combined companies ................... 2,825,000 2,825,000 2,825,000 Paid-in capital ...................................... 804,000 1,744,000 1,744,000 Retained earnings .................................... 1,746,052 1,722,149 1,753,475 ------------ ------------ ----------- Total stockholders' equity ......................... 5,375,052 6,291,149 6,322,475 ------------ ------------ ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............ $ 51,845,210 $ 58,833,378 $61,334,907 ============ ============ ===========
See notes to combined financial statements. 2 HATFIELD AUTOMOTIVE GROUP COMBINED STATEMENTS OF INCOME For the years ended December 31, 1995, 1996 and 1997 and the three months ended March 31, 1997 and 1998
Three months ended Year ended December 31, March 31, ----------------------------------------------- ----------------------------- 1995 1996 1997 1997 1998 --------------- --------------- --------------- -------------- -------------- (Unaudited) REVENUES: Vehicle sales ............................. $164,216,610 $213,251,842 $251,980,884 $58,562,407 $57,661,397 Parts, service and collision repair ....... 11,905,030 13,971,959 16,399,819 3,607,781 4,254,886 Finance and insurance (Note 6) ............ 4,748,018 6,113,302 6,898,899 1,255,145 1,746,647 ------------ ------------ ------------ ----------- ----------- Total revenues .......................... 180,869,658 233,337,103 275,279,602 63,425,333 63,662,930 COST OF SALES .............................. 159,715,893 205,482,172 243,369,818 56,245,650 56,297,257 ------------ ------------ ------------ ----------- ----------- GROSS PROFIT ............................... 21,153,765 27,854,931 31,909,784 7,179,683 7,365,673 SELLING, GENERAL AND ADMINIS- TRATIVE (Note 6) .......................... 14,375,010 16,969,903 21,152,701 4,692,826 5,052,721 MANAGEMENT BONUS (Note 6) .................. 3,809,573 6,339,005 7,120,875 2,009,396 1,700,000 DEPRECIATION AND AMORTIZATION 38,836 107,461 221,463 51,199 66,903 ------------ ------------ ------------ ----------- ----------- OPERATING INCOME ........................... 2,930,346 4,438,562 3,414,745 426,262 546,049 OTHER INCOME AND EXPENSE: Interest expense -- floor plan ............ 2,926,256 3,036,515 3,662,711 513,819 555,530 Interest income ........................... (102,265) (155,804) (225,802) (23,435) (47,335) Other (income) expense .................... 37,313 196,030 1,739 (58,122) 6,528 ------------ ------------ ------------ ----------- ----------- Total other expense ..................... 2,861,304 3,076,741 3,438,648 432,262 514,723 ------------ ------------ ------------ ----------- ----------- NET INCOME (LOSS) .......................... $ 69,042 $ 1,361,821 $ (23,903) $ (6,000) $ 31,326 ============ ============ ============ =========== =========== Pro Forma Provision (Benefit) for Income Taxes (Note 1) (unaudited) ................ $ 27,000 $ 531,000 $ (9,000) $ (2,000) $ 12,000 ============ ============ ============ =========== =========== Pro Forma Net Income (Loss) (Note 1) (unaudited) ............................... $ 42,042 $ 830,821 $ (14,903) $ (4,000) $ 19,326 ============ ============ ============ =========== ===========
See notes to combined financial statements. 3 HATFIELD AUTOMOTIVE GROUP COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (NOTE 5) For the years ended December 31, 1995, 1996 and 1997 and the three months ended March 31, 1998
Common Total Stock of Combined Retained Stockholders' Companies Paid-in Capital Earnings Equity ------------------- ----------------- -------------- -------------- BALANCE AT DECEMBER 31, 1994 ......... $1,525,000 $ 354,000 $ 1,402,130 $ 3,281,130 Issuance of common stock ............ 700,000 -- -- 700,000 Dividends declared .................. -- -- (1,086,941) (1,086,941) Net income .......................... -- -- 69,042 69,042 ---------- ----------- ------------ ------------ BALANCE DECEMBER 31, 1995 ............ 2,225,000 354,000 384,231 2,963,231 Issuance of common stock ............ 600,000 -- -- 600,000 Capital contribution ................ -- 450,000 -- 450,000 Net income .......................... -- -- 1,361,821 1,361,821 ---------- ----------- ------------ ------------ BALANCE DECEMBER 31, 1996 ............ 2,825,000 804,000 1,746,052 5,375,052 Capital contribution ................ -- 940,000 -- 940,000 Net loss ............................ -- -- (23,903) (23,903) ---------- ----------- ------------ ------------ BALANCE AT DECEMBER 31, 1997 ......... 2,825,000 1,744,000 1,722,149 6,291,149 Net income (unaudited) .............. -- -- 31,326 31,326 ---------- ----------- ------------ ------------ BALANCE AT MARCH 31, 1998 (unaudited) ......................... $2,825,000 $ 1,744,000 $ 1,753,475 $ 6,322,475 ========== =========== ============ ============
See notes to combined financial statements. 4 HATFIELD AUTOMOTIVE GROUP COMBINED STATEMENTS OF CASH FLOWS For the years ended December 31, 1995, 1996 and 1997 and the three months ended March 31, 1997 and 1998
Year ended December 31, Three months ended March 31, ----------------------------------------------- ------------------------------ 1995 1996 1997 1997 1998 --------------- --------------- --------------- --------------- -------------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ............................. $ 69,042 $ 1,361,821 $ (23,903) $ (6,000) $ 31,326 ------------ ------------ ------------ ------------ ----------- Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: Depreciation and amortization ............... 38,836 107,461 221,463 51,199 66,903 Changes in assets and liabilities that related to operations: (Increase) decrease in receivables ......... (135,483) (1,503,996) (376,470) 247,890 31,395 Decrease (increase) in inventories ......... 130,645 (8,769,439) (3,624,241) (1,071,569) 169,167 Increase in other current assets ........... (3,000,000) (2,525,214) (1,065,796) (1,039,097) (17,423) Increase (decrease) in notes payable -- floor plan ..................... 264,242 7,356,921 4,764,137 3,877,117 (249,800) Increase (decrease) in accounts payable and other accrued liabilities ............. 1,041,176 1,106,795 (1,229,584) (684,535) 293,885 ------------ ------------ ------------ ------------ ----------- Total adjustments ......................... (1,660,584) (4,227,472) (1,310,491) 1,381,005 294,127 ------------ ------------ ------------ ------------ ----------- Net cash (used in) provided by operating activities .................... (1,591,542) (2,865,651) (1,334,394) 1,375,005 325,453 ------------ ------------ ------------ ------------ ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ........... (138,936) (702,124) (423,048) -- -- Purchase of business .......................... -- -- (1,112,058) -- -- ------------ ------------ ------------ ------------ ----------- Net cash used in investing activities (138,936) (702,124) (1,535,106) -- -- ------------ ------------ ------------ ------------ ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in amounts payable to stockholders ................................ 2,306,507 5,144,349 3,037,518 1,636,941 2,426,118 ------------ ------------ ------------ ------------ ----------- Capital contribution .......................... -- -- 440,000 -- -- Net cash provided by financing activities .............................. 2,306,507 5,144,349 3,477,518 1,636,941 2,426,118 ------------ ------------ ------------ ------------ ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS ................................... 576,029 1,576,574 608,018 3,011,946 2,751,571 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ........................... 9,478,108 10,054,137 11,630,711 11,630,711 12,238,729 ------------ ------------ ------------ ------------ ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD ..................................... $ 10,054,137 $ 11,630,711 $ 12,238,729 $ 14,642,657 $14,990,300 ============ ============ ============ ============ =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for interest ...... $ 1,746,200 $ 1,053,437 $ 1,263,618 $ 295,000 $ 215,579 ============ ============ ============ ============ =========== NON-CASH FINANCING ACTIVITIES: Dividends declared but not paid ............... $ 1,086,941 -- -- -- -- Issuance of common stock in exchange for amounts payable to stockholders ............. $ 700,000 $ 600,000 -- -- -- Contribution to paid-in capital in exchange for amounts payable to stockholders ......... -- $ 450,000 $ 500,000 -- --
See notes to combined financial statements. 5 HATFIELD AUTOMOTIVE GROUP NOTES TO COMBINED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Business -- Hatfield Automotive Group (the "Company") operates six automobile dealerships and a body shop in Columbus, Ohio. The Company sells new and used cars and light trucks, sells replacement parts, provides maintenance, warranty, paint and repair services and arranges related financing and insurance. The Company's six dealerships sell new vehicles manufactured by Toyota, Lincoln, Mercury, Jeep, Eagle, Volkswagen, Hyundai, Subaru, Isuzu, Chrysler, Plymouth, KIA and Dodge. The accompanying combined financial statements include the accounts of the following entities: Hatfield Jeep Eagle, Inc., d/b/a Volkswagen West, Jeep Eagle West, Hatfield KIA and Trader Bud's Westside Chrysler Plymouth Hatfield Lincoln Mercury, Inc., d/b/a Hatfield Lincoln Mercury Westside Dodge, Inc., d/b/a Westside Dodge Toyota West, Inc., d/b/a Toyota West Hatfield Hyundai, Inc., d/b/a Hatfield Hyundai, Hatfield Isuzu and Hatfield Subaru The accompanying combined financial statements reflect the financial position, results of operations, and cash flows of each of the above listed companies. The combination of these entities has been accounted for at historical cost in a manner similar to a pooling-of-interest because the entities are under common management and control. All material intercompany transactions have been eliminated. Revenue Recognition -- The Company records revenue when vehicles are delivered to customers, and when vehicle service work is performed. Finance and insurance commission revenue is recognized principally at the time the contract is placed with the financial institution. Dealer Agreements -- The Company purchases substantially all of its new vehicles from manufacturers at the prevailing prices charged by the manufacturer to its franchised dealers. The Company's sales could be unfavorably impacted by the manufacturer's unwillingness or inability to supply the dealership with an adequate supply of new vehicle inventory. Each dealership operates under a dealer agreement with the manufacturer. The Company's dealer agreement does not give it the exclusive right to sell the manufacturer's product within a given geographic area. The Company could be materially adversely affected if the manufacturer awards franchises to others in the same market where the Company is operating. A similar adverse affect could occur if existing competing franchised dealers increase their market share in the Company's market. The ability of the Company to acquire additional franchises from a particular manufacturer may be limited due to certain restrictions imposed by manufacturers. Additionally, ownership of the Company's stock by third parties may be limited by the terms of the franchise agreements. Cash and Cash Equivalents -- The Company considers contracts in transit and all highly liquid debt instruments with an initial maturity of three months or less to be cash equivalents. Contracts in transit represent cash in transit to the Company from finance companies related to a vehicle purchase and were $8,171,520 and $6,270,709 at December 1996 and 1997, respectively. Inventories -- Vehicle inventories are valued at the lower of specific cost or market. Parts and accessories are valued at the lower of first-in, first-out ("FIFO") cost or market. Goodwill -- Goodwill represents the excess of purchase price over the estimated fair value of the net assets acquired and is being amortized over a 40 year period. The cumulative amount of goodwill amortized at December 31, 1997 was $16,667. The Company periodically reviews goodwill to assess recoverability. The Company's policy is to compare the carrying value of goodwill with the expected undiscounted cash flows from operations. 6 HATFIELD AUTOMOTIVE GROUP NOTES TO COMBINED FINANCIAL STATEMENTS -- Continued 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued Property and Equipment -- Property and equipment are stated at cost. Depreciation is computed using straight-line methods over the estimated useful lives of the assets. The range of estimated useful lives is as follows:
Useful Lives ------------- Office equipment and fixtures .......... 5 Parts and service equipment ............ 5 Leasehold improvements ................. 10 Computer equipment ..................... 5
Expenditures for maintenance and repairs are expensed as incurred. Significant betterments are capitalized. Income taxes -- All of the Company's dealerships are organized as S Corporations for federal and state income tax purposes. As such, the Company's taxable income is included in the stockholders' annual income tax return. Accordingly, no provision for federal or state income taxes has been included in the Company's statements of income. The pro forma provision for income taxes and the pro forma net income for the years ended December 31, 1995, 1996 and 1997, and for the three months ended March 31, 1997 and 1998, reflect amounts that would have been recorded had the Company's income been taxed for federal and state purposes as if it was a C Corporation. Concentration of Credit Risk -- Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash deposits. At times, amounts invested with financial institutions may exceed FDIC insurance limits. Concentrations of credit risk with respect to receivables are limited primarily to automobile manufacturers and financial institutions. Credit risk arising from trade receivables from commercial customers is reduced by the large number of customers comprising the trade receivables balance. Trade receivables are concentrated in the Company's principal market area of Columbus, Ohio. Use of Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Advertising -- The Company expenses advertising costs in the period incurred. Advertising expenses for 1995, 1996 and 1997 amount to $2,619,348, $3,941,810 and $4,475,943, respectively. Interim Financial Information -- The accompanying unaudited interim financial information for the three months ended March 31, 1997 and 1998 has been prepared on substantially the same basis as the audited financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information set forth therein. The results for interim periods are not necessarily indicative of the results to be expected for the entire year. 2. BUSINESS ACQUISITION On May 1, 1997, the Company acquired Trader Bud's Westside Chrysler Plymouth for a total purchase price of $1,112,058. The acquisition has been accounted for using purchase accounting and the results of operations of this dealership have been included in the accompanying combined financial statements from the date of acquisition. The total purchase price has been allocated to the assets and liabilities acquired at their estimated fair market value at acquisition date as follows: Inventory ...................... $ 84,166 Property and equipment ......... 27,892 Goodwill ....................... 1,000,000 ---------- $1,112,058 ==========
7 HATFIELD AUTOMOTIVE GROUP NOTES TO COMBINED FINANCIAL STATEMENTS -- Continued 2. BUSINESS ACQUISITION -- Continued The following unaudited pro forma financial information is presented as if Trader Bud's Westside Chrysler Plymouth were acquired on January 1, 1996 and January 1, 1997, respectively.
Year ended December 31, ------------------------------- 1996 1997 --------------- --------------- Revenues .................. $259,336,000 $281,718,000 Gross profit .............. 30,612,000 32,684,000 Net income (loss) ......... 1,257,000 (67,000)
The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the operating results that would have occurred had Trader Bud's Westside Chrysler Plymouth been acquired on January 1, 1996 and 1997, respectively. These results are also not necessarily indicative of the results of future operations. 3. INVENTORIES AND RELATED NOTES PAYABLE -- FLOOR PLAN Inventories consist of the following:
December 31, March 31, ----------------------------- 1998 1996 1997 (Unaudited) -------------- -------------- -------------- New vehicles .................. $24,597,294 $ 29,227,278 $29,499,807 Used vehicles ................. 5,263,444 4,181,804 3,705,042 Parts and accessories ......... 966,895 1,125,050 1,158,590 Other ......................... 27,756 29,664 31,190 ----------- ------------ ----------- Total ......................... $30,855,389 $ 34,563,796 $34,394,629 =========== ============ ===========
All new and certain used vehicles are pledged to collateralize floor plan notes payable to financial institutions in the amount of $28,941,767 and $33,705,904 at December 31, 1996 and 1997, respectively. The floor plan notes bear interest that fluctuates with prime. Interest is payable monthly on the outstanding balance, ranging from 7.94% to 9.25% and 8.00% to 9.50% at December 31, 1996 and 1997, respectively. The notes payable are due when the related vehicles are sold. As such, these floor plan notes payable are shown as a current liability in the accompanying combined balance sheets. 4. PROPERTY AND EQUIPMENT Property and equipment is comprised of the following:
December 31, March 31, ------------------------------- 1998 1996 1997 (Unaudited) --------------- --------------- --------------- Parts and service equipment ........... $ 1,173,892 $ 1,404,291 $ 1,404,291 Office equipment and fixtures ......... 424,894 504,973 504,973 Leasehold improvements ................ 303,407 422,616 422,616 Computer equipment .................... 35,999 57,252 57,252 ------------ ------------ ------------ 1,938,192 2,389,132 2,389,132 Less accumulated depreciation ......... (1,120,232) (1,325,028) (1,385,681) ------------ ------------ ------------ Property and equipment, net ........... $ 817,960 $ 1,064,104 $ 1,003,451 ============ ============ ============
8 HATFIELD AUTOMOTIVE GROUP NOTES TO COMBINED FINANCIAL STATEMENTS -- Continued 5. COMBINED EQUITY The capital structure of the entities included in the combined financial statements of the Company at December 31, 1996 is as follows:
Common Stock ------------------------------------------------------------ Shares Par Shares Issued and Paid-In Value Authorized Outstanding Amount Capital ------------- ------------ ------------- ------------- ----------- Hatfield Jeep Eagle, Inc. .............. No Par 5,000 100 $ 225,000 $354,000 Hatfield Lincoln Mercury, Inc. ......... $ 100 10,000 6,000 600,000 450,000 Westside Dodge, Inc. Voting ............ No par 5,000 4,000 800,000 -- Non-voting ............................. No par 5,000 1,000 200,000 -- Toyota West, Inc. Voting .............. No par 250 250 250,000 -- Non-voting ............................. No par 250 250 250,000 -- Hatfield Hyundai, Inc. ................. No par 750 750 500,000 -- ---------- -------- Total .................................. $2,825,000 $804,000 ========== ========
The capital structure of the entities included in the combined financial statements of the Company at December 31, 1997 is as follows:
Common Stock ------------------------------------------------------------ Shares Par Shares Issued and Paid-In Value Authorized Outstanding Amount Capital ------------- ------------ ------------- ------------- ------------- Hatfield Jeep Eagle, Inc. .............. No Par 5,000 100 $ 225,000 $1,294,000 Hatfield Lincoln Mercury, Inc. ......... $ 100 10,000 6,000 600,000 450,000 Westside Dodge, Inc. Voting ............ No par 5,000 4,000 800,000 -- Non-voting ............................. No par 5,000 1,000 200,000 -- Toyota West, Inc. Voting ............... No par 250 250 250,000 -- Non-voting ............................. No par 250 250 250,000 -- Hatfield Hyundai, Inc. ................. No par 750 750 500,000 -- ---------- ---------- Total .................................. $2,825,000 $1,744,000 ========== ==========
6. RELATED PARTIES The management bonuses were paid to Company stockholders and certain management companies owned by a Company stockholder. Unpaid bonuses and dividends are included in the amounts payable to stockholders -- non-current. Included in finance and insurance revenues are $433,599, $489,005 and $480,875 for 1995, 1996 and 1997, respectively, in commissions generated from selling credit life policies to customers which have been distributed to a company owned by a stockholder. Other current assets at December 31, 1996 and 1997 include $5,525,214 and $6,653,925, respectively, of cash owned by stockholders on deposit in the Company's cash management account. A liability for this amount is included in amounts payable to stockholders -- current. The Company leases all of its operating facilities directly from a Company stockholder or from a corporation which is owned by that stockholder. Rent expense under these leases was $1,680,000 in 1995 and 1996 and $2,360,000 in 1997. The Company also paid $166,756, $190,500 and $216,332 to these related parties for property taxes for the years ended December 31, 1995, 1996 and 1997, respectively. Total rent expense was $1,746,050 in 1995, $1,724,660 in 1996, and $2,469,859 in 1997. 9 HATFIELD AUTOMOTIVE GROUP NOTES TO COMBINED FINANCIAL STATEMENTS -- Continued 6. RELATED PARTIES -- Continued Other leases consist primarily of leases for office and computer equipment. Future minimum rental payments required under noncancelable operating leases at December 31, 1997 are as follows:
Related Party Other Total --------------- ----------- ------------- Year ending December 31: 1998 ................... $2,460,000 $189,835 $2,649,835 1999 ................... 2,460,000 128,435 2,588,435 2000 ................... 2,335,000 109,618 2,444,618 2001 ................... 300,000 29,080 329,080 2002 ................... -- 15,798 15,798 ---------- -------- ---------- Total .................. $7,555,000 $472,766 $8,027,766 ========== ======== ==========
7. EMPLOYEE BENEFIT PLAN The Company has a contributory 401(k) plan covering substantially all employees. Company contributions to the plan are equal to 25% of the first 6% of participant contributions. Company contributions amounted to $47,528, $63,015 and $76,922 in 1995, 1996, and 1997, respectively. 8. CONTINGENCIES The Company is involved in various legal proceedings incurred in the normal course of business. Management believes that the outcome of such proceedings will not have a materially adverse effect on the Company's financial position or future results of operations and cash flows. 9. SUBSEQUENT EVENT In February 1998, the Company signed an asset purchase agreement with Sonic Automotive, Inc. ("Sonic") whereby Sonic will purchase the Company's assets for a total price of approximately $48.6 million plus the assumption of certain liabilities of the Company. The total purchase price is subject to adjustment based on a final determination of the value of the net current assets of the Company. Preferred stock with a liquidation preference of approximately $14.0 million as of the closing date of the acquisition will be issued to the sellers for a portion of the purchase price. 10 EX-99 4 EXHIBIT 99.3 INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF ECONOMY CARS, INC. CHATTANOOGA, TENNESSEE We have audited the accompanying balance sheet of Economy Cars, Inc., d/b/a Economy Honda Cars (the "Company"), as of December 31, 1997, and the related statements of income, stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 1997, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Charlotte, North Carolina May 11, 1998 1 ECONOMY HONDA CARS BALANCE SHEETS December 31, 1997 and March 31, 1998
December 31, March 31, 1997 1998 -------------- -------------- (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents ............................................ $ 3,834,184 $ 5,396,805 Accounts receivable (net of allowance for doubtful accounts of $13,505 at December 31, 1997) .............................................. 842,907 502,165 Note receivable (Note 2) ............................................. 238,960 231,115 Inventories (Note 3) ................................................. 6,541,972 5,552,280 Other current assets ................................................. 4,477 4,477 ----------- ----------- Total current assets ............................................... 11,462,500 11,686,842 PROPERTY AND EQUIPMENT, NET (Note 4) .................................. 1,791,974 1,759,082 ----------- ----------- TOTAL ASSETS .......................................................... $13,254,474 $13,445,924 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Trade accounts payable ............................................... $ 148,073 $ 175,090 Income taxes payable (Note 6) ........................................ 251,237 78,781 Deferred income taxes (Note 6) ....................................... 173,511 173,511 Other taxes payable .................................................. 215,619 269,489 Accrued payroll and bonuses .......................................... 105,174 298,430 Liability for finance chargebacks .................................... 95,550 82,889 Other accrued liabilities ............................................ 6,879 2,447 ----------- ----------- Total current liabilities .......................................... 996,043 1,080,637 ----------- ----------- DEFERRED INCOME TAXES (Note 6) ........................................ 78,449 78,449 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock (no par, 2,000 shares authorized, 500 shares issued and 450 shares outstanding) ............................................ 50,000 50,000 Retained earnings .................................................... 12,329,982 12,436,838 Treasury stock (50 shares) ........................................... (200,000) (200,000) ----------- ----------- Total stockholders' equity ......................................... 12,179,982 12,286,838 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................ $13,254,474 $13,445,924 =========== ===========
See notes to financial statements. 2 ECONOMY HONDA CARS STATEMENTS OF INCOME Year ended December 31, 1997 and the three months ended March 31, 1997 and 1998
Three months Year ended ended March 31, December 31, ----------------------------- 1997 1997 1998 --------------- -------------- ------------- (Unaudited) REVENUES: Vehicle sales ................................... $41,032,638 $10,367,163 $ 9,896,091 Parts, service and collision repair ............. 5,855,509 1,487,811 1,347,767 Finance and insurance ........................... 1,383,106 428,935 272,379 ----------- ----------- ----------- Total revenues ................................ 48,271,253 12,283,909 11,516,237 COST OF SALES .................................... 41,291,627 10,255,797 10,026,232 ----------- ----------- ----------- GROSS PROFIT ..................................... 6,979,626 2,028,112 1,490,005 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ..... 5,393,705 1,413,387 1,352,217 DEPRECIATION ..................................... 130,996 23,259 35,021 ----------- ----------- ----------- OPERATING INCOME ................................. 1,454,925 591,466 102,767 ----------- ----------- ----------- OTHER INCOME (EXPENSE): Interest expense -- floor plan (Note 3) ......... (2,791) (842) (1,593) Interest income ................................. 75,852 614 38,151 Other income .................................... 119,261 10,358 33,053 ----------- ----------- ----------- Total other income ............................ 192,322 10,130 69,611 ----------- ----------- ----------- INCOME BEFORE INCOME TAXES ....................... 1,647,247 601,596 172,378 PROVISION FOR INCOME TAXES (Note 6) .............. 626,062 228,660 65,522 ----------- ----------- ----------- NET INCOME ....................................... $ 1,021,185 $ 372,936 $ 106,856 =========== =========== ===========
See notes to financial statements. 3 ECONOMY HONDA CARS STATEMENTS OF STOCKHOLDERS' EQUITY Year Ended December 31, 1997 and the three months ended March 31, 1998
Total Common Retained Treasury Stockholders' Stock Earnings Stock Equity ---------- -------------- -------------- -------------- BALANCE AT DECEMBER 31, 1996 .............. $50,000 $11,308,797 $ (200,000) $11,158,797 Net income ............................... -- 1,021,185 -- 1,021,185 ------- ----------- ---------- ----------- BALANCE AT DECEMBER 31, 1997 .............. 50,000 12,329,982 (200,000) 12,179,982 Net income (unaudited) ................... -- 106,856 -- 106,856 ------- ----------- ---------- ----------- BALANCE AT MARCH 31, 1998 (unaudited) ..... $50,000 $12,436,838 $ (200,000) $12,286,838 ======= =========== ========== ===========
See notes to financial statements. 4 ECONOMY HONDA CARS STATEMENTS OF CASH FLOWS Year ended December 31, 1997 and the three months ended March 31, 1997 and 1998
Three months ended Year ended March 31, December 31, ---------------------------- 1997 1997 1998 ------------- ------------- ------------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income .............................................................. $1,021,185 $ 372,936 $ 106,856 ---------- ---------- ---------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation .......................................................... 130,996 23,259 35,021 Loss on disposal of fixed assets ...................................... 2,258 -- -- Deferred income taxes ................................................. (39,266) -- -- Changes in assets and liabilities that related to operations: (Increase) decrease in accounts receivables .......................... (432,900) (537,205) 340,742 Decrease in inventories .............................................. 789,447 5,905 989,692 Decrease in prepaids and other current assets ........................ 330,940 258,449 -- Increase in trade accounts payable and accrued liabilities ........... 142,753 440,166 84,595 ---------- ---------- ---------- Total adjustments ................................................... 924,228 190,574 1,450,050 ---------- ---------- ---------- Net cash provided by operating activities ........................... 1,945,413 563,510 1,556,906 ---------- ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ..................................... (196,016) (35,521) (2,130) Proceeds from sale of assets ............................................ 4,685 -- -- Principal collected on notes receivable ................................. 47,358 13,925 7,845 ---------- ---------- ---------- Net cash provided by (used in) investing activities ................. (143,973) (21,596) 5,715 ---------- ---------- ---------- NET INCREASE IN CASH AND CASH EQUIVALENTS ................................ 1,801,440 541,914 1,562,621 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ........................... 2,032,744 2,032,744 3,834,184 ---------- ---------- ---------- CASH AND CASH EQUIVALENTS, END OF PERIOD ................................. $3,834,184 $2,574,658 $5,396,805 ========== ========== ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -- Cash paid during the period for: Interest ................................................................ $ 89,984 $ 14,028 $ 8,717 Income taxes ............................................................ $ 258,869 $ 13,311 $ 237,978
See notes to financial statements. 5 ECONOMY HONDA CARS NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Business -- Economy Honda Cars (the "Company") operates an automotive dealership, service department, body shop and parts and accessories department in Chattanooga, Tennessee. The Company sells new and used cars and light trucks, sells replacement parts and accessories, provides vehicle maintenance, warranty, paint and repair services and arranges related financing and insurance. The Company sells new vehicles manufactured by Honda. Revenue Recognition -- The Company records revenue when vehicles are delivered to customers, and when vehicle service work is performed. Finance and insurance commission revenue is recognized principally at the time the contract is placed with the financial institution. Dealer Agreements -- The Company purchases substantially all of its new vehicles from the manufacturer at the prevailing prices charged by the manufacturer to its franchised dealers. The Company's sales could be unfavorably impacted by the manufacturer's unwillingness or inability to supply the dealership with an adequate supply of new vehicle inventory. The Company operates under a dealer agreement with the manufacturer. The Company's dealer agreement does not give it the exclusive right to sell the manufacturer's product within a given geographic area. The Company could be materially adversely affected if the manufacturer awards franchises to others in the same market where the Company is operating. A similar adverse affect could occur if existing competing franchised dealers increase their market share in the Company's market. The ability of the Company to acquire additional franchises from a particular manufacturer may be limited due to certain restrictions imposed by manufacturers. Additionally, the Company's ability to enter into significant acquisitions may be restricted and the acquisition of the Company's stock by third parties may be limited by the terms of the franchise agreement. Cash and Cash Equivalents -- The Company considers contracts in transit and all highly liquid debt instruments with an initial maturity of three months or less to be cash equivalents. Contracts in transit represent cash in transit to the Company from finance companies related to vehicle purchases and was $919,251 at December 31, 1997. Inventories -- Inventories of new and used vehicles, including demonstrators and parts and accessories, are valued at the lower of specific cost or market. Cost is determined using the last-in, first-out method ("LIFO") for new vehicles and parts and accessories. Property and Equipment -- Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The range of estimated useful lives is as follows:
Useful Lives ------------- Buildings and improvements ............. 7-31.5 Office equipment and fixtures .......... 5-7 Parts and service equipment ............ 5-10 Company vehicles ....................... 5
Expenditures for maintenance and repairs are expensed as incurred. Significant betterments are capitalized. Income Taxes -- The provision for income taxes includes federal and state taxes currently payable and deferred taxes. Deferred taxes are determined utilizing an asset and liability approach as required by Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. This method gives consideration to the future tax consequences associated with differences between financial accounting and tax basis of assets and liabilities. This method gives immediate effect to changes in income tax laws upon enactment. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized. Concentrations of Credit Risk -- Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash deposits. At times, amounts invested with financial institutions may exceed FDIC insurance limits. Concentrations of credit risk with respect to receivables are limited primarily to automobile manufacturers and financial institutions. Credit risk arising from trade receivables from commercial customers is reduced by the large number of customers comprising the trade receivables balances. Trade receivables are concentrated in the Company's market area of Chattanooga, Tennessee. 6 ECONOMY HONDA CARS NOTES TO FINANCIAL STATEMENTS -- Continued 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued Fair Value of Financial Instruments -- As of December 31, 1997 the fair value of the Company's financial instruments including accounts and notes receivables and trade accounts payable approximate their book values. Use of Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Advertising -- The Company expenses advertising costs in the period incurred. Advertising expense for 1997 amounted to $531,473. Interim Financial Information -- The accompanying unaudited financial information for the three months ended March 31, 1997 and 1998 has been prepared on substantially the same basis as the audited financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information set forth therein. The results of interim periods are not necessarily indicative of results to be expected for the entire year. 2. NOTE RECEIVABLE At December 31, 1997, the Company had a note receivable from an unrelated party totaling $238,960. The note bore interest at 12% per annum and was payable in monthly installments of $6,293. On April 7, 1998, the note was purchased for cash by one of the Company's principal stockholders at the recorded book value of $231,115 at that date. 3. INVENTORIES AND RELATED NOTES PAYABLE -- FLOOR PLAN Inventories consist of the following:
December 31, March 31, 1997 1998 -------------- -------------- (Unaudited) New vehicles .................. $ 1,798,172 $2,627,048 Used vehicles ................. 4,902,142 3,171,435 Parts and accessories ......... 365,630 357,095 ----------- ---------- 7,065,944 6,155,578 LIFO reserve .................. (523,972) (603,298) ----------- ---------- Total ......................... $ 6,541,972 $5,552,280 =========== ==========
Had the Company used the first-in, first-out method of valuing new vehicles, parts and accessories inventory, pretax earnings would have been $1,819,742 in 1997. From time to time certain vehicles are pledged to collateralize floor plan notes payable to financial institutions. The floor plan notes bear interest, payable monthly on the outstanding balance at a rate that fluctuates with prime (8.5% at December 31, 1997). Total floor plan interest expense amounted to $2,791 in 1997. The notes payable are due when the related vehicle is sold; however, the Company generally pays floor plan as invoiced for vehicles during the year. There is no balance outstanding under such floor plan notes at December 31, 1997. 7 ECONOMY HONDA CARS NOTES TO FINANCIAL STATEMENTS -- Continued 4. PROPERTY AND EQUIPMENT Property and equipment consists of the following:
December 31, March 31, 1997 1998 -------------- --------------- (Unaudited) Land .................................. $ 624,430 $ 624,430 Buildings and improvements ............ 1,922,175 1,923,579 Office equipment and fixtures ......... 299,278 300,003 Parts and service equipment ........... 358,961 358,961 Company vehicles ...................... 62,254 62,254 ------------ ------------ 3,267,098 3,269,227 Less accumulated depreciation ......... (1,475,124) (1,510,145) ------------ ------------ Property and equipment, net ........... $ 1,791,974 $ 1,759,082 ============ ============
5. EMPLOYEE BENEFIT PLAN The Company has a 401(k) plan, whereby substantially all of the employees of the Company meeting certain service requirements are eligible to participate. Contributions by the Company in 1997 were approximately $39,000. 6. INCOME TAXES The provision for income taxes consists of the following components for the year ended December 31, 1997: Current: Federal ................ $ 559,667 State .................. 105,663 --------- 665,330 --------- Deferred: Federal ................ (33,061) State .................. (6,207) --------- 39,268 --------- Total .................. $ 626,062 =========
The reconciliation of the statutory federal income tax rate with the Company's federal and state overall effective income tax rate is as follows for the year ending December 31, 1997: Statutory federal rate ......... 34.00% State income taxes ............. 3.98% Miscellaneous .................. 0.03% ----- Effective tax rates ............ 38.01% =====
Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. 8 ECONOMY HONDA CARS NOTES TO FINANCIAL STATEMENTS -- Continued 6. INCOME TAXES -- Continued Deferred income tax assets and liabilities consist of the following at December 31, 1997: Deferred tax assets, primarily from differences relating to chargebacks ........... $ 85,528 Deferred tax liabilities, primarily from differences relating to used car inventory reserve .......................................................................... (337,488) ---------- Net deferred tax liabilities ...................................................... $ 251,960 ==========
7. SUBSEQUENT EVENT On March 16, 1998, the Company entered into an agreement with Sonic Automotive, Inc. ("Sonic") whereby Sonic will purchase all of the outstanding capital stock of the Company for a total purchase price of $7.5 million plus an amount equal to the net book value of the assets of the Company. This purchase price will be paid in cash and convertible preferred stock of Sonic. Preferred stock will be issued for 51% of the total purchase price, not to exceed $5.1 million in liquidation preference as of the closing of the acquisition. 9 EX-99 5 EXHIBIT 99.4 INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF CASA FORD OF HOUSTON, INC. Houston, Texas We have audited the accompanying balance sheet of Casa Ford of Houston, Inc. (the "Company") as of December 31, 1997, and the related statements of income, stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 1997, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Charlotte, North Carolina June 4, 1998 1 CASA FORD OF HOUSTON, INC. BALANCE SHEETS December 31, 1997 and March 31, 1998
December 31, March 31, 1997 1998 -------------- -------------- (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents (Note 1) .................................. $ 1,386,749 $ 1,685,197 Accounts receivable (net of allowance for doubtful accounts of $1,553 at December 31, 1997) ............................................. 822,335 495,339 Inventories (Note 3) ................................................ 8,743,629 6,430,778 Other current assets ................................................ 283,717 315,144 ----------- ----------- Total current assets .............................................. 11,236,430 8,926,458 PROPERTY AND EQUIPMENT, NET (Notes 4 and 5) .......................... 911,615 872,323 DEFERRED INCOME TAXES (Note 8) ....................................... 264,307 264,307 GOODWILL (Note 1) .................................................... 617,518 603,795 ----------- ----------- TOTAL ASSETS ......................................................... $13,029,870 $10,666,883 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable -- floor plan (Note 3) ................................ $ 8,681,340 $ 6,149,209 Trade accounts payable .............................................. 432,860 294,196 Current maturities -- long-term debt (Note 5) ....................... 782,098 770,425 Income taxes payable (Note 8) ....................................... 149,725 233,795 Accrued payroll and bonuses ......................................... 188,080 24,255 Other accrued liabilities ........................................... 538,430 837,295 ----------- ----------- Total current liabilities ......................................... 10,772,533 8,309,175 ----------- ----------- LONG-TERM DEBT (Note 5) .............................................. 1,020,867 857,732 ----------- ----------- COMMITMENTS (Notes 6 and 9) STOCKHOLDERS' EQUITY: Receivable from stockholder (Note 2) ................................ (428,310) (441,309) Common stock ($100 par, 12,500 shares authorized, issued and outstanding) ...................................................... 1,250,000 1,250,000 Retained earnings ................................................... 414,780 691,285 ----------- ----------- Total stockholders' equity ........................................ 1,236,470 1,499,976 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................... $13,029,870 $10,666,883 =========== ===========
See notes to financial statements. 2 CASA FORD OF HOUSTON, INC. STATEMENTS OF INCOME Year ended December 31, 1997 and the three months ended March 31, 1997 and 1998
Three months Year ended ended March 31, December 31, ----------------------------- 1997 1997 1998 --------------- -------------- -------------- (Unaudited) REVENUES: Vehicle sales ................................... $ 58,239,109 $12,889,721 $15,165,697 Parts, service and collision repair ............. 6,025,033 1,290,680 1,498,063 Finance and insurance ........................... 2,252,297 479,359 534,451 ------------ ----------- ----------- Total revenues ................................ 66,516,439 14,659,760 17,198,211 COST OF SALES .................................... 56,873,827 12,595,978 14,549,519 ------------ ----------- ----------- GROSS PROFIT ..................................... 9,642,612 2,063,782 2,648,692 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ..... 7,219,544 1,489,567 1,858,528 DEPRECIATION AND AMORTIZATION .................... 299,456 74,864 76,014 ------------ ----------- ----------- OPERATING INCOME ................................. 2,123,612 499,351 714,150 ------------ ----------- ----------- OTHER INCOME (EXPENSE): Interest expense -- floor plan (Note 3) ......... (885,573) (202,407) (216,937) Interest expense -- other ....................... (301,995) (71,332) (59,624) Other income .................................... 129,518 89 9,541 ------------ ----------- ----------- Total other expense ........................... (1,058,050) (273,650) (267,020) ------------ ----------- ----------- INCOME BEFORE INCOME TAXES ....................... 1,065,562 225,701 447,130 PROVISION FOR INCOME TAXES (Note 8) .............. 406,579 86,178 170,625 ------------ ----------- ----------- NET INCOME ....................................... $ 658,983 $ 139,523 $ 276,505 ============ =========== ===========
See notes to financial statements. 3 CASA FORD OF HOUSTON, INC. STATEMENTS OF STOCKHOLDERS' EQUITY Year ended December 31, 1997 and the three months ended March 31, 1998
Retained Total Receivable Common Earnings Stockholders' from Shareholder Stock (Deficit) Equity ------------------ -------------- --------------- -------------- BALANCE AT DECEMBER 31, 1996 ........... (352,101) $ 1,250,000 $ (244,203) $ 653,696 Amounts loaned to stockholder ......... (76,209) -- -- (76,209) Net income ............................ -- -- 658,983 658,983 -------- ----------- ----------- ---------- BALANCE AT DECEMBER 31, 1997 ........... (428,310) 1,250,000 414,780 1,236,470 Amounts loaned to stockholder ......... (12,999) -- -- (12,999) Net income (unaudited) ................ -- -- 276,505 276,505 -------- ----------- ----------- ---------- BALANCE AT MARCH 31, 1998 (unaudited) $ (441,309) $ 1,250,000 $ 691,285 $1,499,976 ========== =========== =========== ==========
See notes to financial statements. 4 CASA FORD OF HOUSTON, INC. STATEMENTS OF CASH FLOWS Year ended December 31, 1997 and the three months ended March 31, 1997 and 1998
Three months ended Year ended March 31, December 31, --------------------------------- 1997 1997 1998 --------------- --------------- --------------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income ............................................................. $ 658,983 $ 139,523 $ 276,505 ------------ ------------ ------------ Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization ........................................ 354,346 74,864 76,014 Deferred income taxes ................................................ (140,290) (69,860) -- Changes in assets and liabilities that related to operations: (Increase) decrease in accounts receivables ......................... 60,637 302,948 326,996 (Increase) decrease in inventories .................................. (369,151) 2,520,131 2,312,851 Increase in other current assets .................................... (69,385) (309,711) (31,427) Increase (decrease) in income tax payable ........................... (40,341) (103,888) 84,070 Payments of floor plan notes payable ................................ (690,969) (2,952,473) (2,532,131) Increase (decrease) in trade accounts payable and accrued liabilities 29,941 392,792 (3,624) ------------ ------------ ------------ Total adjustments .................................................. (865,212) (145,197) 232,749 ------------ ------------ ------------ Net cash (used in) provided by operating activities ................ (206,229) (5,674) 509,254 ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment .................................... (290,996) (17,338) (22,999) ------------ ------------ ------------ Net cash used in investing activities .............................. (290,996) (17,338) (22,999) ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Payments of long-term debt ............................................. (529,853) (253,428) (174,808) ------------ ------------ ------------ Amounts (loaned to) received from stockholder .......................... (76,209) 3,065 (12,999) Net cash used in financing activities .............................. (606,062) (250,363) (187,807) ------------ ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................... (1,103,287) (273,375) 298,448 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .......................... 2,490,036 2,490,036 1,386,749 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD ................................ $ 1,386,749 $ 2,216,661 $ 1,685,197 ============ ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -- Cash paid during the period for: Interest ............................................................... $ 64,241 $ 112,862 $ 89,417 ============ ============ ============ Income taxes ........................................................... $ 597,500 $ 330,000 $ 86,555 ============ ============ ============
See notes to financial statements. 5 CASA FORD OF HOUSTON, INC. NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Business -- Casa Ford of Houston, Inc. (the "Company") operates an automotive dealership, service department, body shop and parts and accessories department in Houston, Texas. The Company sells new and used cars and light trucks, sells replacement parts and accessories, provides vehicle maintenance, warranty, paint and repair services and arranges related financing and insurance. The Company sells new vehicles manufactured by Ford. Revenue Recognition -- The Company records revenue when vehicles are delivered to customers, and when vehicle service work is performed. Finance and insurance commission revenue is recognized principally at the time the contract is placed with the financial institution. Dealer Agreements -- The Company purchases substantially all of its new vehicles from the manufacturer at the prevailing prices charged by the manufacturer to its franchised dealers. The Company's sales could be unfavorably impacted by the manufacturer's unwillingness or inability to supply the dealership with an adequate supply of new vehicle inventory. The Company operates under a dealer agreement with the manufacturer. The Company's dealer agreement does not give it the exclusive right to sell the manufacturer's product within a given geographic area. The Company could be materially adversely affected if the manufacturer awards franchises to others in the same market where the Company is operating. A similar adverse effect could occur if existing competing franchised dealers increase their market share in the Company's market. The ability of the Company to acquire additional franchises from a particular manufacturer may be limited due to certain restrictions imposed by manufacturers. Additionally, the Company's ability to enter into significant acquisitions may be restricted and the acquisition of the Company's stock by third parties may be limited by the terms of the franchise agreement. Cash and Cash Equivalents -- The Company considers contracts in transit and all highly liquid debt instruments with an initial maturity of three months or less to be cash equivalents. Contracts in transit represent cash in transit to the Company from finance companies related to vehicle purchases and was $761,776 at December 31, 1997. Inventories -- Inventories of new and demonstrator vehicles are valued at the lower of last-in, first-out method ("LIFO") cost or market. Inventories of used vehicles are stated at the lower of specific cost or market. All other inventories are generally stated at replacement cost, which approximates cost on the first-in, first-out method ("FIFO"). Property and Equipment -- Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The range of estimated useful lives is as follows:
Useful Lives ------------- Leasehold improvements ................. 7-31.5 Office equipment and fixtures .......... 5-7 Parts and service equipment ............ 5-10 Company vehicles ....................... 5
Expenditures for maintenance and repairs are expensed as incurred. Significant betterments are capitalized. Income Taxes -- The provision for income taxes includes federal and state taxes currently payable and deferred taxes. Deferred taxes are determined utilizing an asset and liability approach as required by Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. This method gives consideration to the future tax consequences associated with differences between financial accounting and tax basis of assets and liabilities. This method gives immediate effect to changes in income tax laws upon enactment. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized. Goodwill -- Goodwill is being amortized on a straight-line basis over a period of 15 years. Accumulated amortization at December 31, 1997 was $205,839. The Company periodically reviews goodwill to assess recoverability. The Company's policy is to compare the carrying value of goodwill with the expected undiscounted cash flows from operations. Concentrations of Credit Risk -- Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash deposits. At times, amounts invested with financial institutions may exceed FDIC insurance limits. 6 CASA FORD OF HOUSTON, INC. NOTES TO FINANCIAL STATEMENTS -- Continued 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued Concentrations of credit risk with respect to receivables are limited primarily to automobile manufacturers and financial institutions. Credit risk arising from trade receivables from commercial customers is reduced by the large number of customers comprising the trade receivables balances. Trade receivables are concentrated in the Company's market area of Houston, Texas. Use of Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments -- As of December 31, 1997 the fair value of the Company's financial instruments including accounts receivable, receivable from shareholder, trade accounts payable, and long-term debt approximate their book values. Advertising -- The Company expenses advertising costs in the period incurred. Advertising expense for 1997 amounted to $581,752. Interim Financial Information -- The accompanying unaudited financial information for the three months ended March 31, 1997 and 1998 have been prepared on substantially the same basis as the audited financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information set forth therein. The results of interim periods are not necessarily indicative of results to be expected for the entire fiscal year. 2. RECEIVABLE FROM STOCKHOLDER At December 31, 1997, the Company had a receivable due from a related party totaling $428,310, bearing no stated interest rate. The receivable was paid in full as of April 1998 pursuant to a dividend. 3. INVENTORIES AND RELATED NOTES PAYABLE -- FLOOR PLAN Inventories consist of the following:
December 31, March 31, 1997 1998 -------------- -------------- (Unaudited) New and demonstrator vehicles ......... $ 7,969,681 $ 4,980,041 Used vehicles ......................... 996,821 1,484,967 Parts and accessories ................. 412,757 432,264 Other ................................. 77,896 247,032 ----------- ----------- 9,457,155 7,144,304 LIFO reserve .......................... (713,526) (713,526) ----------- ----------- Total ................................. $ 8,743,629 $ 6,430,778 =========== ===========
Had the Company used the first-in, first-out method of valuing new vehicles and parts inventory, pretax earnings would have been $1,304,193 in 1997. All new and certain used vehicles are pledged to collateralize floor plan notes payable to financial institutions in the amount of $8,681,340 at December 31, 1997. The floor plan notes bear interest, payable monthly on the outstanding balance at the prime rate plus 1% to 1-1/2% (prime rate was 8.5% at December 31, 1997). Total floor plan interest expense amounted to $885,573 in 1997. The notes payable are due when the related vehicle is sold. As such, these floor plan notes payable are shown as a current liability in the accompanying balance sheet. The maximum credit available under the financing arrangement is $7,800,000 for 1997. 7 CASA FORD OF HOUSTON, INC. NOTES TO FINANCIAL STATEMENTS -- Continued 4. PROPERTY AND EQUIPMENT Property and equipment consists of the following:
December 31, March 31, 1997 1998 -------------- ------------ (Unaudited) Leasehold improvements ................ $ 221,132 $ 222,496 Office equipment and fixtures ......... 780,133 785,025 Parts and service equipment ........... 437,504 454,163 Company vehicles ...................... 219,547 219,631 ---------- ---------- 1,658,317 1,681,315 Less accumulated depreciation ......... (746,701) (808,992) ---------- ---------- Property and equipment, net ........... $ 911,615 $ 872,323 ========== ==========
5. LONG-TERM DEBT Long-term debt consists of the following:
December 31, March 31, 1997 1998 -------------- ------------ (Unaudited) Unsecured note payable to a related party, in monthly installments of $25,500, plus interest at prime .............................................................................. $ 864,000 $ 787,500 Unsecured note payable in monthly installments of $14,880, plus interest at prime plus 1 1/2%, through February 2001 ......................................................... 570,960 524,237 Notes payable in monthly installments totaling $7,670, plus interest ranging from 9.7% to 10.7%, through December 2000 .......................................................... 104,433 92,389 Unsecured note payable in monthly installments of $2,083, plus interest at 8.55%, through March 1999 ............................................................................ 31,250 27,083 Notes payable in monthly installments totaling $5,501, including interest at rates ranging from 4.748% to 9.312%, maturities from December 1998 to November 2000, collateralized by Company vehicles .................................................... 156,921 142,934 Other notes payable ..................................................................... 75,401 54,014 ----------- ---------- 1,802,965 1,628,157 Less current maturities ................................................................. 782,098 770,425 ----------- ---------- Long-term debt .......................................................................... $ 1,020,867 $ 857,732 =========== ==========
Future maturities of debt at December 31, 1997 are as follows:
Year ending December 31, - -------------------------- 1998 ................... $ 782,098 1999 ................... 544,503 2000 ................... 441,084 2001 ................... 35,280 ----------- Total .................. $ 1,802,965 ===========
6. OPERATING LEASES The Company leases its business premises, modular space and various equipment under non-cancelable operating leases with terms up to 10 years. Future minimum rental payments required under non-cancelable leases at December 31, 1997 are as follows: 8 CASA FORD OF HOUSTON, INC. NOTES TO FINANCIAL STATEMENTS -- Continued 6. OPERATING LEASES -- Continued Year Ending December 31, 1998 ................... $ 305,560 1999 ................... 304,452 2000 ................... 304,452 2001 ................... 304,452 2002 ................... 304,452 Thereafter ............. 989,469 ---------- Total .................. $2,512,837 ==========
Rent expense under all operating leases was $297,592 during 1997. 7. EMPLOYEE BENEFIT PLAN The Company has a qualified 401(k) Profit Sharing Plan (the "Plan"), whereby substantially all of the employees of the Company meeting certain service requirements are eligible to participate. Contributions by the Company in 1997 were $20,733. 8. INCOME TAXES The provision (benefit) for income taxes consists of the following components at December 31, 1997: Current: Federal .............. $ 482,949 State ................ 63,920 ---------- 546,869 Deferred: Federal .............. (123,213) State ................ (17,077) ---------- (140,290) ---------- Total ................ $ 406,579 ==========
The reconciliation of the statutory federal income tax rate with the Company's federal and state overall effective income tax rate is as follows for the year ending December 31, 1997: Statutory federal rate ......... 34.00% State income taxes ............. 2.90% Miscellaneous .................. 1.26% ----- Effective tax rate ............. 38.16% =====
Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Deferred income tax assets and liabilities consist of the following at December 31, 1997: Deferred tax assets -- primarily from differences relating to amortization of extended warranties ....................................................................... $ 522,261 Deferred tax liabilities -- primarily from differences relating to depreciation .... (29,389) --------- Net deferred tax assets ............................................................ $ 492,872 =========
9 CASA FORD OF HOUSTON, INC. NOTES TO FINANCIAL STATEMENTS -- Continued 9. COMMITMENTS Ford Motor Company (FMC) owns vehicles which are used as short-term rentals for which the Company pays FMC monthly fees. A portion of the fees are applied against the purchase price. The Company must pay for the vehicles when they are no longer used for rental. The contingent liability to FMC to purchase the vehicles under this program was $902,057 at December 31, 1997. 10. SUBSEQUENT EVENT In April 1998, the Company entered into an agreement with Sonic Automotive, Inc. ("Sonic") whereby Sonic will purchase all of the outstanding capital stock of the Company for a total purchase price of approximately $11.3 million less certain indebtedness of the Company to employees and affiliates and to financial institutions. The initial purchase price is subject to adjustment based upon a final determination of the net working capital of the Company. The purchase price will be paid in 2,313 shares of Sonic preferred stock with a liquidation preference of approximately $2.3 million. 10 EX-99 6 EXHIBIT 99.6 Exhibit 99.6 AMENDMENT NO. 1 AND SUPPLEMENT TO ASSET PURCHASE AGREEMENT THIS AMENDMENT NO. 1 AND SUPPLEMENT TO ASSET PURCHASE AGREEMENT (this "AMENDMENT") is made and entered into as of this 28th day of May, 1998, by and among: SONIC AUTOMOTIVE, INC., a Delaware corporation (the "BUYER"), HATFIELD JEEP EAGLE, INC., an Ohio corporation d/b/a Volkswagen West, Jeep Eagle West, Hatfield KIA and Trader Bud's Westside Chrysler Plymouth, HATFIELD LINCOLN MERCURY, INC., an Ohio corporation d/b/a Hatfield Lincoln Mercury, WESTSIDE DODGE, INC., an Ohio corporation d/b/a Trader Bud's Westside Dodge, TOYOTA WEST, INC., an Ohio corporation d/b/a Toyota West, and HATFIELD HYUNDAI, INC., an Ohio corporation d/b/a Hatfield Hyundai, Hatfield Isuzu and Hatfield Subaru (collectively, the "SELLERS" and each, individually, a "SELLER"); and Bud C. Hatfield, Dan E. Hatfield and Dan E. Hatfield, as Trustee of the Bud C. Hatfield, Sr. Special Irrevocable Trust (collectively, the "SHAREHOLDERS"). WHEREAS, the Buyer, the Sellers and the Shareholders entered into an Asset Purchase Agreement (the "PURCHASE AGREEMENT") dated as of February 4, 1998; and WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the meanings given to them in the Purchase Agreement; and WHEREAS, the Buyer and the Sellers desire to amend and supplement the Purchase Agreement as hereinafter provided. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. AMENDMENTS TO PURCHASE AGREEMENT. (a) Amendment of Purchase Price. Section 1.3(a) of the Purchase ---------------------------- Agreement is hereby amended to read in its entirety as follows: (a) PURCHASE PRICE. In addition to the assumption by the Buyer of the Assumed Liabilities, as the full consideration to be paid by the Buyer for the Purchased Assets, the Buyer shall pay to the Sellers the aggregate a purchase price of $48,550,000, subject to adjustment as provided in Section 1.3(c) below (the "PURCHASE PRICE"). 1 (b) Amendment of Closing Payment. Section 1.3(b)(1) of the Purchase ---------------------------- Agreement is hereby amended to read in its entirety as follows: (1) $34,525,000 of the Purchase Price (the "CLOSING PAYMENT") shall be payable to the Sellers at Closing by wire transfer of immediately available funds to the account or accounts of the Sellers, which shall be designated by Bud Hatfield, as agent for the Sellers (the "SELLERS' AGENT"), in writing at least one full Business Day prior to the Closing Date, in the respective amounts specified in Part I of Schedule 1.3(d). For purposes of this Agreement, a "BUSINESS --------------- DAY" is a day other than a Saturday, a Sunday or a day on which banks are required or authorized to be closed in the State of North Carolina. (c) Amendment of Adjustment Procedures. ---------------------------------- (1) the portion of the first sentence of Section 1.3(c)(1) of the Purchase Agreement which precedes the words "PROVIDED, HOWEVER" is hereby deleted and the following is hereby inserted in its place: (1) As used in this Agreement, the term "NET CURRENT ASSETS" shall mean (i) all of the Purchased Assets as of the Closing Date which would, in conformity with generally accepted accounting principles applied in a manner consistent with those used in the preparation of the Financial Statements referred to in Section 3.4 below ("GAAP"), be included under current assets on a balance sheet, MINUS (ii) all of the Assumed Liabilities as of the Closing Date which would, in conformity with GAAP, be included under current liabilities on a balance sheet. Not later than 60 days after the Closing Date (as defined in Article 2 hereof), the Buyer will prepare and deliver to the Sellers' Agent an unaudited balance sheet (the "CLOSING BALANCE SHEET") of the Sellers as of the Closing Date, consisting of computations of (A) the Net Current Assets, and (B) the tangible book value as of the Closing Date of the Purchased Assets (excluding goodwill and other intangible assets) less the book value as of the Closing Date of the Assumed Liabilities, all as determined in accordance with GAAP; (2) Section 1.3(c)(2) of the Purchase Agreement is hereby amended to read in its entirety as follows: (2) To the extent that the Net Current Assets, as deemed mutually agreed by the parties or as determined by the Accountants, as aforesaid, is less than $9,800,000 (the "NET CURRENT ASSETS SHORTFALL"), the Sellers shall be obligated, jointly and severally, to 2 pay the amount of the Net Current Assets Shortfall, together with interest on such amount at a rate equal to the Buyer's floor plan financing rate from time to time in effect (the "INTEREST RATE") from and including the Closing Date through the date of payment, promptly to the Buyer. In furtherance of (but not by way of limitation of) the Sellers' obligation in the immediately preceding sentence, the Sellers' Agent and the Buyer shall execute and deliver to the Escrow Agent a joint instruction to deliver up to 500 of the Escrow Shares to the Buyer, with the balance of such 500 of the Escrow Shares to be delivered to the Sellers so long as no claim by the Buyer for indemnification shall then be pending pursuant to this Agreement. To the extent that the Net Current Assets, as deemed mutually agreed by the parties or as determined by the Accountants, as aforesaid, is at least equal to $9,800,00, the Buyer shall be obligated to execute and deliver to the Escrow Agent a joint instruction to deliver 500 of the Escrow Shares to the Sellers pursuant to the Escrow Agreement (except to the extent of any pending claim by the Buyer for indemnification pursuant to this Agreement). To the extent that the Net Current Assets, as deemed mutually agreed by the parties or as determined by the Accountants, as aforesaid, is greater than $9,800,000 (the "NET CURRENT ASSETS EXCESS"), the Buyer shall be obligated to pay the amount of the Net Current Assets Excess in cash promptly to the Sellers, together with interest thereon at the Interest Rate from and including the Closing Date through the date of payment. (d) Amendment of Closing. Article 2 of the Purchase Agreement is hereby -------------------- amended to read in its entirety as follows: ARTICLE 2 CLOSING The sale and purchase of the Purchased Assets contemplated hereby shall take place at a closing (the "CLOSING") at the offices of Kemp, Schaeffer, Rowe & Lardiere Co., L.P.A., 88 West Mound Street, Columbus, Ohio 43215, at 10:00 a.m. local time on the fifth (5th) Business Day, or such shorter period as the Buyer may choose, following the date the Buyer gives notice of the Closing to the Sellers, but in no event later than June 30, 1998 (the "CLOSING DATE DEADLINE"). The date on which the Closing actually occurs is hereinafter referred to as the "CLOSING DATE". (e) Amendment Regarding Certain Prohibitions of Sellers. Section 5.3 of --------------------------------------------------- the Purchase Agreement is hereby amended to read in its entirety as follows: 3 5.3 CERTAIN PROHIBITIONS. The Sellers hereby acknowledge that, after March 31, 1998, they have been operating their businesses for the economic benefit of the Buyer. Accordingly, the Sellers warrant that they have not, and the Sellers further agree that they shall not, without the written consent of the Buyer, (a) engage or take part in, or agree to engage or take part in, any reorganization or similar transaction, (b) enter into any contract, agreement, undertaking or commitment which would have been required to be set forth in Schedule 3.6(a) if in effect on the date hereof --------------- or enter in to any contract, agreement, undertaking or commitment which cannot be assigned to the Buyer or a permitted assignee of the Buyer, (c) sell or otherwise dispose of any of their respective assets, other than sales of inventory in the ordinary course of business, (d) make any capital appropriation or expenditure or commitment therefor on behalf of the Sellers, (e) take, cause, agree to take or cause, or permit to occur any of the actions or events set forth in Section 3.5 of this Agreement, or (f) declare or make payment of any dividend or other distribution of cash or other property in respect of any of their capital stock, or redeem, purchase or otherwise acquire any such capital stock; PROVIDED, HOWEVER, the Buyer's consent to the payment of dividends by the Sellers will not be withheld so long as the Sellers shall have demonstrated, to the reasonable satisfaction of the Buyer, that such dividends (A) are only out of retained earnings for periods ending prior to April 1, 1998, and (B) will not result in the Net Current Assets falling below $9,800,000. (g) Deletion of Section 11.1(f). Section 11.1(f) of the Purchase --------------------------- Agreement is hereby deleted in its entirety. 2. AGREEMENT ON EXHIBITS AND SCHEDULES. (a) Agreement on Exhibits. The parties hereto hereby agree on the form --------------------- and substance of Exhibits A (Preferred Stock Statement of Rights and Preferences), B (Form of Escrow Agreement), C (Form of Bills of Sale and Assignment), D (Form of Dealerships Leases), E (Form of Non-Competition Agreement), F (Form of Legal Opinion of Counsel for the Sellers and the Shareholders), and G (Form of Legal Opinion of Counsel for the Buyer), all as attached hereto. (b) Agreement on Schedules. The parties hereto hereby agree on the form ---------------------- of Schedules 1.3(d), 3.1, 3.2, 3.3, 3.4, 3.5, 3.6(a), 3.6(b), 3.7, 3.8(a), 3.9, 3.12, 3.13, 3.14(a), 3.14(b), 3.16, 3.17, 3.19, 3.20, 3.21, 3.22, 3.23, 3.24, 3.26, 3.29(j), 3.29(l), 3.30, 3.31, 3.32, and 4.2(a), all as attached hereto. 4 3. EMPLOYMENT AGREEMENTS. At the Closing, the Buyer and Messrs., Bud C. Hatfield and Dan E. Hatfield will enter into separate employment agreements in substantially the form of Exhibit H attached hereto. 4. DEALERSHIP LEASES. The monthly "Rent" under each of the Dealership Leases and the "Purchase Price" for the Buyer's purchase option under each of the Dealership Leases shall be as set forth on Exhibit I attached hereto. 5. COUNTERPARTS. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, and all such counterparts together shall constitute one instrument. 6. PURCHASE AGREEMENT CONFIRMED. Except as set forth in this Amendment, the Purchase Agreement is hereby confirmed and shall remain in full force and effect. 7. EFFECT ON LETTER AGREEMENT DATED FEBRUARY 4, 1998. The Letter Agreement among the Sellers, the Shareholders and the Buyer, dated February 4, 1998, regarding delivery of the Exhibits and Schedules, is superseded by this Agreement; provided, however, paragraph 7 thereof (regarding indemnification by the Buyer under certain circumstances) shall remain in full force and effect. [Signatures begin on the following page] 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed all as of the day, month and year first above written. THE BUYER: SONIC AUTOMOTIVE, INC. By: /s/ ------------------------------------- Name: Title: THE SELLERS: HATFIELD JEEP EAGLE, INC. By: /s/ ------------------------------------- Name: Title: HATFIELD LINCOLN MERCURY, INC. By: /s/ ------------------------------------- Name: Title: WESTSIDE DODGE, INC. By: /s/ ------------------------------------- Name: Title: TOYOTA WEST, INC. By: /s/ ------------------------------------- Name: Title: 6 HATFIELD HYUNDAI, INC. By: /s/ -------------------------------------- Name: Title: THE SHAREHOLDERS: /s/ Bud C. Hatfield (SEAL) ------------------------------------- BUD C. HATFIELD -------------------------------------- /s/ Dan E. Hatfield (SEAL) -------------------------------------- DAN E. HATFIELD /s/ Dan E. Hatfield (SEAL) -------------------------------------- DAN E. HATFIELD, AS TRUSTEE OF THE BUD C. HATFIELD, SR. SPECIAL IRREVOCABLE TRUST Attachments: - ----------- Exhibits: A through G - --------- Exhibit H - Form of Employment Agreement - --------- Exhibit I - Rents under Dealership Leases - --------- Schedules: 1.3(d), 3.1, 3.2, 3.3, 3.4, 3.5, 3.6(a), 3.6(b), 3.7, 3.8(a), 3.9, 3.12, 3.13, 3.14(a), 3.14(b), 3.16, 3.17, 3.19, 3.20, 3.21, 3.22, 3.23, 3.24, 3.26, 3.29(j), 3.29 (l), 3.30, 3.31, 3.32, and 4.2(a) 7 EX-99 7 EXHIBIT 99.9 Exhibit 99.9 ASSET PURCHASE AGREEMENT (CENTURY) THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made this 10th day of April, 1998 by and among CENTURY AUTO SALES, INC., a South Carolina corporation ("SELLER"), A. FOSTER McKISSICK, III and MURRAY P. McKISSICK (collectively, the "STOCKHOLDERS") and SONIC AUTOMOTIVE, INC., a Delaware corporation ("BUYER"). WITNESSETH: WHEREAS, Seller is the owner of certain assets used in connection with Seller's BMW automobile dealership business (the "BUSINESS") operated at 2752 Laurens Road, Greenville, South Carolina, and at 2550 Reidville Road, Spartanburg, South Carolina; WHEREAS, Seller desires to sell and Buyer desires to buy, or to cause a subsidiary or affiliate of Buyer to buy, certain assets pertaining to the Business, subject to the terms and conditions of this Agreement; WHEREAS, contemporaneously with the execution of this Agreement, Buyer has entered into a Contract to Purchase and Sell Real Property (the "REAL PROPERTY PURCHASE AGREEMENT") with Seller and Fairway Investments, LLC, a South Carolina limited liability company ("FAIRWAY"), whereby Buyer has agreed to buy, and Seller and Fairway have agreed to sell, the land, buildings and improvements located at the Real Property (as defined in the Real Property Purchase Agreement); and WHEREAS, the consummation of the transactions contemplated by each of this Agreement and the Real Property Purchase Agreement is subject to the consummation of the transactions contemplated by the other such Agreement; NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the receipt and legal sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereby agree as follows: ARTICLE I CERTAIN DEFINITIONS 1.1 "ASSETS" shall mean: the New Vehicles (as defined in Section 3.1 hereof); the Demonstrators (as defined in Section 3.2 hereof); the Parts (as defined in Section 4.4 hereof); the Miscellaneous Inventories (as defined in Section 5.1 hereof); the Work in Progress (as defined in Section 5.3 hereof); the Fixtures and Equipment (as defined in Section 5.4 hereof); the Miscellaneous Assets (as defined in Section 5.5 hereof); any used vehicles which Buyer agrees to 1 buy at the Closing; and all of Seller's rights to the name "Century BMW", and all goodwill of the Business. 1.2 "CLOSING DATE" shall mean the date, not later than the Closing Date Deadline (as hereinafter defined), of the closing of the purchase and sale of the Assets (the "CLOSING") which shall be a date designated by Buyer not later than fifteen (15) days after the approvals set forth in Section 8.13 hereof and all other conditions precedent set forth in Articles VIII and IX have been satisfied, or such other date as is mutually agreed upon by the parties hereto. The Closing shall be held at the offices of Leatherwood Walker Todd & Mann, P.C., 100 East Coffee Street, Greenville, South Carolina, 29602, at 9:00 a.m. on the Closing Date. 1.3 "CLOSING DATE DEADLINE" shall mean May 15, 1998; provided, however, if as of May 15, 1998, any of the approvals set forth in Section 8.13 hereof shall not have been obtained and the obtaining of any such approvals is the sole condition precedent to Buyer's obligations under Article VIII which remains unsatisfied, Buyer may elect to extend the Closing Date Deadline for up to an additional thirty (30) days. 1.4 "INVENTORY DATE" shall mean the close of business on March 28, 1998. 1.5 "LIABILITIES" shall mean all obligations of Seller, arising in the ordinary course of business after the Inventory Date and not as a result of any breach or default, under those contracts and leases of Seller set forth on Schedule 1.5 attached hereto. 1.6 "MANAGEMENT AGREEMENT" shall mean that certain Management Agreement dated the date hereof between Seller, as "Owner", and Buyer as "Manager." 1.7 "BMW" shall mean BMW of North America. ARTICLE II SALE AND PURCHASE OF THE ASSETS 2.1 Upon the terms and subject to the conditions hereinafter set forth, at the Closing, Seller will sell, transfer and convey the Assets to Buyer and Buyer will purchase the Assets from Seller for the consideration set forth in this Agreement. The sale, transfer and conveyance of the Assets will be made by execution and delivery at the Closing of a bill of sale in a form reasonably satisfactory to Buyer's counsel (the "BILL OF SALE") and such other instruments of assignment, transfer and conveyance as Buyer shall reasonably request. Except to the extent specifically included within the Assets, Seller will not sell, and Buyer will not purchase, any other tangible or intangible assets of Seller. 2 2.2 The aggregate purchase price (the "PURCHASE PRICE") to be paid for the Assets shall consist of Four Million Dollars ($4,000,000) plus the Warrants (as defined in Section 2.3 hereof), as the purchase price for the Business and intangible Assets included in the Assets, plus the sum of: (i) the New Vehicle Purchase Price (as defined in Section 3.1 hereof); (ii) the Demonstrator Purchase Price (as defined in Section 3.2 hereof); (iii) the Used Vehicle Purchase Price, if applicable (as defined in Section 3.6 hereof); (iv) the Parts Purchase Price (as defined in Section 4.5 hereof); (v) the Miscellaneous Inventories Purchase Price (as defined in Section 5.1 hereof); (vi) the Work in Progress Purchase Price (as defined in Section 5.3 hereof); (vii) the F&E Purchase Price (as defined in Section 5.4 hereof); and (viii) the amount of the Liabilities. Each party will use the Purchase Price allocation described in this Section 2.2 in all reporting to, and tax returns filed with, the Internal Revenue Service. 2.3 Upon the terms and subject to the conditions hereinafter set forth, Buyer shall pay the Purchase Price as follows: (a) At the Closing, Buyer shall deliver to Seller a certified check, or a wire transfer to an account designated by Seller, in an amount equal to Two Million Dollars ($2,000,000) plus the sum of (i) the New Vehicle Purchase Price; (ii) the Demonstrator Purchase Price; (iii) the Parts Purchase Price; (iv) the Miscellaneous Inventories Purchase Price; and (v) the Work in Progress Purchase Price; and (vi) an amount equal to fifty percent (50%) of the F&E Purchase Price; provided, however, to the extent that (A) Buyer shall have paid or discharged, pursuant to the Management Agreement, any liability or obligation of Seller accrued or outstanding as of the Inventory Date and not included in the Liabilities or (B) Seller shall have collected and not paid over to Buyer any accounts receivable from transactions after the Inventory Date, the amount of such liability or obligation paid or discharged by Buyer, or accounts receivable collected by Seller, shall be a credit towards the amount payable under this Section 2.3(a); (b) At the Closing, Buyer shall issue to Seller warrants (the "WARRANTS") to purchase Seventy-five Thousand (75,000) shares of Class A Common Stock, $0.01 par value per share (the "COMMON STOCK"), of Buyer pursuant to a Warrant Certificate in the form attached hereto as Exhibit A; (c) At the Closing, Buyer shall issue to Seller that number of shares (the "PREFERRED SHARES") of Buyer's Convertible Preferred Stock, with such rights and preferences as are set forth in the Statement of Rights and Preferences of Preferred Stock attached hereto as Exhibit B (the "STATEMENT OF RIGHTS AND PREFERENCES"), obtained by dividing the sum of (i) Two Million Dollars ($2,000,000) plus (ii) fifty percent (50%) of the F&E Purchase Price by One Thousand Dollars ($1,000); (d) At the Closing, Buyer shall assume the Liabilities in accordance with Section 2.4 hereof; 3 (e) Buyer shall receive a credit against the Purchase Price with respect to all amounts paid by Buyer to Seller (or on Seller's behalf) after the Inventory Date and on or prior to the Closing Date under the Management Agreement with respect to the Assets; and (f) On the date hereof, Buyer shall deliver to Seller a certified check, or a wire transfer to an account designated by Seller, in an amount equal to the Used Vehicle Purchase Price, if applicable. Any such payment of the Used Vehicle Purchase Price shall constitute earnest money, which shall be refunded by Seller to Buyer in the event this Agreement is terminated and for which Buyer shall receive a credit towards the Purchase Price. Seller shall not be required to hold or maintain the earnest money in any separate account. 2.4 At the Closing, Seller will assign to Buyer and Buyer will assume and agree to perform and discharge the Liabilities pursuant to an assignment and assumption agreement in a form reasonably satisfactory to Seller's counsel (the "ASSUMPTION AGREEMENT"). Notwithstanding anything herein to the contrary, except as expressly provided in this Section 2.4 and in the Assumption Agreement, Buyer does not and will not assume or become liable for any obligations or liabilities of Seller, of any kind whatsoever, fixed or contingent, known or unknown, as a result of the transactions contemplated in this Agreement. Seller shall retain and agrees to satisfy and discharge all of its obligations and liabilities, including the obligations and liabilities set forth on Schedule 2.4, other than the Liabilities. 2.5 (a) At the Closing, Seller and each of the Stockholders shall execute and deliver to Buyer the certificate referred to in the Statement of Rights and Preferences and the representations and warranties set forth in such certificate shall also apply to the Warrants and the Common Stock issued on exercise of the Warrants. At Seller's option, exercisable only by written notice to Buyer at or prior to the Closing (the "REGISTRATION NOTICE"), Buyer shall be obligated to use its reasonable best efforts to register under the Securities Act of 1933, as amended (the "SECURITIES ACT"), on or before December 31, 1998, the shares (the "COMMON SHARES") of Common Stock which are issuable upon conversion of the Preferred Shares. (b) If requested by the managing or lead managing underwriter for any such underwritten registered offering of the Common Shares, the Seller shall execute and deliver such underwriting agreement with the managing or lead managing underwriter in such form as is customarily used by such underwriter with any modifications as the parties thereto shall agree. In connection with any such registration, Seller and the Stockholders shall supply to Buyer such information as may be reasonably requested by Buyer in connection with the preparation and filing of a registration statement with the Securities and Exchange Commission. Seller and the Stockholders shall not supply any information to Buyer for inclusion in such registration statement that will, taken as a whole, at the time the registration statement becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Provided that Buyer shall have timely completed such registration of the Common Shares, Seller shall promptly convert the Preferred Shares into the Common Shares. 4 (c) In the event that Buyer fails to timely complete such registration of the Common Shares, Seller may, at its option, exercisable by notice to Buyer not later than January 31, 1999, require Buyer to purchase up to all of the Preferred Shares at the price of $1,000 per share. Such notice to Buyer shall specify the number of Preferred Shares required to be purchased and a closing date for such purchase which shall be not sooner than fifteen (15) days and not longer than thirty (30) days from the date of delivery of such notice. At the closing of such purchase, Buyer shall deliver to Seller the applicable purchase price in the same manner that the cash portion of the Purchase Price paid at Closing was paid against delivery by Seller of (i) the certificates for the Preferred Shares being purchased, duly endorsed for transfer to Buyer, and (ii) a certificate signed by Seller and each of the Stockholders to the effect that such Preferred Shares are being sold free and clear of all encumbrances and claims of third persons. (d) In the event Seller does not timely deliver a Registration Notice, Buyer shall have no obligation to register the Common Shares. Thereafter, Buyer's sole obligation with respect to the Preferred Shares and the Common Shares shall be to use its reasonable best efforts to make available current public information with respect to Buyer within the meaning of Subsection (c)(1) of Securities and Exchange Commission Rule 144 ("RULE 144") to the extent necessary to facilitate public resales by Seller of the Common Share pursuant to Rule 144. ARTICLE III NEW VEHICLES AND DEMONSTRATORS 3.1 At the Closing, Buyer shall purchase all of Seller's untitled new 1997 and 1998 model BMW motor vehicles in Seller's stock and unsold by Seller as of the Inventory Date and which are listed on Schedule 3.1, to be delivered to Buyer as promptly as possible after the date hereof (all such vehicles are collectively referred to hereinafter as the "NEW VEHICLES"). The purchase price to be paid by Buyer for each New Vehicle shall be the price at which the New Vehicle was invoiced to Seller by BMW, as adjusted pursuant to this Article III (the sum of all such amounts to be paid for New Vehicles as determined by this Article III is herein referred to as the "NEW VEHICLE PURCHASE PRICE"). Schedule 3.1 shall set forth each New Vehicle's model, invoice cost, odometer reading and all other information necessary to calculate the New Vehicle Purchase Price with respect to such New Vehicle. At the Inventory Date, Seller shall assign to Buyer, without any additional consideration therefor, by appropriate documents reasonably satisfactory to Buyer, all unfilled retail orders and deposits made thereon. 3.2 At the Closing, Buyer shall purchase all of Seller's untitled 1997 and 1998 model BMW motor vehicles in Seller's stock and unsold by Seller as of the Inventory Date which are used in the ordinary course of business for the purpose of demonstration, and which are listed on Schedule 3.2, to be delivered to Buyer as promptly as possible after the date hereof (all such vehicles are collectively referred to herein as the "DEMONSTRATORS"). For purposes of this Agreement, any motor vehicle with more than 9,000 miles shall be deemed to be "used" rather than a "Demonstrator". The purchase price to be paid by Buyer for each Demonstrator shall be the price at which the Demonstrator was invoiced to Seller by BMW, as adjusted pursuant to this Article III 5 and as reduced as follows: (a) if such Demonstrator's odometer reflects total mileage of six thousand (6,000) miles or less, an amount equal to ten cents ($.10) multiplied by the total mileage on such odometer; and (b) if such Demonstrator's odometer reflects total mileage of more than six thousand (6,000) miles but less than nine thousand (9,000) miles, an amount equal to twenty cents ($.20) multiplied by the total mileage on such odometer (the sum of all such amounts to be paid for Demonstrators hereunder is herein referred to as the "DEMONSTRATOR PURCHASE PRICE"). Schedule 3.2 shall set forth each Demonstrator's model, invoice cost, odometer reading and all other information necessary to calculate the Demonstrator Purchase Price with respect to such Demonstrator. 3.3 The purchase price paid for each New Vehicle and each Demonstrator purchased under this Article III shall be: (a) increased by (i) sixty dollars ($60) if Seller has completed new car delivery preparation on such Vehicle and (ii) out-of-pocket costs incurred by Seller for dealer-installed equipment and accessories; and/or (b) decreased by (i) the dealer cost of any equipment and accessories which have been removed from such vehicles, (ii) all paid or unpaid rebates, discounts, Holdback for Dealer Account and other factory incentives (including without limitation rebates applied for and paid but unearned, incentive monies claimed on pre-reported units and carryover allowances on 1997 models), (iii) any refundable advertising allowances, and (iv) sixty dollars ($60) if such vehicle has not been prepped. 3.4 In the event any New Vehicle or Demonstrator shall have been damaged prior to the Inventory Date, or is otherwise in a condition such that it cannot reasonably be presented as being in a first-class saleable condition, Seller and Buyer will attempt to agree on the cost to cover such repairs or some other equitable reduction in value to reflect such condition, which amount shall be deducted from the price to be paid for such New Vehicle or Demonstrator. In the event Buyer and Seller cannot agree on the cost of repairs or the amount of reduction, Buyer shall have no obligation to purchase any such damaged New Vehicle or Demonstrator. With respect to any New Vehicle or Demonstrator which has been damaged and repaired prior to the Inventory Date, Seller and Buyer will attempt to agree on an adjustment to the price to reflect any decrease in the wholesale value of such New Vehicle or Demonstrator resulting from such damage and repair. In the event Buyer and Seller cannot agree on such adjustment, Buyer shall have no obligation to purchase such New Vehicle or Demonstrator. 3.5 [Intentionally Left Blank] 3.6 Buyer shall have no obligation to purchase any vehicle from Seller other than its obligation hereunder to purchase the New Vehicles and the Demonstrators. When Seller and Buyer perform the vehicle inventory, the parties shall assign a price to each used vehicle owned by Seller at such time. At the Inventory Date, Buyer, in its sole discretion, may elect to purchase, at the Closing, any or all of Seller's used vehicles for the price assigned to each such used vehicle. If 6 Buyer elects to purchase any used vehicles, the sum of all prices assigned to such used vehicles pursuant to the terms of this Section 3.6 shall be referred to herein as the "USED VEHICLE PURCHASE PRICE". ARTICLE IV PARTS/ACCESSORIES 4.1 Buyer and Seller shall engage a mutually acceptable third party engaged in the business of appraising, valuing and preparing inventories for automobile dealerships (hereinafter referred to as the "INVENTORY SERVICE") to prepare an inventory list (the "INVENTORY") of the parts and accessories, as well as the Miscellaneous Inventory, used by Seller in the Business as a BMW dealer at the Real Property. The Inventory shall be posted to the BMW-approved system of inventory control. The cost of the aforesaid physical inventory shall be shared equally by Buyer and Seller. Buyer shall have the right to deduct Seller's portion of such expense from the consideration to be paid to Seller under the terms of this Agreement and to remit such sum directly to the Inventory Service. The Inventory shall be completed by March 29, 1998, or such later date as is mutually convenient and which is as close as possible to the Closing Date. The Inventory shall identify each part and accessory and its purchase price. 4.2 The Inventory shall classify parts and accessories as "returnable" or "nonreturnable". For purposes of this Agreement, the terms "returnable parts" and "returnable accessories" shall describe and include only those new parts and new accessories for BMW vehicles which are listed (coded) in the latest current BMW Master Parts Price List Suggested List Prices and Dealer Prices with supplements or the equivalent in effect as of the date of the Inventory (the "MASTER PRICE LIST") as returnable to BMW at not less than the purchase price reflected in the Master Price List. The purchase price for each "returnable part" and "returnable accessory"will be the price listed in the Master Price List. All parts and accessories not falling within the definition of "returnable" shall be classified as "nonreturnable". The purchase price for each "nonreturnable" part and accessory, of which type Seller has made no sales during the ninety (90) day period prior to the date of the Inventory, shall be sixty percent (60%) of the price listed therefor in the Master Price List. The purchase price for each "nonreturnable" part and accessory, of which type Seller has made retail sales to one or more customers during the ninety (90) day period prior to the date of the Inventory, shall be one hundred percent (100%) of the price therefor listed in the Master Price List. The purchase price for all "Jobber" and/or "NPN" parts shall be equal to Seller's original cost of such parts. The purchase price for all nuts, bolts and any other parts not addressed in this Section 4.2 shall equal the fair market value thereof as determined by the Inventory Service. 4.3 [Intentionally Left Blank] 4.4 At the Closing, Buyer shall purchase all parts and accessories owned by Seller at the Inventory Date and listed on the Inventory (the "PARTS") provided, however, that Buyer shall not be obligated to purchase any damaged parts or accessories, parts and accessories with component parts missing, superseded or obsolete parts or accessories, or used parts or accessories. Seller agrees that 7 if parts and accessories that Buyer is not obligated to purchase hereunder are not removed from the Real Property within thirty (30) days after the Closing Date, they shall become the property of Buyer without the payment of any consideration in addition to the consideration otherwise provided herein. 4.5 The purchase price for the Parts will equal the value of such items shown on the Inventory (the "PARTS PURCHASE PRICE"). 4.6 Seller shall assign to Buyer at Closing any net parts return privileges under the BMW Parts Return Plan that may have accrued to Seller prior to the Closing (and any other special parts return authorizations which may have been granted to Seller by BMW). ARTICLE V MISCELLANEOUS INVENTORIES; WORK IN PROGRESS; FIXTURES AND EQUIPMENT 5.1 At the Closing, Buyer shall purchase all useable gas, oil and grease, all undercoat material and body materials in unopened cans and such miscellaneous useable and saleable articles in unbroken lots which (i) are on the dealership premises, (ii) are owned by Seller on the Inventory Date, (iii) were purchased during the thirty (30) day period prior to the Inventory Date, and (iv) are identified in the Inventory taken by the Inventory Service on the Inventory Date (collectively referred to herein as the "MISCELLANEOUS INVENTORIES"). The purchase price for the Miscellaneous Inventories shall be equal to the replacement cost of the Miscellaneous Inventories as determined by the Inventory Service and set forth on the Inventory (the sum of all prices of the Miscellaneous Inventories pursuant to the terms of this Section 5.1 shall be referred to herein as the "MISCELLANEOUS INVENTORIES PURCHASE PRICE"). 5.2 Buyer shall have no obligation to purchase any such miscellaneous items that are not included in the Miscellaneous Inventories. Seller agrees that any miscellaneous items that are not included in the Miscellaneous Inventories and are not removed from the Real Property within the thirty (30) days after the Closing Date, they shall become the property of Buyer without the payment of any consideration in addition to the consideration otherwise provided herein. 5.3 At the Closing, Buyer shall buy at Seller's cost for parts and labor such shop labor and sublet repairs as Seller shall have caused to be performed on any repair orders which are in process at the close of business on the Inventory Date for which there are adequate credit arrangements (the "WORK IN PROGRESS") (the sum of all costs for the Work in Progress pursuant to the terms of this Section 5.3 shall be referred to herein as the "Work in Progress Purchase Price"). Buyer shall complete such repair work and shall be entitled to the entire proceeds to be collected for such services. 5.4 At the Closing, Buyer shall purchase all fixtures, machinery, equipment (including special tools and shop equipment), furniture, "BMW" and other signs and office equipment owned by Seller and used or held for use in connection with the Business, including the items listed on the 8 Book Depreciation Schedule included as Schedule 5.4 attached hereto (collectively referred to herein as the "FIXTURES AND EQUIPMENT"). The purchase price for each item of Fixtures and Equipment shall equal the depreciated book value of such item based upon Schedule 5.4 (the sum of all prices assigned to the Fixtures and Equipment pursuant to the terms of this Section 5.4 shall be referred to herein as the "F&E PURCHASE PRICE"). The Fixtures and Equipment shall not include the ADP computer system. 5.5 At the Closing, and without payment of any additional consideration, Buyer shall purchase all of Seller's (i) unused shop repair orders, parts sales tickets, accounting forms, binders, office and shop supplies and such shop reference manuals, parts reference catalogs, non-accounting file copies for all sales of Seller for the three (3) years preceding the Closing Date, (ii) copies of new and used car sales records and specifically wholesale parts sales records, new and used parts sales records, and service sales records for the three (3) years preceding the Closing Date, (iii) product sales training material and reference books on hand as of the Closing Date, (iv) customer and registration lists pertaining to the sale of motor vehicles, service files, repair orders, owner follow-up lists and similar records relating to the operation of the Business, (v) telephone numbers and listings used by Seller in connection with the Business, (vi) names and addresses of Seller's service customers and prospective purchasers and (vii) Seller's rights to the tradename "Century BMW" or any similar variation thereof (such items collectively referred to herein as the "MISCELLANEOUS ASSETS"). 5.6 Seller may retain all corporate records, financial records and correspondence which are not necessary for the continued operation of the Business by Buyer, and all derivations and extensions thereof. 5.7 Buyer shall have no responsibility to perform any services required under any warranties issued by Seller on the vehicles sold by Seller on or prior to the Inventory Date, unless authorized in writing by Seller accompanied by arrangements in writing satisfactory to Buyer to assure Buyer of payment for all work performed by Buyer, and, if so authorized by Seller, Seller shall reimburse Buyer for all of Buyer's costs for parts and labor in connection therewith at established internal rates for parts and labor. At the Inventory Date, Seller shall supply Buyer with a list to which such warranties and guaranties are applicable, which list shall include the names of the purchasers, the make and year model of the vehicles purchased and the date of purchase. Seller shall also supply to Buyer at or prior to the Inventory Date an address for and a designation of the person who will be responsible for authorizing Buyer to perform any services under any warranties issued by Seller on vehicles sold by it prior to the Inventory Date. Seller shall reimburse Buyer promptly upon demand for all sums due or payable by Seller to Buyer hereunder. 5.8 Seller shall retain all accounts receivable held by Seller as of the Inventory Date and Buyer shall retain all accounts receivable arising out of sales and/or services of the Business after the Inventory Date. Buyer shall have no responsibilities or obligations with respect to the documentation or collection of the Seller's accounts receivable, except that Buyer, on Seller's behalf, shall accept payment of Seller's accounts receivable arising out of the operation of Seller's business prior to the Inventory Date, at no charge to Seller, during the term of the Management 9 Agreement and for a period of 60 days after the Closing, and Buyer shall forward to Seller, from time to time during said period, all of the money so accepted on said accounts receivable. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to Seller and the Stockholders as follows: 6.1 Buyer is a corporation duly organized and existing and in good standing under the laws of the State of Delaware, is duly qualified to do business and is in good standing in every jurisdiction in which the nature of its business makes such qualification necessary and has the corporate power to own its properties and to carry on its business as now being conducted. The Board of Directors of Buyer has duly approved this Agreement, all other agreements, certificates and documents executed or to be executed by Buyer in connection herewith, and the transactions contemplated hereby and thereby. Buyer has full corporate power and authority to execute and deliver this Agreement and all other agreements, certificates and documents executed or to be executed by Buyer in connection herewith, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. This Agreement, and all other agreements, certificates and documents executed or to be executed by Buyer in connection herewith, constitute or, when executed and delivered, will constitute legal, valid and binding agreements of Buyer enforceable in accordance with their respective terms. 6.2 Except as set forth on Schedule 6.2 attached hereto, the consummation of the transactions contemplated by this Agreement and compliance with the provisions hereof will not conflict with or result in a breach of the terms, conditions or provisions of, or constitute a breach or default under, any provision of law, any order of any court or other agency of government, the charter or bylaws of Buyer or any note, debenture, mortgage, loan agreement or other instrument to which Buyer is a party or by which it or any of its properties or assets is bound. 6.3 There are no actions, suits or proceedings pending, or, to the knowledge of Buyer, threatened against or affecting Buyer which might adversely affect the power or authority of Buyer to carry out the transactions to be performed by it hereunder. 6.4 The issuance of the Preferred Shares and the Warrants, as well as the Common Shares issuable upon conversion of the Preferred Shares and exercise of the Warrants, has been duly authorized by all necessary corporate action of Buyer. Upon the issuance of the Preferred Shares pursuant to this Agreement, and upon the issuance of Common Shares upon conversion of any of the Preferred Shares or exercise of any of the Warrants, such Preferred Shares and/or Common Shares, as the case may be, shall be validly issued, fully paid and non-assessable. ARTICLE VII ----------- REPRESENTATIONS AND WARRANTIES AND SELLER AND THE STOCKHOLDERS -------------------------------------------------------------- 10 Seller and the Stockholders, jointly and severally, represent and warrant to Buyer as follows: 7.1 Seller is a corporation duly organized and existing and in good standing under the laws of the State of South Carolina, is duly qualified to do business and is in good standing in every jurisdiction in which the nature of its business makes such qualification necessary and has the corporate power to own its properties and to carry on its business as now being conducted. Except as set forth on Schedule 7.1 attached hereto, the Stockholders are the only persons owning shares of Seller. The Board of Directors and the shareholders of Seller have duly approved this Agreement, all other agreements, certificates and documents executed or to be executed by Seller in connection herewith, and the transactions contemplated hereby and thereby. Seller has full corporate power and authority to execute and deliver this Agreement and all other agreements, certificates and documents executed or to be executed by Seller in connection herewith, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. Each stockholder has full capacity, power and authority to execute and deliver this Agreement and all other agreements, certificates and documents executed or to be executed by Seller in connection herewith, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. This Agreement, and all other agreements, certificates and documents executed or to be executed by Seller in connection herewith, constitute or, when executed and delivered, will constitute legal, valid and binding agreements of Seller enforceable in accordance with their respective terms. This Agreement, and all other agreements, certificates and documents executed or to be executed by each Stockholder in connection herewith, constitute or, when executed and delivered, will constitute legal, valid and binding agreements of such Stockholder enforceable in accordance with their respective terms. 7.2 Except as set forth in Schedule 7.2 attached hereto, the consummation of the transactions contemplated by this Agreement and compliance with the provisions hereof will not conflict with or result in a breach of the terms, conditions or provisions of, or constitute a breach or default under, any provision of law, any order of any court or other agency of government, the charter or bylaws of Seller or any note, debenture, mortgage, loan agreement or other instrument to which Seller or any of the Stockholders is a party, or by which it or any of the Assets are bound, or result in the creation or imposition of any Encumbrance of any kind whatsoever on the Assets. 7.3 There are no actions, suits or proceedings pending or, to the knowledge of Seller and the Stockholders, threatened against Seller or any of the Stockholders which might adversely affect the power or authority of any of them to carry out the transactions to be performed by such party hereunder. There are no actions, suits or proceedings pending, or, to the knowledge of Seller and the Stockholders, threatened against or affecting Seller, other than those adequately covered by insurance, and those disclosed on Schedule 7.3 attached hereto, and none of the actions, suits or proceedings described on Schedule 7.3, if determined adversely to Seller, would have a material adverse effect on the business, assets or financial condition of Seller. 7.4 Except as disclosed on Schedule 7.4 attached hereto, Seller has good title to the Assets, free and clear of all liens (including tax liens), encumbrances, actions, claims, payments or 11 demands of any kind and character (collectively, "ENCUMBRANCES"), except Encumbrances for ad valorem personal property taxes not yet due and payable. All of the Assets to be transferred hereunder conform, as to condition and character, to the descriptions of such Assets contained herein and will be transferred at the Closing free and clear of all Encumbrances, except Encumbrances for ad valorem personal property taxes not yet due and payable and the Liabilities assumed by Buyer and described in Schedule 2.4. 7.5 Except as disclosed on Schedule 7.5 attached hereto, there are no permits or approvals used or obtained for use by Seller which are required under applicable law in connection with the ownership or operation of its Business, except where the failure to have or obtain any such permits or approvals would not have a material adverse effect on Seller or the Business. 7.6 [Intentionally Left Blank] 7.7 [Intentionally Left Blank] 7.8 The financial statements of Seller attached hereto or set forth on Schedule 7.8 (the "Financial Statements") have been prepared in accordance with generally accepted accounting principles consistently applied. The balance sheet of Seller included in the Financial Statements fairly presents the financial condition of Seller as of the date thereof and reflects all claims against and all material debts and liabilities of Seller, fixed or contingent, as of the date thereof, and the related statement of income included in the Financial Statements fairly presents the results of the operations of Seller and the changes in its financial position for the period indicated, all in accordance with generally accepted accounting principles consistently applied. Seller has no outstanding material claims, liabilities, obligations or indebtedness of any nature, except as set forth in the Financial Statements, other than liabilities incurred in the ordinary course of business and of the kind and type reflected in the Financial Statements. To the knowledge of the Seller and the Stockholders, the Financial Statements contain adequate reserves for all reasonably anticipated claims relating to matters with respect to which Seller is self-insured. 7.9 Neither Seller nor any of the Stockholders has engaged any broker or any other person or entity who would be entitled to any brokerage commission or finder's fee in respect of the execution of this Agreement and/or the consummation of the transactions contemplated hereby. 12 7.10 Except as set forth on Schedule 7.10 attached hereto, the Assets comply with, and the Business has been conducted in all material respects in compliance with, all laws, rules and regulations (including all worker safety and all environmental laws, rules and regulations) applicable zoning and other laws, ordinances, regulations and building codes, and neither Seller nor any of the Stockholders have received any notice of any violation thereof which has not been remedied. 7.11 The Fixtures and Equipment are in good condition, ordinary wear and tear excepted, and constitute all of the fixtures, machinery, equipment, furniture, signs and office equipment used or intended for use by Seller in the Business. All vehicles on Schedule 3.2 are used as demonstrators in the ordinary course of Seller's Business, are operated with dealer tags and have not had certificates of title issued with respect to them. 7.12 Except for Seller's cash and accounts receivable and Seller's rights under its dealership agreement with BMW, the Assets, together with the Real Property and the contracts and leases set forth on Schedule 1.5 hereto, comprise all of the assets, properties and rights necessary for Buyer to operate the Business substantially in the manner operated by Seller prior to the Closing. 7.13 The Warrants are being acquired for the account of the Seller for the purposes of investment and not with a view to the distribution thereof, as those terms are used in the Securities Act, and the rules and regulations promulgated thereunder. ARTICLE VIII CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS The obligations of Buyer to perform this Agreement at Closing are subject to the following conditions precedent which shall be fully satisfied at or before the Closing, unless waived in writing by Buyer. 8.1 All of the representations and warranties of Seller and the Stockholders herein contained shall be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date, and Buyer shall have received a certificate from the Stockholders and a duly authorized officer of Seller, dated the Closing Date, to such effect. 8.2 Each of the agreements or obligations required by this Agreement to be performed or complied with by Seller or the Stockholders at or before the Closing shall have been duly performed or complied with, and Buyer shall have received a certificate from the Stockholders and a duly authorized officer of Seller, dated the Closing Date, to such effect. 13 8.3 No action, suit or proceeding shall have been instituted by a governmental agency or any other third party (i) to prohibit or restrain the sale contemplated by this Agreement or otherwise challenge the power and authority of the parties to enter into this Agreement or to carry out their obligations hereunder or the legality or validity of the sale contemplated by this Agreement, or (ii) which would have a materially adverse effect on the conduct of a BMW automobile dealership business by Buyer at the Real Property. 8.4 The Inventory shall have been completed to the reasonable satisfaction of Buyer. 8.5 Seller shall have furnished to Buyer (i) evidence to the reasonable satisfaction of Buyer and its counsel with respect to the corporate organization and existence of Seller and (ii) UCC-11 search reports or other evidence reasonably satisfactory to Buyer and its counsel that the Assets are free and clear of all Encumbrances. 8.6 Seller shall have furnished to Buyer a copy of the resolutions duly adopted by the Board of Directors and the stockholders of Seller authorizing the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, certified by an authorized officer of Seller as of the Closing Date. 8.7 As of the Inventory Date, there shall not have been any fire, accident or other casualty or any labor disturbance, civil commotion, riot, act of God or the public enemy, or any change in the Business or Assets or which would have a material adverse effect on the conduct of a BMW automobile business using the Assets at the Real Property or which would interfere with the use by Buyer of such Assets in connection with the conduct of a BMW automobile dealership business at the Real Property. 8.8 Buyer shall have been licensed as a Motor Vehicle Dealer under applicable South Carolina motor vehicle dealer registration laws and shall have obtained all other authorizations, consents, licenses and permits from applicable governmental agencies having or asserting jurisdiction, which Buyer deems necessary or appropriate to conduct business as a BMW dealer at the Real Property; provided, however, this Section 8.8 shall only be a condition to Buyer's obligations so long as Buyer is using its reasonable best efforts to obtain such authorizations, consents, licenses and permits. 8.9 Buyer and Seller shall have obtained all other authorizations, consents and approvals from third persons and entities as are required to assign those contracts and leases that Buyer is to assume at Closing. 8.10 Seller shall have transferred to Buyer certificates of title or origin for all New Vehicles and Demonstrators, and any used vehicles, if applicable, and all of its registration lists, owner follow-up lists and service files on hand as of the Closing Date with respect to the Business. 8.11 Seller shall have terminated in writing Seller's Sales and Service Agreement with BMW. 14 8.12 Seller and the Stockholders shall have executed, as appropriate, and delivered to Buyer the Bill of Sale, other documents of transfer of title contemplated hereby and any and all other documents necessary or desirable in connection with the transfer of the Assets, which documents shall warrant title to Buyer consistent with this Agreement and shall in all respects be in such form as may be reasonably required by Buyer and its counsel. 8.13 BMW shall have approved Buyer or Buyer's affiliate as an authorized dealer at each parcel of the Real Property and O. Bruton Smith or O. Bruton Smith's designee, as the authorized Dealer Operator, and BMW shall have executed Dealer Agreements on terms reasonably satisfactory to Buyer. 8.14 All conditions to Buyer's obligations under the Real Property Purchase Agreement shall have been satisfied or fulfilled unless waived in writing by Buyer. ARTICLE IX CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS The obligations of Seller and the Stockholders to perform this Agreement at Closing are subject to the following conditions precedent which shall be fully satisfied on or before the Closing, unless waived in writing by Seller: 9.1 All of the representations and warranties of Buyer herein contained shall be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date, and Seller shall have received a certificate from the President or a Vice President of Buyer, dated the Closing Date, to such effect. 9.2 Each of the agreements or obligations required by this Agreement to be performed or complied with by Buyer at or before the Closing shall have been duly performed or complied with, and Seller shall have received a certificate from the President or a Vice President of Buyer, dated the Closing Date, to such effect. 9.3 No action, suit or proceeding shall have been instituted by a governmental agency or any third party to prohibit or restrain the sale contemplated by this Agreement or otherwise challenge the power and authority of the parties to enter into this Agreement or to carry out their obligations hereunder or the legality or validity of the sale contemplated by this Agreement. 9.4 The Inventory shall have been completed to the reasonable satisfaction of Seller. 9.5 Buyer shall have furnished Seller and the Stockholders with (i) evidence to the reasonable satisfaction of Seller and its counsel with respect to the corporate organization and existence and (ii) a copy of the resolutions duly adopted by the Board of Directors of Buyer authorizing the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, certified by an officer of Buyer as of the Closing Date. 15 9.6 Buyer shall have tendered to Seller the cash portion of the Purchase Price and the Preferred Shares and the Warrants. 9.7 All conditions to the obligations of Seller and Fairway under the Real Property Purchase Agreement shall have been satisfied or fulfilled, unless waived in writing by Seller. ARTICLE X COVENANTS AND AGREEMENTS 10.1 [Intentionally Left Blank] 10.2 Seller agrees that it will, at any time and from time to time, after the Closing, upon request of Buyer, do, execute, acknowledge and deliver all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may be reasonably required to convey and transfer to and vest in Buyer and protect its rights, title and interest in and enjoyment of all the Assets. 10.3 The parties hereto shall use their reasonable best efforts to obtain, and to cooperate with each other in obtaining, all authorizations, approvals, licenses, permits and other consents contemplated by Articles VIII and IX. 10.4 During the period from the date of this Agreement through the Closing Date, Seller will conduct its operation of the Business only in accordance with the Management Agreement and Seller shall not dispose of any of the assets of the Business, except as contemplated by the Management Agreement. 10.5 Seller shall afford to Buyer, its attorneys, accountants and such other representatives of Buyer as Buyer shall designate to Seller, free and full access at all reasonable times, and upon reasonable prior notice, to the Assets and the properties, books and records of Seller, and to interview personnel, suppliers and customers of Seller, in order that Buyer may have full opportunity to make such investigation as it shall reasonably desire of the Assets, the Liabilities and the Business. Seller shall allow an environmental consulting firm selected by Buyer (the "ENVIRONMENTAL AUDITOR") to have prompt access to the Real Property in order to conduct an environmental investigation, satisfactory to Buyer in scope (such scope being sufficient to result in a Phase I environmental audit report and a Phase II environmental audit report, if desired by Buyer), of, and to prepare a report with respect to, the Real Property (the "ENVIRONMENTAL AUDIT"). Seller shall provide to the Environmental Auditor: (i) reasonable access to all of its existing records concerning the matters which are the subject of the Environmental Audit; and (ii) reasonable access to the employees of Seller and the last known addresses of former employees of Seller who are most familiar with the matters which are the subject of the Environmental Audit (Seller agreeing to use reasonable efforts to have such former employees respond to any reasonable requests or inquiries by the Environmental Auditor). Seller shall otherwise cooperate with the Environmental Auditor 16 in connection with the Environmental Audit. Buyer shall bear 100% of the costs, fees and expenses in connection with the Environmental Audit. 10.6 All representations and warranties of Seller and the Stockholders shall survive the Closing Date. Seller and the Stockholders, jointly and severally, agree to indemnify and hold harmless Buyer and its stockholders, officers, directors, employees and agents, and their respective successors and assignees, from and against any and all losses, liabilities, obligations, assessments, suits, actions, proceedings, claims or demands, including costs, expenses and fees (including reasonable attorneys' fees and expert witness fees) incurred in connection therewith, suffered by any of them or asserted against any of them or the Assets, arising out of or based upon (a) the failure of any representation or warranty of Seller or the Stockholders contained herein, or in any agreement, certificate or document executed by Seller or any of the Stockholders in connection herewith, to be true and correct in all material respects as of the Inventory Date, (b) the breach of any covenant or agreement of Seller or any of the Stockholders contained in this Agreement, (c) any liability or obligation of Seller or any of the Stockholders not expressly assumed by Buyer pursuant to this Agreement, or (d) any arrangements or agreements made or alleged to have been made by Seller or any of the Stockholders with any broker, finder or other agent in connection with the transactions contemplated hereby. Notwithstanding the foregoing, the total indemnification obligations of the Seller and the Stockholders hereunder shall not exceed the Purchase Price. 10.7 All representations and warranties of Buyer shall survive the Closing Date. Buyer agrees to indemnify and hold harmless Seller and its stockholders, officers, directors, employees and agents, and their respective successors and assignees, from and against any and all losses, liabilities, obligations, assessments, suits, actions, proceedings, claims or demands, including costs, expenses and fees (including reasonable attorneys' fees and expert witness fees) incurred in connection therewith, suffered by any of them, or asserted against any of them, arising out of or based upon (a) the failure of any representation or warranty of Buyer contained herein, or in any agreement, certificate or document executed by Buyer in connection herewith, to be true and correct in all material respects as of the Closing Date, (b) the breach of any covenant or agreement of Buyer contained in this Agreement, or (c) the Liabilities. 10.8 Personal property, use and intangible taxes and assessments with respect to the Assets shall be prorated on a per diem basis and apportioned between Seller and Buyer as of the date of the Closing. Seller shall be liable for that portion of such taxes and assessments relating to, or arising in respect of, periods on or prior to the Inventory Date, and Buyer shall be liable for that portion of such taxes and assessments relating to, or arising in respect of, any period after the Inventory Date. Any taxes attributable to the sale or transfer of the Assets to Buyer hereunder shall be paid by Seller. 10.9 Except as may be required by law or the rules of the New York Stock Exchange or as necessary in connection with the transactions contemplated hereby, no party hereto shall (i) make any press release or other public announcement relating to this Agreement or the transactions contemplated hereby, without the prior approval of the other parties hereto or (ii) otherwise disclose the existence and nature of negotiations regarding the transactions contemplated hereby to any 17 person or entity other than such party's accountants, attorneys, agents and representatives, all of whom shall be subject to this nondisclosure obligation as agents of such party. The parties shall cooperate with each other in the preparation and dissemination of any public announcements of the transactions contemplated by this Agreement. 10.10 Neither Seller nor any of the Stockholders shall pursue, initiate, encourage or engage in, any negotiations or discussions with, or provide any information to, any person or entity (other than Buyer and its representatives and affiliates) regarding the sale or possible sale to any such person or entity of any of the Assets or capital stock of Seller or any merger or consolidation or similar transaction involving Seller. 10.11 Buyer shall promptly apply for, or cause an affiliate of Buyer to apply for, the issuance of a franchise to operate a BMW dealership upon the Real Property. Effective as of the Closing, Seller shall terminate its Dealer Sales and Service Agreements with BMW. Seller shall fully cooperate with Buyer, and take all reasonable steps to assist Buyer, in Buyer's efforts to obtain its own similar Dealer Sales and Service Agreements with BMW. The parties acknowledge that Buyer's Dealer Agreements are subject to the approval of BMW and that Buyer would be unable to obtain its own, similar Dealer Sales and Service Agreement absent Seller's termination of its agreement. 10.12 Prior to Closing, Seller shall furnish to Buyer a list of all employees and their rates of pay, including, separately, base pay and any incentive or commission plans. Buyer shall have the right, but not the obligation, to employ any or all of Seller's employees. If permitted by law and applicable regulations, Seller shall, in consideration for the sale of substantially all of Seller's assets in bulk, assign and transfer to Buyer, without additional charge therefor, the amount of reserve in Seller's State Unemployment Compensation Fund with respect to the Business and the corresponding experience rate. 10.13 Termination. (a) Notwithstanding any other provision herein contained to the contrary, this Agreement may be terminated at any time prior to the Closing Date: (i) by the written mutual consent of the parties hereto; (ii) [Intentionally Left Blank] (iii) by Buyer in the event of any breach by Seller or any of the Stockholders of any of their respective material covenants, representations or warranties contained herein; (iv) by Seller in the event of any breach by Buyer of any of Buyer's material covenants, representations or warranties contained herein; or 18 (v) at any time after the Closing Date Deadline, by written notice by Buyer or (subject to Buyer's option to elect to extend the Closing Date Deadline in accordance with Section 1.3) Seller to the other parties hereto if the Closing shall not have occurred on or before the Closing Date Deadline; provided, however, no party may terminate this Agreement pursuant to clauses (iii), (iv) or (v) above if such party is in breach of any of its material covenants, representations or warranties contained herein. (b) In the event of termination pursuant to Section 10.13(a), this Agreement shall be of no further force or effect; PROVIDED, HOWEVER, that, except as set forth in Section 10.13(c), any termination pursuant to Section 10.13 shall not relieve any party hereto of any liability for breach of any representation and warranty, covenant or agreement hereunder occurring prior to such termination. (c) If, as of the Closing Date Deadline (as the same may have been extended by Buyer in accordance with the provisions of Section 1.3 hereof), all conditions to Buyer's obligations to close set forth in Article VIII hereof shall have been satisfied or fulfilled, and Buyer shall have failed to perform its material obligations at the Closing by the Closing Date Deadline (as the same may have been so extended), then Buyer shall, within ten (10) days after receipt of a written demand from Seller, pay to Seller, in immediately available funds, as liquidated damages for the loss of the transaction, a termination fee of Five Hundred Thousand Dollars ($500,000) (the "BUYER'S TERMINATION FEE"). Provided that Buyer shall have paid the Buyer's Termination Fee upon such demand by Seller, payment of the Buyer's Termination Fee shall be the sole and exclusive remedy of Seller and the Stockholders for any such failure of Buyer to perform its material obligations at the Closing, regardless of whether Seller terminates or does not terminate this Agreement, and Seller and the Stockholders shall have no right to any other damages or other relief of any kind or nature, whether at law or in equity (including without limitation, specific performance by Buyer), for any breach or alleged breach by Buyer of this Agreement. Notwithstanding the foregoing, Seller may elect not to demand payment of the Buyer's Termination Fee, in which case Seller shall be free to pursue any other remedies it may have, at law or in equity, including specific performance. 19 ARTICLE XI MISCELLANEOUS 11.1 Except as provided in this Section, this Agreement shall not be assignable by any party hereto without the prior written consent of the other parties. Buyer may assign this Agreement, without the consent of the other parties hereto, to a corporation, partnership or limited liability company controlled by Buyer, including a corporation, partnership or limited liability company to be formed at any time prior to the Closing Date, and to any person or entity who shall acquire all or substantially all of the assets of Buyer or of such corporation, partnership or limited liabilities company controlled by Buyer; provided said assignment shall be in writing and the assignee shall assume all obligations of Buyer hereunder, whereupon the assignee shall be substituted in lieu of Buyer named herein for all purposes, provided, however, that Buyer originally named herein shall continue to be liable with respect to its obligations hereunder. Buyer may assign this Agreement, without the consent of the other parties hereto, as collateral security, and the other parties hereto agree to execute and deliver any acknowledgment of such assignment by Buyer as may be required by any lender to Buyer. 11.2 The interpretation and construction of this Agreement, and all matters relating hereto, shall be governed by the laws of the State of South Carolina. 11.3 All accounting matters required or contemplated by this Agreement shall be in accordance with generally accepted accounting principles. 11.4 Except as otherwise specifically provided in this Agreement, each of the parties hereto shall be responsible for the payment of such party's fees, costs and expenses incurred in connection with the negotiation and consummation of the transactions contemplated hereby. 11.5 This Agreement, including the schedules and other documents referred to herein which form a part hereof, contains the entire understanding of the parties hereto with respect to the subject matter contained herein and therein. This Agreement may not be amended except by a writing executed by all of the parties hereto. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 11.6 Any party to this Agreement may, by written notice to the other parties hereto, waive any provision of this Agreement from which such party is entitled to receive a benefit. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of such provision or any other provision of this Agreement. 11.7 All notices, claims, certificates, requests, demands and other communications hereunder shall be given in writing and shall be delivered personally or sent by facsimile or by a nationally recognized overnight courier, postage prepaid, and shall be deemed to have been duly given when so delivered personally or by confirmed facsimile or one (1) business day after the date 20 of deposit with such nationally recognized overnight courier. All such notices, claims, certificates, requests, demands and other communications shall be addressed to the respective parties at the addresses set forth below or to such other address as the person to whom notice is to be given may have furnished to the others in writing in accordance herewith. If to Buyer, to: Sonic Automotive, Inc. 5401 E. Independence Boulevard Charlotte, North Carolina 28212 Telecopy No.: (704) 563-5116 Attention: Chief Financial Officer With a copy to: Parker, Poe, Adams & Bernstein L.L.P. 2500 Charlotte Plaza Charlotte, North Carolina 28244 Telecopy No.: (704) 334-4706 Attention: Edward W. Wellman, Jr. If to Seller or the Stockholders, to: Fairway Investments, L.L.C. 2323 Laurens Road Greenville, South Carolina 29607 Attention: A. Foster McKissick, III Telecopy No.: (864) 242-3222 With a copies to: A. Foster McKissick, III and Murray P. McKissick 245 McDaniel Avenue Greenville, South Carolina 29601 Leatherwood Walker Todd & Mann, P.C. 100 East Coffee Street Greenville, South Carolina 29602-0087 Telecopy No.: (864) 240-2478 Attention: Harvey G. Sanders, Jr. 21 11.8 This Agreement may be executed in any number of counterparts. Each such counterpart hereof shall be deemed to be an original instrument, and all such counterparts together shall constitute but one agreement. 11.9 Whenever any representation or warranty of Seller or the Stockholders contained herein or in any other document executed and delivered in connection herewith is based upon the knowledge of Seller or the Stockholders, (i) such knowledge shall be deemed to include (A) the best actual knowledge, information and belief of Seller and the Stockholders and (B) any information which any Stockholder would reasonably be expected to be aware of in the prudent discharge of his duties in the ordinary course of business (including consultation with legal counsel) on behalf of Seller, and (ii) the knowledge of any Stockholder shall be deemed to be the knowledge of Seller and all the Stockholders. 22 IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written. CENTURY AUTO SALES, INC. By: /s/ A. Foster McKissick, III ------------------------------------- Its: Chairman ------------------------------------- ATTEST: /s/ Murray McKissick - --------------------------- Secretary [CORPORATE SEAL] /s/ A. Foster McKissick, III (SEAL) ------------------------------- A. FOSTER MCKISSICK, III /s/ Murray McKissick (SEAL) ------------------------------- MURRAY P. MCKISSICK SONIC AUTOMOTIVE, INC. By: /s/ O. Bruton Smith ------------------------------------- Its: Chief Executive Officer ------------------------------------- ATTEST: /s/ Theodore M. Wright - --------------------------- Secretary [CORPORATE SEAL] 23 INDEX OF SCHEDULES AND EXHIBITS TO ASSET PURCHASE AGREEMENT Schedules --------- Schedule 1.5 Contracts and Leases Schedule 2.4 Retained Liabilities Schedule 3.1 New Vehicles Schedule 3.2 Demonstrators Schedule 5.4 Fixtures and Equipment Schedule 6.2 Compliance re: Buyer Schedule 7.1 Shareholders Schedule 7.2 Compliance re: Seller and Stockholders Schedule 7.3 Pending or Threatened Actions, Suits or Proceedings Schedule 7.4 Encumbrances on the Assets Schedule 7.5 Permits and Approvals Schedule 7.8 Financial Statements Schedule 7.10 Compliance with Laws Exhibits -------- A Warrant Certificate B Statement of Rights and Preferences 24 EX-99 8 EXHIBIT 99.10 Exhibit 99.10 CONTRACT TO PURCHASE AND SELL REAL PROPERTY (CENTURY BMW) THIS CONTRACT TO PURCHASE AND SELL REAL PROPERTY (the "Purchase Contract") is made and entered into as of the 10th day of April, 1998, by and between CENTURY AUTO SALES, INC., a South Carolina corporation ("Century") and FAIRWAY INVESTMENTS, LLC, a South Carolina limited liability company ("Fairway") (Century and Fairway are collectively called "Sellers") and SONIC AUTOMOTIVE, INC., a Delaware ("Buyer"). W I T N E S S E T H: WHEREAS, Century is the owner of certain real estate located at 2752 Laurens Road, in the City of Greenville, Greenville County, South Carolina, more particularly described and/or shown on EXHIBIT A attached (the "Century Property"). WHEREAS, Fairway is the owner of certain real estate located at 2550 Reidville Road, in the City of Spartanburg, Spartanburg County, South Carolina, more particularly described and/or shown as Tract 2 on EXHIBIT A attached (the "Fairway Property"). WHEREAS, Sellers desire to sell to Buyer and Buyer desires to acquire from Sellers the Real Property (defined below) together with the buildings and improvements (collectively, the "Improvements") thereon and which are presently utilized in the automobile dealership operations of Century, d/b/a Century BMW in accordance with the terms and conditions hereinafter set forth in this Purchase Contract. NOW, THEREFORE, in consideration of the agreements and mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Sellers do hereby covenant and agree as follows: 1. DEFINITIONS. In addition to the terms defined above, each of the following terms, when used herein with an initial capital letter, shall have the meaning ascribed to it as follows, unless such meanings are expressly modified, limited or expanded elsewhere in this Purchase Contract. a. "APPRAISED VALUE" shall, subject to the limitations set forth as to the Purchase Price below, mean the value obtained by agreement of two (2) appraisers, one appointed jointly by Century and Fairway, and one appointed by the Buyer. Both appraisers shall have at least five (5) years experience valuing commercial real estate situate in Greenville and Spartanburg counties of South Carolina. If the two (2) appraisers cannot agree on an Appraised Value within thirty (30) days after they have both been selected, the average of the two appraisals shall be the Appraised Value if the value established by the respective appraisals do not vary by more than ten percent (10%). If the value differs by more than ten percent (10%), the two appraisers shall appoint 1 a third appraiser. The third appraiser shall determine the value of the Real Property within fifteen (15) days of his appointment. The Appraised Value for purposes of this Purchase Contract shall be the value as finally agreed upon by any two of the three appraisers. If two of the three appraisers do not agree within fifteen (15) days, the appraisers shall be dismissed and the appraisal process repeated. Century and Fairway and Buyer shall each pay the costs of the appraiser appointed by them, and one-half (1/2) of the cost of the third appraiser. If any party fails to appoint an appraiser within the time required herein, the Purchase Price determined by the appraiser appointed by the other party shall be conclusive and binding upon the parties, subject to the limitations set forth as to the amount of the Purchase Price. b. "ASSET PURCHASE CONTRACT" shall mean that certain Asset Purchase Agreement dated the date hereof by and among Century, the stockholders of Century and Buyer. c. "CLOSING" shall mean the closing and consummation of the purchase and sale of the Real Property pursuant to this Purchase Contract. d. "CLOSING DATE" shall mean the date of the Closing to be held on (i) the date of the closing under the Asset Purchase Contract; or (ii) such other date as mutually agreed upon by the parties hereto. e. "DEED" shall mean the duly executed and acknowledged general warranty deed conveying title to the Real Property from Sellers to Buyer, the form of which is attached hereto as EXHIBIT C an original of which conveys the Century Property to be recorded in Greenville County, South Carolina, and an original of which conveys the Fairway Property to be recorded in Spartanburg County, South Carolina. f. "DEFECT" OR "DEFECTS" shall mean a lien, claim, charge, security interest, encumbrance, easement, restriction or other such matter affecting title to the Real Property other than the Permitted Exceptions. g. "EFFECTIVE DATE" shall mean the later of: (i) the date in the heading of this Purchase Contract; and (ii) the date which the last of the parties to this Purchase Contract executes and delivers this Purchase Contract to the other party. h. "ENVIRONMENTAL REVIEW PERIOD" shall mean a period of fifteen (15) business days after receipt of both a Phase I Environmental Evaluation and/or a Phase II Environmental Evaluation, as applicable. i. "ENVIRONMENTAL LAWS" shall mean any applicable current or future federal, state or local governmental law, regulation or ruling applicable to environmental conditions on, under or about the Real Property, including, without limitation, federal, state or local solid waste disposal rules, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, The Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, as amended, the Toxic Substances Act, as amended, the Water Pollution Control Act, 2 as amended, or any other applicable federal, state or local laws, regulations or ordinances. j. "EVALUATIONS" shall mean a Phase I Environmental Evaluation and a Phase II Environmental Evaluation of the Real Property prepared at Buyer's expense by environmental consultant(s) selected by Buyer. k. "HAZARDOUS MATERIALS" means any waste, pollutant, chemical, hazardous substance, toxic substance, hazardous waste, solid waste, petroleum or petroleum-derived substance or waste, or any constituent or decomposition product of any such pollutant, material, substance or waste, regulated under or as defined by any Environmental Law(s). l. "IMPROVEMENTS" shall mean all buildings and improvements constructed upon the Land together with any fixtures or improvements related thereto. m. "INSPECTION PERIOD" shall mean and refer to the period commencing on later of (i) the day following the Effective Date or (ii) the day following delivery of the materials referred to in Section 7.a. below, and continuing for fifteen (15) days thereafter. n. "LAND" shall mean those certain parcels or tracts of land owned by Sellers located in or near the City of Greenville and the City of Spartanburg, South Carolina, as more particularly described on EXHIBIT A attached hereto and incorporated herein by reference, together with all and singular the rights and appurtenances pertaining thereto, including any right, title and interest of Sellers in and to adjacent streets, easements or rights-of-way. o. "OWNER'S TITLE POLICY" shall mean a standard ALTA form owner's policy of title insurance for the Real Property issued at standard rates as compared to comparable Real Property in Greenville and Spartanburg County, South Carolina. p. "PERMITTED EXCEPTIONS" shall mean all matters described on EXHIBIT B attached hereto and incorporated herein by reference. q. "PURCHASE PRICE" shall mean the Appraised Value of the Real Property (however, in no event shall the total Purchase Price exceed Five Million Two Hundred Thousand Dollars ($5,200,000.00) or be less than Four Million Four Hundred Thousand Dollars ($4,400,000.00) to be paid by Buyer to Sellers for the Real Property as provided in Paragraph 2 hereof). r. "REAL PROPERTY" shall mean the Land (including the Century Property and the Fairway Property) and the Improvements thereon. s. "SURVEY" shall mean a current boundary, topographical and/or physical survey of the Real Property prepared by a South Carolina Registered Land Surveyor. 3 t. "TITLE COMMITMENT" shall mean a current title binder or commitment issued by the Title Company for an owner. u. "TITLE COMPANY" shall mean the title insurer of Buyer's choice. 2. AGREEMENT TO SELL AND PURCHASE. Sellers hereby agree to sell and convey to Buyer, and Buyer hereby agrees to purchase from Sellers, the Real Property pursuant to the terms and conditions of this Purchase Contract. 3. PURCHASE PRICE; DELIVERY OF POSSESSION. a. The Purchase Price shall be paid to Sellers in immediately available funds at Closing, subject to the terms and conditions of this Purchase Contract. b. Sellers shall deliver sole possession of the Real Property to Buyer at Closing. 4. CONVEYANCE OF TITLE. At Closing, Sellers shall by the Deed convey to Buyer marketable fee simple title to all of the Real Property, free and clear of any and all liens, encumbrances, easements, assessments, restrictions, taxes and other conditions except for the Permitted Exceptions. 5. SURVEY. Buyer, at Buyer's sole cost and expense, prior to Closing may, at its election, obtain the Survey from which a legal description of the Real Property will be prepared and inserted in the Deed. Buyer, its employees and agents may, at any reasonable time prior to Closing, enter upon the Real Property for the purpose of obtaining the Survey. 6. TITLE AND TITLE INSURANCE FOR THE REAL PROPERTY. a. Prior to the Closing Date, Buyer shall, at its sole cost and expense, obtain an owner's Title Commitment issued by the Title Company providing for the issuance at Closing to Buyer of an Owner's Title Policy for the Real Property. The Title Commitment shall set forth the state of title of the Real Property and all exceptions, including but not limited to, easements, restrictions, road rights-of-way, floodways, covenants, reservations and other conditions, if any, affecting the Real Property which would appear in an Owner's Title Policy if issued. b. At Closing, the Real Property shall be conveyed to Buyer by the Deed free and clear of all Defects and subject only to the Permitted Exceptions. 7. INSPECTIONS. a. On or prior to the Effective Date or within three (3) days thereafter, Sellers shall provide to Buyer true, correct and complete copies of the following items: i. Sellers' existing owner's and lender's title insurance policies for the Real Property (if any) together with legible copies of any exceptions set forth therein. 4 ii. The most recently dated existing surveys of the Real Property. iii. Any and all engineering reports, soil reports and environmental reports prepared by or for Sellers with respect to the Real Property, if any. iv. All warranties, if any, related to the Improvements. v. Attorneys' opinions, if any, on title to the Real Property and legible copies of deeds, mortgages, easements or restrictions, if any, affecting Property which Sellers may possess. b. Buyer, its agents and contractors shall be entitled to go upon the Real Property during the Inspection Period to obtain financing, to inspect the Real Property to perform investigations, to determine the status of utilities thereon, to conduct title examinations, zoning investigations, feasibility studies and other studies or tests necessary to determine whether the Real Property is suitable for Buyer's intended use of the Real Property. If Buyer determines, in Buyer's reasonable discretion, that the Real Property is not suitable for Buyer's intended use, Buyer may terminate this Contract and shall be relieved of all obligations hereunder by giving written notice to Sellers prior to the end of the Inspection Period. However, Buyer does not waive its right to terminate this Contract, as set forth above, based on any restriction which may adversely affect the Real Property that has been revealed through documentation and/or other due diligence material in Buyer's possession prior to the execution of this Contract. c. Buyer may, at its sole expense, commission the Evaluations. The Evaluations shall be conducted in accordance with such standards and procedures as selected by Buyer and Buyer's consultant, and may include, without limitation, drilling and installation of ground water testing wells at locations specified by Buyer's consultant, soil samples at locations designated to detect environmental conditions and/or impacts from current or past operations, both ground water and soil analysis and investigation as to the presence of any asbestos materials on the Real Property. If, based upon the Evaluations, Buyer determines, in Buyer's reasonable discretion, that the Real Property is not free of Hazardous Materials, and that such Hazardous Materials materially adversely affect Buyer's intended use of the Real Property for the operation of an automobile dealership, or the value of the Real Property, then Buyer may terminate this Purchase Contract by notice in writing given to Sellers prior to the expiration of the Environmental Review Period and the parties shall have no further rights or obligations under this Purchase Contract. If the Buyer chooses to terminate this Purchase Contract as a result of its review of the Evaluations, Buyer shall provide to Sellers copies of all environmental reports relating to the Real Property which may be obtained by Buyer, and shall repair any damage to the Real Property resulting from the Evaluations. d. In addition to Buyer's rights set forth in PARAGRAPH 7(C) above, in the event that any underground storage tanks or any other storage tanks are or have been located upon any portion of the Real Property, Sellers, at their sole expense, shall: i. Remove any such tanks which remain on the Real Property; 5 ii. Remediate any current or former tank sites and any surrounding portion of the Real Property and any adjacent property to the reasonable satisfaction of Buyer and Buyer's consultant. Notwithstanding the termination of the Inspection Period or the Environmental Review Period, if Buyer reasonably determines that Sellers have failed to meet its obligations described in this PARAGRAPH 7(D), then Buyer may either: iii. Terminate this Purchase Contract; or iv. Remediate any such tank site(s) to the reasonable satisfaction of Buyer and Buyer's consultant and deduct the cost of any such remediation from the Purchase Price. In the event such remediation shall extend beyond the Closing Date set forth herein, Buyer shall have the option of extending the Closing Date to such time as may be necessary to complete any such remediation. 8. COSTS AND PRORATIONS. Sellers shall pay the cost to cancel any mortgage or other lien of record. Buyer shall pay any and all documentary stamp taxes, deed taxes or transfer taxes applicable to this transaction and any and all costs of the Survey, the title examination, the title insurance premiums, testing or inspections of the Real Property and recording costs for the Deed or any other documents to be recorded relating to the transfer of the Real Property. Each party shall pay its own attorney's fees. Sellers shall pay any "roll-back" taxes or similar taxes based upon any change in use of the Real Property, whether such taxes are assessed before or after Closing. Sellers' obligation to pay such taxes, if any, shall survive Closing. All prorations for real estate taxes, utilities and other such costs shall be prorated between Buyer and Sellers as of the Closing Date on the basis of a 365-day year. Buyer and Sellers hereby agree that if any of the aforesaid prorations cannot be calculated accurately on the proration date (or as soon as information sufficient to complete such prorations is available), then the same shall be calculated within thirty (30) days after the information necessary to make such prorations becomes available and either party owing the other party a sum of money based on such subsequent proration(s) shall promptly pay said sum to the other party. 9. RISK OF LOSS; EMINENT DOMAIN. a. If, after the Effective Date and prior to the Closing Date, the Real Property or any portion thereof is damaged or destroyed, Sellers shall immediately notify Buyer in writing and Buyer shall elect, within ten (10) days from and after such notice, by written notice to Sellers, either: i. to not close the transaction contemplated hereby, in which event the Purchase Contract shall be void and of no further force and effect; provided, however, Buyer shall not be entitled to elect under this item i. unless Buyer determines, in its reasonable judgment, that such damage or destruction cannot be restored within ninety (90) days; or 6 ii. to close the transaction contemplated hereby in accordance with the terms and conditions contained herein, in which event the Purchase Price shall remain the same and Sellers shall transfer and assign to Buyer at Closing all rights, title and interest to any insurance proceeds payable in connection with such damage or destruction. If Buyer elects to purchase the Real Property after receipt of such notice from Sellers, all actions taken by Sellers with regard to the repair or replacement of any such damaged or destroyed portion of the Real Property, including but not limited to, negotiations, litigation, settlement, appraisals and appeals, shall be subject to the approval of Buyer, which approval shall not be unreasonably withheld. In no event shall Buyer have any responsibility to repair or rebuild the Improvements. b. If, after the Effective Date and prior to the Closing Date, Sellers shall receive notice of the commencement or threatened commencement of eminent domain or other like proceedings against the Real Property or any portion thereof, Sellers shall immediately notify Buyer in writing, and Buyer shall elect, within ten (10) days from and after such notice of such threatened or pending proceedings, by written notice to Sellers, either: i. to not close the transaction contemplated hereby, in which event this Purchase Contract shall be void and of no further force and effect; provided, however, Buyer shall not be entitled to elect under this item i. unless more than 5% of the Real Property is taken and such taking materially interferes with the operation of an automobile dealership business substantially as operated before such taking; or ii. to close the transaction contemplated hereby in accordance with the terms and conditions contained herein, but subject to such proceedings, in which event the Purchase Price shall remain the same and Sellers shall transfer and assign to Buyer at Closing all rights, title and interests to the proceeds of such eminent domain proceedings. If Buyer elects to purchase the Real Property after receipt of such notice, all actions taken by Sellers with regard to such eminent domain or like proceedings, including but not limited to, negotiations, litigation, settlement, appraisals and appeals, shall be subject to the approval of Buyer, which approval shall not be unreasonably withheld. In no event shall Buyer have any responsibility to repair or rebuild the Improvements. 10. NOTICE. Each notice required or permitted to be given hereunder shall be in writing and shall comply with the requirements of this paragraph. Any notice by Buyer to Sellers shall be deemed to be duly given if: (a) either (i) hand delivered to the person(s) listed below for Sellers, or (ii) delivered or sent by telephone facsimile transmittal to the facsimile telephone numbers of Sellers listed below, in which event proof of delivery shall be by telephone records, and (b) a duplicate of such notice shall be sent by registered or certified mail to Sellers at the addresses set forth below (or at such other address as may hereafter be designated by Sellers). Any notice by Sellers to Buyer shall be deemed to be duly given if: 7 (a) either (i) hand delivered to the person(s) listed below for Buyer, or (ii) delivered or sent by telephone facsimile transmittal to the facsimile telephone number of Buyer listed below, in which event proof of delivery shall be by telephone records, and (b) a duplicate of such notice shall be sent by registered or certified mail to Buyer at the address set forth below (or at such other address as may hereafter be designated by Buyer). Notice shall be deemed effective at the time of hand delivery or transmission of the telephone facsimile and upon deposit of the notice in the United States Mail for registered or certified delivery. The parties hereto reserve the right to change the addresses or telephone numbers to which notices are to be sent by giving notice to the other as herein provided. The addresses and facsimile telephone numbers of the parties to which notices are to be sent shall be those set forth below: As to Buyer: Sonic Automotive, Inc. 5401 E. Independence Boulevard Charlotte, North Carolina 28212 Attention: Chief Financial Officer Telecopy No.: (704) 536-5116 With a Copy to: Edward W. Wellman, Esq. Parker, Poe, Adams & Bernstein L.L.P. 2500 Charlotte Plaza Charlotte, North Carolina 28244 Telecopy No.: (704) 334-4706 As to Sellers: Fairway Investments, L.L.C. 2323 Laurens Road Greenville, SC 29607 Attention: A. Foster McKissick, III Telecopy No.: (864) 242-3222 With a Copy to: Harvey G. Sanders, Jr., Esq. Leatherwood Walker Todd & Mann, P.C. 100 East Coffee Street Greenville, SC 29602-0087 Telecopy No.: 864-240-2478 8 Any party shall have the right from time to time to change the address to which notices to it shall be sent by giving to the other party or parties at least five (5) days prior notice of the changed address. 11. CLOSING. Unless Buyer or Sellers have otherwise elected hereunder to terminate this Purchase Contract, and subject to the satisfaction or written waiver of each of the conditions precedent to Closing set forth in PARAGRAPH 12 hereof, the Closing of the sale and purchase of the Real Property shall be held at a mutually agreeable time on the Closing Date, at the offices of Leatherwood Walker Todd & Mann, P.C. at 9:00 a.m. 12. CONDITIONS PRECEDENT TO CLOSING. a. Buyer's Conditions. Buyer's obligation to close the purchase of the Real Property is subject to the satisfactory performance, occurrence or written waiver by Buyer, in Buyer's sole discretion, of each of the following conditions: i. Sellers shall have delivered to Buyer all of the documents, properly executed, as required by PARAGRAPH 13(A) hereof; ii. No adverse change in the status of the title to the Real Property as set forth in the Title Commitment shall have occurred prior to the Closing Date; iii. No default by Sellers shall exist under this Purchase Contract, this Purchase Contract shall not have terminated and Sellers shall be ready, willing and able to close under the terms hereof; iv. The representations of Sellers contained in this Purchase Contract shall be true, complete and correct in all material respects as of the Closing Date, without the necessity of any material amendment or modification, with the same force and effect as if made as of the Closing Date; v. The Inspection Period and Evaluation Review Period shall have expired; vi. Sellers' obligations pursuant to PARAGRAPH 7(D) shall have been met; vii. Buyer's confirmation, by a Phase I environmental inspection performed at Buyer's expense, and by a Phase II inspection if Buyer deems such inspection necessary, that the properties are free of environmentally hazardous or toxic substances that would materially adversely affect Buyer's use and possession of the respective properties for the operation of an automobile dealership, or the value of the Real Property; viii. Buyer's confirmation that as of the Closing Date there will be no contracts, leases or liabilities which will affect Buyer's ownership of the Real Property or right to use and possession thereof; 9 ix. Buyer's confirmation that both the Century Property and the Fairway Property are properly zoned for use as an automobile dealership; x. Buyer's confirmation that both the Century Property and the Fairway Property are free and clear of mortgages, security agreements or other encumbrances; other than any Permitted Exception shown on Exhibit B; xi. Receipt by Buyer of all required waivers or approvals to Buyer's acquisition of the Real Property and approval by BMW of North America for Buyer's operation of a franchised BMW dealership on each of the Century Property and the Fairway Property; xii. All required consents and approvals of the shareholders and directors of Century and all required consents and approvals of the members of Fairway shall have been obtained and provided to Buyer; xiii. All conditions to Buyer's obligations at closing under the Asset Purchase Contract shall have been fully satisfied, unless waived in writing by Buyer; and xiv. The closing of the Century Property by Buyer and the closing of the Fairway Property by Buyer are each a condition to the other closing. If any of the foregoing conditions have not been satisfied or waived within the times and in the manner required by this Purchase Contract, Buyer may terminate this Purchase Contract and seek any remedies available at law or equity, including without limitation, specific performance. b. Sellers' Conditions. Sellers' obligation to close the sale of the Real Property is subject to the satisfactory performance, occurrence or written waiver by Sellers, in Sellers' sole discretion, of each of the following conditions: i. Buyer shall pay the Purchase Price to Sellers and shall have delivered to Sellers all of the documents, properly executed, as required by PARAGRAPH 13(B) hereof; ii. No default by Buyer shall exist under this Purchase Contract, this Purchase Contract shall not have been terminated, and Buyer shall be ready, willing and able to close under the terms hereof; iii. The representations of Buyer contained in this Purchase Contract shall be true, complete and correct in all material respects as of the Closing Date, without the necessity of any material amendment or modification, with the same force and effect as if made as of the Closing Date; 10 iv. All conditions to Century's obligations at closing under the Asset Purchase Contract shall have been fully satisfied unless waived in writing by Century; v. The closing of the Century Property by Century and the closing of the Fairway Property by Fairway are each a condition to the other closing. If any of the foregoing conditions have not been satisfied or waived within the times and in the manner required by this Purchase Contract, Sellers may terminate this Purchase Contract and seek any remedies which are available at law or equity, including, without limitation, specific performance; provided, however, in the event of payment by Buyer of the "Buyer's Termination Fee" under the Asset Purchase Contract, neither of the Sellers shall have any right to any other damages or relief of any kind or nature, whether at law or in equity (including, without limitation, specific performance). 13. DOCUMENTS AT CLOSING. a. Sellers' Documents. Sellers shall execute and/or deliver the following to Buyer at Closing: i. The Deed, duly executed by Sellers and acknowledged. ii. A lien affidavit, duly executed by Sellers, acceptable to the Title Company. iii. Affidavits and other documents, duly executed by Sellers, to satisfy federal, state and local tax reporting and withholding requirements. iv. An affidavit, duly executed by Sellers that Sellers are not a "foreign person" within the meaning of Section 1445 of the Internal Revenue Code. v. A certificate, duly executed by Sellers and notarized, that the representations of Sellers contained in this Purchase Contract remain true, complete and correct in all material respects as of the Closing Date. vi. A settlement statement setting forth the amounts paid by or on behalf of and/or credited to each of Buyer and Sellers pursuant to this Purchase Contract. vii. Such other customary documents and assurances as shall be reasonably required by Buyer's counsel. b. Buyer's Documents. Buyer shall pay the Purchase Price to Sellers at Closing and the Buyer shall execute and/or deliver the following to Sellers at Closing: 11 i. A certificate, duly executed by Buyer and notarized, that the representations of Buyer contained in this Purchase Contract remain true, complete and correct in all material respects as of the Closing Date. ii. A settlement statement setting forth the amounts paid by or on behalf of and/or credited to each of Buyer and Sellers pursuant to this Purchase Contract. iii. Such other customary documents and assurances as shall be reasonably required by Sellers' counsel. 14. REPRESENTATIONS AND WARRANTIES. a. Representations and Warranties by Sellers. Sellers hereby represent and warrant to Buyer that as of the Effective Date: i. Sellers have no notice of any pending or threatened condemnation or similar proceeding or assessment affecting the Real Property, or any part thereof, nor to the best of its knowledge, is any such proceeding or assessment contemplated by any governmental authority, nor to the best of its knowledge, is there any litigation pending or threatened which affects or could affect the Real Property. ii. Except as set forth on Schedule 14(a)(ii) attached hereto, (a) except in the ordinary course of business and in compliance with applicable law, Sellers have not at any time generated, used, treated or stored Hazardous Materials on, or transported Hazardous Material to or from the Real Property or any property adjoining or adjacent to the Real Property and, to the knowledge of Sellers, no party other than Sellers have taken such actions on the Real Property, (b) Sellers have not at any time released or disposed of Hazardous Materials on the Real Property or any property adjoining or adjacent to the Real Property, and to the knowledge of the Sellers, no party other than Sellers have taken any such actions on the Real Property, (c) Sellers have not transported or arranged for the transportation of any Hazardous Materials to any site other than the Real Property, (d) Sellers are in compliance with all Environmental Laws and the requirements of any permits issued under such Environmental Laws with respect to the Real Property, except where failure to comply would not have a material adverse effect on Sellers Real Property, (e) there are no past, pending or, to the knowledge of Sellers, threatened environmental claims against Sellers or the Real Property, (f) to the knowledge of Sellers, there are no facts or circumstances, conditions or occurrences regarding the Real Property that could reasonably be anticipated (A) to form the basis of an environmental claim against Sellers or (B) to cause the Real Property to be subject to any restrictions on its ownership, occupancy, use or transferability under any Environmental Law, and (g) there 12 are not now, and to the knowledge of Sellers, never have been any underground storage tanks located on the Real Property. iii. To the best of Sellers' knowledge, Sellers have complied in all material respects with all applicable laws, ordinances, regulations and statutes relating to the Real Property or any part thereof and is not in violation of any such laws as they relate to the Real Property. iv. This Purchase Contract and all documents executed by Sellers which are to be delivered to Buyer at Closing are or at the time of delivery will be duly executed and delivered by Sellers, and are or at the time of Closing, will be legal, valid, binding obligations of Sellers, and do not and at Closing will not violate any provisions of any agreement or any applicable governmental law or regulation to which either of the Sellers are a party or to which Sellers are subject. v. There are no restrictions or applicable regulations which prevent the use of the Real Property for automobile dealership and servicing purposes. vi. The restrictive covenants encumbering the Real Property (if any) have not been violated and there are no assessments owed pursuant to such restrictions. vii. Other than ad valorem real property taxes, there are no other taxes or assessments pending or periodically charged to Sellers with respect to the Real Property. b. Representations and Warranties by Buyer. Buyer hereby represents and warrants to Sellers that as of the Effective Date: i. Buyer is a duly organized and validly existing corporation under the laws of the State of Delaware and is authorized to acquire property in the State of South Carolina, and Buyer has the power and authority to enter into this Purchase Contract. ii. This Purchase Contract and all documents executed by Buyer which are to be delivered to Sellers at Closing are or at the time of delivery will be duly authorized, executed and delivered by Buyer, and are or at the time of Closing, will be legal, valid, binding obligations of Buyer, and do not and at Closing will not violate any provisions of any agreement or any applicable governmental law or regulation to which Buyer is a party or to which it is subject. c. INDEMNITIES. i. Buyer and Sellers hereby agree that they have relied upon the representations and warranties given by the respective parties in PARAGRAPH 14(A) and 14(B) 13 of this Purchase Agreement. Buyer hereby agrees to indemnify and hold Sellers harmless from and against any and all liabilities, losses, costs, damages, expenses, including reasonable attorneys' fees and costs of litigation, arising or resulting from the untruth of any of Buyer's representations and warranties set forth in PARAGRAPH 14(B). Sellers, jointly and severally, hereby indemnify and hold Buyer harmless from and against any and all liabilities, losses, costs, damages and expenses, including reasonable attorneys' fees and costs of litigation, arising or resulting from the untruth of any of Sellers' representations and warranties set forth in PARAGRAPH 14(A). ii. To the extent caused by or resulting from the acts of Sellers, its agents, servants, employees or contractors, Sellers agree to immediately clean up any Hazardous Materials found on or within any portion of the Real Property and to remediate the Real Property, to comply with any and all Environmental Laws, and to pay for all clean up and remediation costs at no cost to Buyer. To the extent caused by or resulting from the acts of Buyer, its agents, servants, employees, or contractors, Buyer agrees to immediately clean up any Hazardous Materials found on or within any portion of the Real Property and, with respect to such matters as described herein for which Buyer is responsible, to remediate the Real Property, to comply with any Environmental Laws, and to pay for all clean-up and remediation costs at no cost to Sellers. Each parties' respective clean-up and/or remediation efforts as described herein shall mean and refer to those actions which are necessary and required under the Environmental Laws. iii. To the extent that Sellers are responsible for the same in accordance with Subparagraph (ii) above, Sellers hereby agree to indemnify, release and hold Buyer, its successors, assigns, tenants, subtenants, officers, directors, shareholders and employees, harmless from and against all Liabilities (defined below) incurred in connection therewith, suffered by, incurred by or assessed against such parties, their agents or other representatives, whether incurred as a result of legal action taken by any governmental entity or agency, taken by any private claimant, or taken by Buyer, before or after Closing as a result of the presence, disturbance, discharge, release, removal or cleanup of any Hazardous Materials upon or under, on or off site, associated with or flowing or originating from the Real Property. To the extent that Buyer is responsible for the same in accordance with Subparagraph (ii) above, Buyer hereby agrees to indemnify, release and hold Sellers, its successors, assigns, officers, directors, shareholders and employees, harmless from and against all Liabilities, suffered by, incurred by or assessed against such parties, their agents or other representatives, whether incurred as a result of legal action taken by any governmental entity or agency, taken by any private claimant, or taken by Sellers, before or after Closing as a result of the presence, disturbance, discharge, release, removal or clean-up of any Hazardous Materials upon or under, on or off site, associated with or flowing or originating from the Real Property. The term 14 "Liabilities" as used in this paragraph is hereby defined as any and all liabilities, expenses, demands, damages, punitive or exemplary damages, consequential damages, costs, cleanup costs, response costs, losses, causes of action, claims for relief, attorneys and other legal fees, other professional fees, penalties, fines, assessments and charges. iv. All representations, warranties, indemnities and covenants of Sellers in this Purchase Contract are made on a joint and several basis. 15. BROKER'S COMMISSION. Buyer and Sellers represent and warrant to the other that neither of them have engaged or contracted with any person, firm or entity to serve or act as a broker, agent or finder for the purpose of the sale and purchase of the Real Property, and that no broker's or real estate or other similar commissions or fees are or shall be due in respect of the transaction contemplated by this Purchase Contract. The Buyer and Sellers each agree to indemnify, defend and save harmless the other from and against any cost and expense, including reasonable attorney's fees, incurred by the other as a result of the untruth of any of the foregoing representations made by it. 16. ENTIRE AGREEMENT. This Purchase Contract constitutes the entire agreement between Buyer and Sellers with respect to the Real Property and may not be amended except by written instrument executed by Buyer and Sellers. Any other agreements, written or oral, between Buyer and Sellers with respect to the Real Property are hereby superseded in their entirety by this Purchase Contract. 17. CAPTIONS. The paragraph captions are inserted for convenience only and are in no way intended to describe, interpret, define or limit the scope or content of this Purchase Contract or any provision hereof. 18. CONSTRUCTION. Words of any gender used in this Purchase Contract shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise. Any disputes regarding the interpretation of any portion of this Purchase Contract shall not be presumptively construed against the drafting party. 19. REMEDIES CUMULATIVE. Except as specifically set forth above all rights, powers and privileges conferred hereunder upon the parties hereto shall be cumulative and in addition to those other rights, powers and remedies hereunder and those available at law or in equity. All such rights, powers and remedies may be exercised separately or at once, and no exercise of any right, power or remedy shall be construed to be an election of remedies or shall preclude the future exercise of any or all other rights, powers and remedies granted hereunder or available at law or in equity, except as expressly provided herein. 20. NO WAIVER. Neither the failure of either party to exercise any power given such party hereunder nor to insist upon strict compliance with its obligations hereunder, nor any custom or practice of the parties at variance with the terms hereof shall constitute a waiver of either party's right to demand exact compliance with the terms hereof. 15 21. APPLICABLE LAW. This Purchase Contract shall be construed and interpreted in accordance with the laws of the State of South Carolina. 22. SUCCESSORS AND ASSIGNS. This Purchase Contract shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns. Buyer shall have the right and privilege to assign and transfer its interest hereunder to MAR MAR REALTY TRUST, A TO-BE-FORMED MARYLAND REAL ESTATE INVESTMENT TRUST, OR MAR MAR REALTY L.P., A TO-BE-FORMED MARYLAND LIMITED PARTNERSHIP (EACH TO BE FORMED BY AFFILIATES OF BUYER) OR TO an existing corporation, partnership, limited liability company or other business entity, or to a corporation, partnership, limited liability company or business entity formed for the purpose of consummating this transaction in which Buyer has an ownership interest or is affiliated by common ownership. 23. COUNTERPARTS. This Purchase Contract may be executed in two (2) or more counterparts. 24. SURVIVAL. Sellers' and Buyer's representations and warranties and indemnities set forth in PARAGRAPHS 14 and 15 shall survive Closing. 16 IN WITNESS WHEREOF, the parties have executed the Purchase Contract pursuant to authority duly given the day and year first above written. SONIC AUTOMOTIVE, INC. By: /s/ O. Bruton Smith ----------------------------------- Its: Chief Executive Officer ----------------------------------- CENTURY AUTO SALES, INC. By: /s/ A. Foster McKissick, III ----------------------------------- Its: Chairman ----------------------------------- FAIRWAY INVESTMENTS, LLC By: /s/ A. Foster McKissick, III ----------------------------------- Its: President ----------------------------------- 17 EX-99 9 EXHIBIT 99.11 Exhibit 99.11 ASSET PURCHASE AGREEMENT [HERITAGE] THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made this 10th day of April, 1998 by and among FAIRWAY MANAGEMENT COMPANY, a South Carolina corporation d/b/a Heritage Lincoln-Mercury-Jaguar ("SELLER"), FAIRWAY FORD, INC., a South Carolina corporation (the "STOCKHOLDER"), and SONIC AUTOMOTIVE, INC., a Delaware corporation ("BUYER"). WITNESSETH: WHEREAS, Seller is the owner of certain assets used in connection with Seller's Lincoln- Mercury-Jaguar automobile dealership business (the "BUSINESS") operated at 2424 Laurens Road, Greenville, South Carolina; WHEREAS, Seller desires to sell and Buyer desires to buy, or to cause a subsidiary or affiliate of Buyer to buy, certain assets pertaining to the Business, subject to the terms and conditions of this Agreement; WHEREAS, contemporaneously with the execution of this Agreement, Buyer has entered into a Contract to Purchase and Sell Real Property (the "REAL PROPERTY PURCHASE AGREEMENT") with Fairway Ford, Inc., a South Carolina corporation ("Fairway"), whereby Buyer has agreed to buy, and Fairway has agreed to sell, the land, buildings and improvements located at the Real Property (as defined in the Real Property Purchase Agreement); and WHEREAS, the consummation of the transactions contemplated by each of this Agreement and the Real Property Purchase Agreement is subject to the consummation of the transactions contemplated by the other such Agreement; NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the receipt and legal sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereby agree as follows: ARTICLE I CERTAIN DEFINITIONS 1.1 "ASSETS" shall mean: the New Vehicles (as defined in Section 3.1 hereof); the Demonstrators (as defined in Section 3.2 hereof); the Parts (as defined in Section 4.4 hereof); the Miscellaneous Inventories (as defined in Section 5.1 hereof); the Work in Progress (as defined in 1 Section 5.3 hereof); the Fixtures and Equipment (as defined in Section 5.4 hereof); the Miscellaneous Assets (as defined in Section 5.5 hereof); any used vehicles which Buyer agrees to buy at the Closing; and all of Seller's rights to the name "Heritage Lincoln-Mercury-Jaguar", and all goodwill of the Business. 1.2 "CLOSING DATE" shall mean the date, not later than the Closing Date Deadline (as hereinafter defined), of the closing of the purchase and sale of the Assets (the "CLOSING") which shall be a date designated by Buyer not later than fifteen (15) days after the approvals set forth in Section 8.13 hereof and all other conditions precedent set forth in Articles VIII and IX have been satisfied, or such other date as is mutually agreed upon by the parties hereto. The Closing shall be held at the offices of Leatherwood Walker Todd & Mann, P.C., 100 East Coffee Street, Greenville, South Carolina, 29602, at 9:00 a.m. on the Closing Date. 1.3 "CLOSING DATE DEADLINE" shall mean May 15, 1998; provided, however, if as of May 15, 1998, any of the approvals set forth in Section 8.13 hereof shall not have been obtained and the obtaining of any such approvals is the sole condition precedent to Buyer's obligations under Article VIII which remains unsatisfied, Buyer may elect to extend the Closing Date Deadline for up to an additional thirty (30) days. 1.4 "INVENTORY DATE" shall mean the close of business on March 28, 1998. 1.5 "LIABILITIES" shall mean all obligations of Seller, arising in the ordinary course of business after the Inventory Date and not as a result of any breach or default, under those contracts and leases of Seller set forth on Schedule 1.5 attached hereto. 1.6 "MANAGEMENT AGREEMENT" shall mean that certain Management Agreement dated the date hereof between Seller, as "Owner", and Buyer as "Manager." 1.7 "MANUFACTURERS" shall mean the Lincoln-Mercury division of the Ford Motor Company and Jaguar Cars. ARTICLE II SALE AND PURCHASE OF THE ASSETS 2.1 Upon the terms and subject to the conditions hereinafter set forth, at the Closing, Seller will sell, transfer and convey the Assets to Buyer and Buyer will purchase the Assets from Seller for the consideration set forth in this Agreement. The sale, transfer and conveyance of the Assets will be made by execution and delivery at the Closing of a bill of sale in a form reasonably satisfactory to Buyer's counsel (the "BILL OF SALE") and such other instruments of assignment, transfer and conveyance as Buyer shall reasonably request. Except to the extent specifically included within the Assets, Seller will not sell, and Buyer will not purchase, any other tangible or intangible assets of Seller. 2 3 2.2 The aggregate purchase price (the "PURCHASE PRICE") to be paid for the Assets shall consist of Six Hundred Thousand Dollars ($600,000), as the purchase price for the Business and intangible Assets included in the Assets, plus the sum of: (i) the New Vehicle Purchase Price (as defined in Section 3.1 hereof); (ii) the Demonstrator Purchase Price (as defined in Section 3.2 hereof); (iii) the Used Vehicle Purchase Price, if applicable (as defined in Section 3.6 hereof); (iv) the Parts Purchase Price (as defined in Section 4.5 hereof); (v) the Miscellaneous Inventories Purchase Price (as defined in Section 5.1 hereof); (vi) the Work in Progress Purchase Price (as defined in Section 5.3 hereof); (vii) the F&E Purchase Price (as defined in Section 5.4 hereof); and (viii) the amount of the Liabilities. Each party will use the Purchase Price allocation described in this Section 2.2 in all reporting to, and tax returns filed with, the Internal Revenue Service. 2.3 Upon the terms and subject to the conditions hereinafter set forth, Buyer shall pay the Purchase Price as follows: (a) At the Closing, Buyer shall deliver to Seller a certified check, or a wire transfer to an account designated by Seller, in an amount equal to the sum of (i) the New Vehicle Purchase Price; (ii) the Demonstrator Purchase Price; (iii) the Parts Purchase Price; (iv) the Miscellaneous Inventories Purchase Price; (v) the Work in Progress Purchase Price; and (vi) the F&E Purchase Price; provided, however, to the extent that (A) Buyer shall have paid or discharged, pursuant to the Management Agreement, any liability or obligation of Seller accrued or outstanding as of the Inventory Date and not included in the Liabilities or (B) Seller shall have collected and not paid over to Buyer any accounts receivable from transactions after the Inventory Date, the amount of such liability or obligation paid or discharged by Buyer, or accounts receivable collected by Seller, shall be a credit towards the amount payable under this Section 2.3(a); (b) At the Closing, Buyer shall issue to Seller six hundred (600) shares (the "PREFERRED SHARES") of Buyer's Convertible Preferred Stock, with such rights and preferences as are set forth in the Statement of Rights and Preferences of Preferred Stock attached hereto as Exhibit A (the "STATEMENT OF RIGHTS AND PREFERENCES"); (c) At the Closing, Buyer shall assume the Liabilities in accordance with Section 2.4 hereof; (d) Buyer shall receive a credit against the Purchase Price with respect to all amounts paid by Buyer to Seller (or on Seller's behalf) after the Inventory Date and on or prior to the Closing Date under the Management Agreement with respect to the Assets; and (e) On the date hereof, Buyer shall deliver to Seller a certified check, or a wire transfer to an account designated by Seller, in an amount equal to the Used Vehicle Purchase Price, if applicable. Any such payment of the Used Vehicle Purchase Price shall constitute earnest money, which shall be refunded by Seller to Buyer in the event this Agreement is terminated and for which Buyer shall receive a credit towards the Purchase Price. Seller shall not be required to hold or maintain the earnest money in any separate account. 4 2.4 At the Closing, Seller will assign to Buyer and Buyer will assume and agree to perform and discharge the Liabilities pursuant to an assignment and assumption agreement in a form reasonably satisfactory to Seller's counsel (the "ASSUMPTION AGREEMENT"). Notwithstanding anything herein to the contrary, except as expressly provided in this Section 2.4 and in the Assumption Agreement, Buyer does not and will not assume or become liable for any obligations or liabilities of Seller, of any kind whatsoever, fixed or contingent, known or unknown, as a result of the transactions contemplated in this Agreement. Seller shall retain and agrees to satisfy and discharge all of its obligations and liabilities, including the obligations and liabilities set forth on Schedule 2.4. 2.5 (a) At the Closing, Seller and the Stockholder shall execute and deliver to Buyer the certificate referred to in the Statement of Rights and Preferences. At Seller's option, exercisable only by written notice to Buyer at or prior to the Closing (the "REGISTRATION NOTICE"), Buyer shall be obligated to use its reasonable best efforts to register under the Securities Act of 1933, as amended (the "SECURITIES ACT"), on or before December 31, 1998, the shares (the "COMMON SHARES") of the Buyer's Class A Common Stock, $0.01 par value per above (the "Common Stock"), which are issuable upon conversion of the Preferred Shares. (b) If requested by the managing or lead managing underwriter for any such underwritten registered offering of the Common Shares, the Seller shall execute and deliver such underwriting agreement with the managing or lead managing underwriter in such form as is customarily used by such underwriter with any modifications as the parties thereto shall agree. In connection with any such registration, Seller and the Stockholder shall supply to Buyer such information as may be reasonably requested by Buyer in connection with the preparation and filing of a registration statement with the Securities and Exchange Commission. Seller and the Stockholder shall not supply any information to Buyer for inclusion in such registration statement that will, taken as a whole, at the time the registration statement becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Provided that Buyer shall have timely completed such registration of the Common Shares, Seller shall promptly convert the Preferred Shares into the Common Shares. (c) In the event that Buyer fails to timely complete such registration of the Common Shares, Seller may, at its option, exercisable by notice to Buyer not later than January 31, 1999, require Buyer to purchase up to all of the Preferred Shares at the price of $1,000 per share. Such notice to Buyer shall specify the number of Preferred Shares required to be purchased and a closing date for such purchase which shall be not sooner than fifteen (15) days and not longer than thirty (30) days from the date of delivery of such notice. At the closing of such purchase, Buyer shall deliver to Seller the applicable purchase price in the same manner that the cash portion of the Purchase Price paid at Closing was paid against delivery by Seller of (i) the certificates for the Preferred Shares being purchased, duly endorsed for transfer to Buyer, and (ii) a certificate signed 5 by Seller and the Stockholder to the effect that such Preferred Shares are being sold free and clear of all encumbrances and claims of third persons. (d) In the event Seller does not timely deliver a Registration Notice, Buyer shall have no obligation to register the Common Shares. Thereafter, Buyer's sole obligation with respect to the Preferred Shares and the Common Shares shall be to use its reasonable best efforts to make available current public information with respect to Buyer within the meaning of Subsection (c)(1) of Securities and Exchange Commission Rule 144 ("Rule 144") to the extent necessary to facilitate public resales by Seller of the Common Share pursuant to Rule 144. ARTICLE III ----------- NEW VEHICLES AND DEMONSTRATORS ------------------------------ 3.1 At the Closing, Buyer shall purchase all of Seller's untitled new 1997 and 1998 model Lincoln, Mercury and Jaguar motor vehicles in Seller's stock and unsold by Seller as of the Inventory Date and which are listed on Schedule 3.1, to be delivered to Buyer as promptly as possible after the date hereof (all such vehicles are collectively referred to hereinafter as the "NEW VEHICLES"). The purchase price to be paid by Buyer for each New Vehicle shall be the price at which the New Vehicle was invoiced to Seller by the applicable Manufacturer, as adjusted pursuant to this Article III (the sum of all such amounts to be paid for New Vehicles as determined by this Article III is herein referred to as the "NEW VEHICLE PURCHASE PRICE"). Schedule 3.1 shall set forth each New Vehicle's model, invoice cost, odometer reading and all other information necessary to calculate the New Vehicle Purchase Price with respect to such New Vehicle. At the Inventory Date, Seller shall assign to Buyer, without any additional consideration therefor, by appropriate documents reasonably satisfactory to Buyer, all unfilled retail orders and deposits made thereon. 3.2 At the Closing, Buyer shall purchase all of Seller's untitled 1997 and 1998 model Lincoln, Mercury and Jaguar motor vehicles in Seller's stock and unsold by Seller as of the Inventory Date which are used in the ordinary course of business for the purpose of demonstration, and which are listed on Schedule 3.2, to be delivered to Buyer as promptly as possible after the date hereof (all such vehicles are collectively referred to herein as the "Demonstrators"). For purposes of this Agreement, any motor vehicle with more than 9,000 miles shall be deemed to be "used" rather than a "Demonstrator". The purchase price to be paid by Buyer for each Demonstrator shall be the price at which the Demonstrator was invoiced to Seller by the applicable Manufacturer, as adjusted pursuant to this Article III and as reduced as follows: (a) if such Demonstrator's odometer reflects total mileage of six thousand (6,000) miles or less, an amount equal to ten cents ($.10) multiplied by the total mileage on such odometer; and (b) if such Demonstrator's odometer reflects total mileage of more than six thousand (6,000) miles but less than nine thousand (9,000) miles, an amount equal to twenty cents ($.20) multiplied by the total mileage on such odometer (the sum of all such amounts to be paid for Demonstrators hereunder is herein referred to as the "Demonstrator Purchase Price"). Schedule 3.2 shall set forth each Demonstrator's model, invoice cost, odometer reading and all other information necessary to calculate the Demonstrator Purchase Price with respect to such Demonstrator. 6 3.3 The purchase price paid for each New Vehicle and each Demonstrator purchased under this Article III shall be: (a) increased by (i) sixty dollars ($60) if Seller has completed new car delivery preparation on such Vehicle and (ii) out-of-pocket costs incurred by Seller for dealer-installed equipment and accessories; and/or (b) decreased by (i) the dealer cost of any equipment and accessories which have been removed from such vehicles, (ii) all paid or unpaid rebates, discounts, Holdback for Dealer Account and other factory incentives (including without limitation rebates applied for and paid but unearned, incentive monies claimed on pre-reported units and carryover allowances on 1997 models), (iii) any refundable advertising allowances, and (iv) sixty dollars ($60) if such vehicle has not been prepped. 3.4 In the event any New Vehicle or Demonstrator shall have been damaged prior to the Inventory Date, or is otherwise in a condition such that it cannot reasonably be presented as being in a first-class saleable condition, Seller and Buyer will attempt to agree on the cost to cover such repairs or some other equitable reduction in value to reflect such condition, which amount shall be deducted from the price to be paid for such New Vehicle or Demonstrator. In the event Buyer and Seller cannot agree on the cost of repairs or the amount of reduction, Buyer shall have no obligation to purchase any such damaged New Vehicle or Demonstrator. With respect to any New Vehicle or Demonstrator which has been damaged and repaired prior to the Inventory Date, Seller and Buyer will attempt to agree on an adjustment to the price to reflect any decrease in the wholesale value of such New Vehicle or Demonstrator resulting from such damage and repair. In the event Buyer and Seller cannot agree on such adjustment, Buyer shall have no obligation to purchase such New Vehicle or Demonstrator. 3.5 [Intentionally Left Blank] 3.6 Buyer shall have no obligation to purchase any vehicle from Seller other than its obligation hereunder to purchase the New Vehicles and the Demonstrators. When Seller and Buyer perform the vehicle inventory, the parties shall assign a price to each used vehicle owned by Seller at such time. At the Inventory Date, Buyer, in its sole discretion, may elect to purchase, at the Closing, any or all of Seller's used vehicles for the price assigned to each such used vehicle. If Buyer elects to purchase any used vehicles, the sum of all prices assigned to such used vehicles pursuant to the terms of this Section 3.6 shall be referred to herein as the "Used Vehicle Purchase Price". ARTICLE IV ---------- PARTS/ACCESSORIES ----------------- 7 4.1 Buyer and Seller shall engage a mutually acceptable third party engaged in the business of appraising, valuing and preparing inventories for automobile dealerships (hereinafter referred to as the "Inventory Service") to prepare an inventory list (the "INVENTORY") of the parts and accessories, as well as the Miscellaneous Inventory, used by Seller in the Business as a Lincoln- Mercury-Jaguar dealer at the Real Property. The Inventory shall be posted to the respective Manufacturer's approved system of inventory control. The cost of the aforesaid physical inventory shall be shared equally by Buyer and Seller. Buyer shall have the right to deduct Seller's portion of such expense from the consideration to be paid to Seller under the terms of this Agreement and to remit such sum directly to the Inventory Service. The Inventory shall be completed by March 29, 1998, or such later date as is mutually convenient and which is as close as possible to the Closing Date. The Inventory shall identify each part and accessory and its purchase price. 4.2 The Inventory shall classify parts and accessories as "returnable" or "nonreturnable". For purposes of this Agreement, the terms "returnable parts" and "returnable accessories" shall describe and include only those new parts and new accessories for Lincoln, Mercury or Jaguar vehicles which are listed (coded) in the latest current Master Parts Price List Suggested List Prices and Dealer Prices of the respective Manufacturers, with supplements or the equivalent in effect as of the date of the Inventory (the "MASTER PRICE LIST") as returnable to the respective Manufacturer at not less than the purchase price reflected in the Master Price List. The purchase price for each "returnable part" and "returnable accessory"will be the price listed in the Master Price List. All parts and accessories not falling within the definition of "returnable" shall be classified as "nonreturnable". The purchase price for each "nonreturnable" part and accessory, of which type Seller has made no sales during the ninety (90) day period prior to the date of the Inventory, shall be sixty percent (60%) of the price listed therefor in the Master Price List. The purchase price for each "nonreturnable" part and accessory, of which type Seller has made retail sales to one or more customers during the ninety (90) day period prior to the date of the Inventory, shall be one hundred percent (100%) of the price therefor listed in the Master Price List. The purchase price for all "Jobber" and/or "NPN" parts shall be equal to Seller's original cost of such parts. The purchase price for all nuts, bolts and any other parts not addressed in this Section 4.2 shall equal the fair market value thereof as determined by the Inventory Service. 4.3 [Intentionally Left Blank] 4.4 At the Closing, Buyer shall purchase all parts and accessories owned by Seller at the Inventory Date and listed on the Inventory (the "PARTS") provided, however, that Buyer shall not be obligated to purchase any damaged parts or accessories, parts and accessories with component parts missing, superseded or obsolete parts or accessories, or used parts or accessories. Seller agrees that if parts and accessories that Buyer is not obligated to purchase hereunder are not removed from the Real Property within thirty (30) days after the Closing Date, they shall become the property of Buyer without the payment of any consideration in addition to the consideration otherwise provided herein. 4.5 The purchase price for the Parts will equal the value of such items shown on the Inventory (the "PARTS PURCHASE PRICE"). 8 4.6 Seller shall assign to Buyer at Closing any net parts return privileges under the respective Manufacturers' Parts Return Plans that may have accrued to Seller prior to the Closing (and any other special parts return authorizations which may have been granted to Seller by the respective Manufacturers). ARTICLE V --------- MISCELLANEOUS INVENTORIES; WORK IN PROGRESS; FIXTURES ----------------------------------------------------- AND EQUIPMENT ------------- 5.1 At the Closing, Buyer shall purchase all useable gas, oil and grease, all undercoat material and body materials in unopened cans and such miscellaneous useable and saleable articles in unbroken lots which (i) are on the dealership premises, (ii) are owned by Seller on the Inventory Date, (iii) were purchased during the thirty (30) day period prior to the Inventory Date, and (iv) are identified in the Inventory taken by the Inventory Service on the Inventory Date (collectively referred to herein as the "Miscellaneous Inventories"). The purchase price for the Miscellaneous Inventories shall be equal to the replacement cost of the Miscellaneous Inventories as determined by the Inventory Service and set forth on the Inventory (the sum of all prices of the Miscellaneous Inventories pursuant to the terms of this Section 5.1 shall be referred to herein as the "Miscellaneous Inventories Purchase Price"). 5.2 Buyer shall have no obligation to purchase any such miscellaneous items that are not included in the Miscellaneous Inventories. Seller agrees that any miscellaneous items that are not included in the Miscellaneous Inventories and are not removed from the Real Property within the thirty (30) days after the Closing Date, they shall become the property of Buyer without the payment of any consideration in addition to the consideration otherwise provided herein. 5.3 At the Closing, Buyer shall buy at Seller's cost for parts and labor such shop labor and sublet repairs as Seller shall have caused to be performed on any repair orders which are in process at the close of business on the Inventory Date for which there are adequate credit arrangements (the "WORK IN PROGRESS") (the sum of all costs for the Work in Progress pursuant to the terms of this Section 5.3 shall be referred to herein as the "Work in Progress Purchase Price"). Buyer shall complete such repair work and shall be entitled to the entire proceeds to be collected for such services. 5.4 At the Closing, Buyer shall purchase all fixtures, machinery, equipment (including special tools and shop equipment), furniture, "Lincoln," "Mercury," and "Jaguar" and other signs and office equipment owned by Seller and used or held for use in connection with the Business, including the items listed on the Book Depreciation Schedule included as Schedule 5.4 attached hereto (collectively referred to herein as the "Fixtures and Equipment"). The purchase price for each item of Fixtures and Equipment shall equal the depreciated book value of such item based upon Schedule 5.4 (the sum of all prices assigned to the Fixtures and Equipment pursuant to the terms of 9 this Section 5.4 shall be referred to herein as the "F&E Purchase Price"). The Fixtures and Equipment shall include the UCS computer system. 5.5 At the Closing, and without payment of any additional consideration, Buyer shall purchase all of Seller's (i) unused shop repair orders, parts sales tickets, accounting forms, binders, office and shop supplies and such shop reference manuals, parts reference catalogs, non-accounting file copies for all sales of Seller for the three (3) years preceding the Closing Date, (ii) copies of new and used car sales records and specifically wholesale parts sales records, new and used parts sales records, and service sales records for the three (3) years preceding the Closing Date, (iii) product sales training material and reference books on hand as of the Closing Date, (iv) customer and registration lists pertaining to the sale of motor vehicles, service files, repair orders, owner follow-up lists and similar records relating to the operation of the Business, (v) telephone numbers and listings used by Seller in connection with the Business, (vi) names and addresses of Seller's service customers and prospective purchasers and (vii) Seller's rights to the tradename "Heritage Lincoln- Mercury-Jaguar" or any similar variation thereof (such items collectively referred to herein as the "Miscellaneous Assets"). 5.6 Seller may retain all corporate records, financial records and correspondence which are not necessary for the continued operation of the Business by Buyer, and all derivations and extensions thereof. 5.7 Buyer shall have no responsibility to perform any services required under any warranties issued by Seller on the vehicles sold by Seller on or prior to the Inventory Date, unless authorized in writing by Seller accompanied by arrangements in writing satisfactory to Buyer to assure Buyer of payment for all work performed by Buyer, and, if so authorized by Seller, Seller shall reimburse Buyer for all of Buyer's costs for parts and labor in connection therewith at established internal rates for parts and labor. At the Inventory Date, Seller shall supply Buyer with a list to which such warranties and guaranties are applicable, which list shall include the names of the purchasers, the make and year model of the vehicles purchased and the date of purchase. Seller shall also supply to Buyer at or prior to the Inventory Date an address for and a designation of the person who will be responsible for authorizing Buyer to perform any services under any warranties issued by Seller on vehicles sold by it prior to the Inventory Date. Seller shall reimburse Buyer promptly upon demand for all sums due or payable by Seller to Buyer hereunder. 5.8 Seller shall retain all accounts receivable held by Seller as of the Inventory Date and Buyer shall retain all accounts receivable arising out of sales and/or services of the Business after the Inventory Date. Buyer shall have no responsibilities or obligations with respect to the documentation or collection of the Seller's accounts receivable, except that Buyer, on Seller's behalf, shall accept payment of Seller's accounts receivable arising out of the operation of Seller's business prior to the Inventory Date, at no charge to Seller, during the term of the Management Agreement and for a period of 60 days after the Closing, and Buyer shall forward to Seller, from time to time during said period, all of the money so accepted on said accounts receivable. 10 ARTICLE VI ---------- REPRESENTATIONS AND WARRANTIES OF BUYER --------------------------------------- Buyer represents and warrants to Seller and the Stockholder as follows: 6.1 Buyer is a corporation duly organized and existing and in good standing under the laws of the State of Delaware, is duly qualified to do business and is in good standing in every jurisdiction in which the nature of its business makes such qualification necessary and has the corporate power to own its properties and to carry on its business as now being conducted. The Board of Directors of Buyer has duly approved this Agreement, all other agreements, certificates and documents executed or to be executed by Buyer in connection herewith, and the transactions contemplated hereby and thereby. Buyer has full corporate power and authority to execute and deliver this Agreement and all other agreements, certificates and documents executed or to be executed by Buyer in connection herewith, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. This Agreement, and all other agreements, certificates and documents executed or to be executed by Buyer in connection herewith, constitute or, when executed and delivered, will constitute legal, valid and binding agreements of Buyer enforceable in accordance with their respective terms. 6.2 Except as set forth on Schedule 6.2 attached hereto, the consummation of the transactions contemplated by this Agreement and compliance with the provisions hereof will not conflict with or result in a breach of the terms, conditions or provisions of, or constitute a breach or default under, any provision of law, any order of any court or other agency of government, the charter or bylaws of Buyer or any note, debenture, mortgage, loan agreement or other instrument to which Buyer is a party or by which it or any of its properties or assets is bound. 6.3 There are no actions, suits or proceedings pending, or, to the knowledge of Buyer, threatened against or affecting Buyer which might adversely affect the power or authority of Buyer to carry out the transactions to be performed by it hereunder. 6.4 The issuance of the Preferred Shares, as well as the Common Shares issuable upon conversion of the Preferred Shares, has been duly authorized by all necessary corporate action of Buyer. Upon the issuance of the Preferred Shares pursuant to this Agreement, and upon the issuance of Common Shares upon conversion of any of the Preferred Shares, such Preferred Shares and/or Common Shares, as the case may be, shall be validly issued, fully paid and non-assessable. 11 ARTICLE VII REPRESENTATIONS AND WARRANTIES AND SELLER AND THE STOCKHOLDER Seller and the Stockholder, jointly and severally, represent and warrant to Buyer as follows: 7.1 Seller is a corporation duly organized and existing and in good standing under the laws of the State of South Carolina, is duly qualified to do business and is in good standing in every jurisdiction in which the nature of its business makes such qualification necessary and has the corporate power to own its properties and to carry on its business as now being conducted. Except as set forth on Schedule 7.1 attached hereto, the Stockholder is the only person or entity owning shares of Seller. The Board of Directors and the shareholder of Seller have duly approved this Agreement, all other agreements, certificates and documents executed or to be executed by Seller in connection herewith, and the transactions contemplated hereby and thereby. Seller has full corporate power and authority to execute and deliver this Agreement and all other agreements, certificates and documents executed or to be executed by Seller in connection herewith, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. The Stockholder is a corporation duly organized and existing and in good standing under the laws of the State of South Carolina, is duly qualified to do business and is in good standing in every jurisdiction in which the nature of its business makes such qualification necessary and has the corporate power to own its properties and to carry on its business as now being conducted. The Board of Directors of the Stockholder has duly approved this Agreement, all other agreements, certificates and documents executed or to be executed by the Stockholder in connection herewith, and the transactions contemplated hereby and thereby. The Stockholder has full corporate power and authority to execute and deliver this Agreement and all other agreements, certificates and documents executed or to be executed by the Stockholder in connection herewith, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. This Agreement, and all other agreements, certificates and documents executed or to be executed by Seller in connection herewith, constitute or, when executed and delivered, will constitute legal, valid and binding agreements of Seller enforceable in accordance with their respective terms. This Agreement, and all other agreements, certificates and documents executed or to be executed by the Stockholder in connection herewith, constitute or, when executed and delivered, will constitute legal, valid and binding agreements of the Stockholder enforceable in accordance with their respective terms. 7.2 Except as set forth in Schedule 7.2 attached hereto, the consummation of the transactions contemplated by this Agreement and compliance with the provisions hereof will not conflict with or result in a breach of the terms, conditions or provisions of, or constitute a breach or default under, any provision of law, any order of any court or other agency of government, the charter or bylaws of Seller or the Stockholder or any note, debenture, mortgage, loan agreement or other instrument to which Seller or the Stockholder is a party, or by which it or any of the Assets are bound, or result in the creation or imposition of any Encumbrance of any kind whatsoever on the Assets. 12 7.3 There are no actions, suits or proceedings pending or, to the knowledge of Seller and the Stockholder, threatened against Seller or the Stockholder which might adversely affect the power or authority of any of them to carry out the transactions to be performed by such party hereunder. There are no actions, suits or proceedings pending, or, to the knowledge of Seller and the Stockholder, threatened against or affecting Seller, other than those adequately covered by insurance, and those disclosed on Schedule 7.3 attached hereto, and none of the actions, suits or proceedings described on Schedule 7.3, if determined adversely to Seller, would have a material adverse effect on the business, assets or financial condition of Seller. 7.4 Except as disclosed on Schedule 7.4 attached hereto, Seller has good title to the Assets, free and clear of all liens (including tax liens), encumbrances, actions, claims, payments or demands of any kind and character (collectively, "ENCUMBRANCES"), except Encumbrances for ad valorem personal property taxes not yet due and payable. All of the Assets to be transferred hereunder conform, as to condition and character, to the descriptions of such Assets contained herein and will be transferred at the Closing free and clear of all Encumbrances, except Encumbrances for ad valorem personal property taxes not yet due and payable and the Liabilities assumed by Buyer and described in Schedule 2.4. 7.5 Except as disclosed on Schedule 7.5 attached hereto, there are no permits or approvals used or obtained for use by Seller which are required under applicable law in connection with the ownership or operation of its Business, except where the failure to have or obtain any such permits or approvals would not have a material adverse effect on Seller or the Business. 7.6 [Intentionally Left Blank] 7.7 [Intentionally Left Blank] 7.8 The financial statements of Seller attached hereto or set forth on Schedule 7.8 (the "Financial Statements") have been prepared in accordance with generally accepted accounting principles consistently applied. The balance sheet of Seller included in the Financial Statements fairly presents the financial condition of Seller as of the date thereof and reflects all claims against and all material debts and liabilities of Seller, fixed or contingent, as of the date thereof, and the related statement of income included in the Financial Statements fairly presents the results of the operations of Seller and the changes in its financial position for the period indicated, all in accordance with generally accepted accounting principles consistently applied. Seller has no outstanding material claims, liabilities, obligations or indebtedness of any nature, except as set forth in the Financial Statements, other than liabilities incurred in the ordinary course of business and of the kind and type reflected in the Financial Statements. To the knowledge of the Seller and the Stockholder, the Financial Statements contain adequate reserves for all reasonably anticipated claims relating to matters with respect to which Seller is self-insured. 7.9 Neither Seller nor the Stockholder has engaged any broker or any other person or entity who would be entitled to any brokerage commission or finder's fee in respect of the execution of this Agreement and/or the consummation of the transactions contemplated hereby. 13 7.10 Except as set forth on Schedule 7.10 attached hereto, the Assets comply with, and the Business has been conducted in all material respects in compliance with, all laws, rules and regulations (including all worker safety and all environmental laws, rules and regulations) applicable zoning and other laws, ordinances, regulations and building codes, and neither Seller nor the Stockholder has received any notice of any violation thereof which has not been remedied. 7.11 The Fixtures and Equipment are in good condition, ordinary wear and tear excepted, and constitute all of the fixtures, machinery, equipment, furniture, signs and office equipment used or intended for use by Seller in the Business. All vehicles on Schedule 3.2 are used as demonstrators in the ordinary course of Seller's Business, are operated with dealer tags and have not had certificates of title issued with respect to them. 7.12 Exept for the Seller's cash and accounts receivable and Seller's rights under its dealership agreements with the Manufacturers, the Assets, together with the Real Property and the contracts and leases set forth on Schedule 1.5 hereto, comprise all of the assets, properties and rights necessary for Buyer to operate the Business substantially in the manner operated by Seller prior to the Closing. ARTICLE VIII ------------ CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS ------------------------------------------- The obligations of Buyer to perform this Agreement at Closing are subject to the following conditions precedent which shall be fully satisfied at or before the Closing, unless waived in writing by Buyer. 8.1 All of the representations and warranties of Seller and the Stockholder herein contained shall be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date, and Buyer shall have received a certificate from a duly authorized officer of each of the Stockholder and Seller, dated the Closing Date, to such effect. 8.2 Each of the agreements or obligations required by this Agreement to be performed or complied with by Seller or the Stockholder at or before the Closing shall have been duly performed or complied with, and Buyer shall have received a certificate from a duly authorized officer of each of the Stockholder and Seller, dated the Closing Date, to such effect. 8.3 No action, suit or proceeding shall have been instituted by a governmental agency or any other third party (i) to prohibit or restrain the sale contemplated by this Agreement or otherwise challenge the power and authority of the parties to enter into this Agreement or to carry out their obligations hereunder or the legality or validity of the sale contemplated by this Agreement, or (ii) which would have a materially adverse effect on the conduct of a Lincoln-Mercury-Jaguar automobile dealership business by Buyer at the Real Property. 14 8.4 The Inventory shall have been completed to the reasonable satisfaction of Buyer. 8.5 Seller shall have furnished to Buyer (i) evidence to the reasonable satisfaction of Buyer and its counsel with respect to the corporate organization and existence of Seller and (ii) UCC-11 search reports or other evidence reasonably satisfactory to Buyer and its counsel that the Assets are free and clear of all Encumbrances. 8.6 Seller shall have furnished to Buyer a copy of the resolutions duly adopted by the Board of Directors and the Stockholder authorizing the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, certified by an authorized officer of Seller as of the Closing Date. 8.7 As of the Inventory Date, there shall not have been any fire, accident or other casualty or any labor disturbance, civil commotion, riot, act of God or the public enemy, or any change in the Business or Assets or which would have a material adverse effect on the conduct of a Lincoln- Mercury-Jaguar automobile business using the Assets at the Real Property or which would interfere with the use by Buyer of such Assets in connection with the conduct of a Lincoln-Mercury-Jaguar automobile dealership business at the Real Property. 8.8 Buyer shall have been licensed as a Motor Vehicle Dealer under applicable South Carolina motor vehicle dealer registration laws and shall have obtained all other authorizations, consents, licenses and permits from applicable governmental agencies having or asserting jurisdiction, which Buyer deems necessary or appropriate to conduct business as a Lincoln-Mercury- Jaguar dealer at the Real Property; provided, however, this Section 8.8 shall only be a condition to Buyer's obligations so long as Buyer is using its reasonable best efforts to obtain such authorizations, consents, licenses and permits. 8.9 Buyer and Seller shall have obtained all other authorizations, consents and approvals from third persons and entities as are required to assign those contracts and leases that Buyer is to assume at Closing. 8.10 Seller shall have transferred to Buyer certificates of title or origin for all New Vehicles and Demonstrators, and any used vehicles, if applicable, and all of its registration lists, owner follow-up lists and service files on hand as of the Closing Date with respect to the Business. 8.11 Seller shall have terminated in writing Seller's Sales and Service Agreements with the Manufacturers. 8.12 Seller and the Stockholder shall have executed, as appropriate, and delivered to Buyer the Bill of Sale, other documents of transfer of title contemplated hereby and any and all other documents necessary or desirable in connection with the transfer of the Assets, which documents shall warrant title to Buyer consistent with this Agreement and shall in all respects be in such form as may be reasonably required by Buyer and its counsel. 15 8.13 Each of the Manufacturers shall have approved Buyer or Buyer's affiliate as an authorized dealer at each parcel of the Real Property and O. Bruton Smith or O. Bruton Smith's designee, as the authorized Dealer Operator, and the respective Manufacturers shall have executed Dealer Agreements on terms reasonably satisfactory to Buyer. 8.14 All conditions to Buyer's obligations under the Real Property Purchase Agreement shall have been satisfied or fulfilled unless waived in writing by Buyer. ARTICLE IX ---------- CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS -------------------------------------------- The obligations of Seller and the Stockholder to perform this Agreement at Closing are subject to the following conditions precedent which shall be fully satisfied on or before the Closing, unless waived in writing by Seller: 9.1 All of the representations and warranties of Buyer herein contained shall be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date, and Seller shall have received a certificate from the President or a Vice President of Buyer, dated the Closing Date, to such effect. 9.2 Each of the agreements or obligations required by this Agreement to be performed or complied with by Buyer at or before the Closing shall have been duly performed or complied with, and Seller shall have received a certificate from the President or a Vice President of Buyer, dated the Closing Date, to such effect. 9.3 No action, suit or proceeding shall have been instituted by a governmental agency or any third party to prohibit or restrain the sale contemplated by this Agreement or otherwise challenge the power and authority of the parties to enter into this Agreement or to carry out their obligations hereunder or the legality or validity of the sale contemplated by this Agreement. 9.4 The Inventory shall have been completed to the reasonable satisfaction of Seller. 16 9.5 Buyer shall have furnished Seller and the Stockholder with (i) evidence to the reasonable satisfaction of Seller and its counsel with respect to the corporate organization and existence and (ii) a copy of the resolutions duly adopted by the Board of Directors of Buyer authorizing the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, certified by an officer of Buyer as of the Closing Date. 9.6 Buyer shall have tendered to Seller the cash portion of the Purchase Price and the Preferred Shares. 9.7 All conditions to the obligations of Fairway under the Real Property Purchase Agreement shall have been satisfied or fulfilled, unless waived in writing by Fairway. ARTICLE X COVENANTS AND AGREEMENTS 10.1 [Intentionally Left Blank] 10.2 Seller agrees that it will, at any time and from time to time, after the Closing, upon request of Buyer, do, execute, acknowledge and deliver all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may be reasonably required to convey and transfer to and vest in Buyer and protect its rights, title and interest in and enjoyment of all the Assets. 10.3 The parties hereto shall use their reasonable best efforts to obtain, and to cooperate with each other in obtaining, all authorizations, approvals, licenses, permits and other consents contemplated by Articles VIII and IX. 10.4 During the period from the date of this Agreement through the Closing Date, Seller will conduct its operation of the Business only in accordance with the Management Agreement and Seller shall not dispose of any of the assets of the Business, except as contemplated by the Management Agreement. 10.5 Seller shall afford to Buyer, its attorneys, accountants and such other representatives of Buyer as Buyer shall designate to Seller, free and full access at all reasonable times, and upon reasonable prior notice, to the Assets and the properties, books and records of Seller, and to interview personnel, suppliers and customers of Seller, in order that Buyer may have full opportunity to make such investigation as it shall reasonably desire of the Assets, the Liabilities and the Business. Seller shall allow an environmental consulting firm selected by Buyer (the "ENVIRONMENTAL AUDITOR") to have prompt access to the Real Property in order to conduct an environmental investigation, satisfactory to Buyer in scope (such scope being sufficient to result in a Phase I environmental audit report and a Phase II environmental audit report, if desired by Buyer), of, and to prepare a report with respect to, the Real Property (the "ENVIRONMENTAL AUDIT"). Seller shall provide to the Environmental Auditor: (i) reasonable access to all of its existing records 17 concerning the matters which are the subject of the Environmental Audit; and (ii) reasonable access to the employees of Seller and the last known addresses of former employees of Seller who are most familiar with the matters which are the subject of the Environmental Audit (Seller agreeing to use reasonable efforts to have such former employees respond to any reasonable requests or inquiries by the Environmental Auditor). Seller shall otherwise cooperate with the Environmental Auditor in connection with the Environmental Audit. Buyer shall bear 100% of the costs, fees and expenses in connection with the Environmental Audit. 10.6 All representations and warranties of Seller and the Stockholder shall survive the Closing Date. Seller and the Stockholder, jointly and severally, agree to indemnify and hold harmless Buyer and its stockholders, officers, directors, employees and agents, and their respective successors and assignees, from and against any and all losses, liabilities, obligations, assessments, suits, actions, proceedings, claims or demands, including costs, expenses and fees (including reasonable attorneys' fees and expert witness fees) incurred in connection therewith, suffered by any of them or asserted against any of them or the Assets, arising out of or based upon (a) the failure of any representation or warranty of Seller or the Stockholder contained herein, or in any agreement, certificate or document executed by Seller or the Stockholder in connection herewith, to be true and correct in all material respects as of the Inventory Date, (b) the breach of any covenant or agreement of Seller or the Stockholder contained in this Agreement, (c) any liability or obligation of Seller or the Stockholder not expressly assumed by Buyer pursuant to this Agreement, or (d) any arrangements or agreements made or alleged to have been made by Seller or the Stockholder with any broker, finder or other agent in connection with the transactions contemplated hereby. Notwithstanding the foregoing, the total indemnification obligations of the Seller and the Stockholder hereunder shall not exceed the Purchase Price. 10.7 All representations and warranties of Buyer shall survive the Closing Date. Buyer agrees to indemnify and hold harmless Seller and its stockholder, officers, directors, employees and agents, and their respective successors and assignees, from and against any and all losses, liabilities, obligations, assessments, suits, actions, proceedings, claims or demands, including costs, expenses and fees (including reasonable attorneys' fees and expert witness fees) incurred in connection therewith, suffered by any of them, or asserted against any of them, arising out of or based upon (a) the failure of any representation or warranty of Buyer contained herein, or in any agreement, certificate or document executed by Buyer in connection herewith, to be true and correct in all material respects as of the Closing Date, (b) the breach of any covenant or agreement of Buyer contained in this Agreement, or (c) the Liabilities. 10.8 Personal property, use and intangible taxes and assessments with respect to the Assets shall be prorated on a per diem basis and apportioned between Seller and Buyer as of the date of the Closing. Seller shall be liable for that portion of such taxes and assessments relating to, or arising in respect of, periods on or prior to the Inventory Date, and Buyer shall be liable for that portion of such taxes and assessments relating to, or arising in respect of, any period after the Inventory Date. Any taxes attributable to the sale or transfer of the Assets to Buyer hereunder shall be paid by Seller. 18 10.9 Except as may be required by law or the rules of the New York Stock Exchange or as necessary in connection with the transactions contemplated hereby, no party hereto shall (i) make any press release or other public announcement relating to this Agreement or the transactions contemplated hereby, without the prior approval of the other parties hereto or (ii) otherwise disclose the existence and nature of negotiations regarding the transactions contemplated hereby to any person or entity other than such party's accountants, attorneys, agents and representatives, all of whom shall be subject to this nondisclosure obligation as agents of such party. The parties shall cooperate with each other in the preparation and dissemination of any public announcements of the transactions contemplated by this Agreement. 10.10 Neither Seller nor the Stockholder shall pursue, initiate, encourage or engage in, any negotiations or discussions with, or provide any information to, any person or entity (other than Buyer and its representatives and affiliates) regarding the sale or possible sale to any such person or entity of any of the Assets or capital stock of Seller or any merger or consolidation or similar transaction involving Seller. 10.11 Buyer shall promptly apply for, or cause an affiliate of Buyer to apply for, the issuance of franchises to operate a Lincoln-Mercury-Jaguar dealership upon the Real Property. Effective as of the Closing, Seller shall terminate its Dealer Sales and Service Agreements with the Manufacturers. Seller shall fully cooperate with Buyer, and take all reasonable steps to assist Buyer, in Buyer's efforts to obtain its own similar Dealer Sales and Service Agreements with the Manufacturers. The parties acknowledge that Buyer's Dealer Agreements are subject to the approval of the Manufacturers and that Buyer would be unable to obtain its own, similar Dealer Sales and Service Agreement absent Seller's termination of its agreement. 10.12 Prior to Closing, Seller shall furnish to Buyer a list of all employees and their rates of pay, including, separately, base pay and any incentive or commission plans. Buyer shall have the right, but not the obligation, to employ any or all of Seller's employees. If permitted by law and applicable regulations, Seller shall, in consideration for the sale of substantially all of Seller's assets in bulk, assign and transfer to Buyer, without additional charge therefor, the amount of reserve in Seller's State Unemployment Compensation Fund with respect to the Business and the corresponding experience rate. 10.13 Termination. (a) Notwithstanding any other provision herein contained to the contrary, this Agreement may be terminated at any time prior to the Closing Date: (i) by the written mutual consent of the parties hereto; 19 (ii) [Intentionally Left Blank] (iii) by Buyer in the event of any breach by Seller or the Stockholder of any of their respective material covenants, representations or warranties contained herein; (iv) by Seller in the event of any breach by Buyer of any of Buyer's material covenants, representations or warranties contained herein; or (v) at any time after the Closing Date Deadline, by written notice by Buyer or (subject to Buyer's option to elect to extend the Closing Date Deadline in accordance with Section 1.3) Seller to the other parties hereto if the Closing shall not have occurred on or before the Closing Date Deadline; provided, however, no party may terminate this Agreement pursuant to clauses (iii), (iv) or (v) above if such party is in breach of any of its material covenants, representations or warranties contained herein. (b) In the event of termination pursuant to Section 10.13(a), this Agreement shall be of no further force or effect; PROVIDED, HOWEVER, that, except as set forth in Section 10.13(c), any termination pursuant to Section 10.13 shall not relieve any party hereto of any liability for breach of any representation and warranty, covenant or agreement hereunder occurring prior to such termination. (c) If, as of the Closing Date Deadline (as the same may have been extended by Buyer in accordance with the provisions of Section 1.3 hereof), all conditions to Buyer's obligations to close set forth in Article VIII hereof shall have been satisfied or fulfilled, and Buyer shall have failed to perform its material obligations at the Closing by the Closing Date Deadline (as the same may have been so extended), then Buyer shall, within ten (10) days after receipt of a written demand from Seller, pay to Seller, in immediately available funds, as liquidated damages for the loss of the transaction, a termination fee of Fifty Thousand Dollars ($50,000) (the "BUYER'S TERMINATION FEE"). Provided that Buyer shall have paid the Buyer's Termination Fee upon such demand by Seller, payment of the Buyer's Termination Fee shall be the sole and exclusive remedy of Seller and the Stockholder for any such failure of Buyer to perform its material obligations at the Closing, regardless of whether Seller terminates or does not terminate this Agreement, and Seller and the Stockholder shall have no right to any other damages or other relief of any kind or nature, whether at law or in equity (including without limitation, specific performance by Buyer), for any breach or alleged breach by Buyer of this Agreement. Notwithstanding the foregoing, Seller may elect not to demand payment of the Buyer's Termination Fee, in which case Seller shall be free to pursue any other remedies it may have, at law or in equity, including specific performance. 20 ARTICLE XI MISCELLANEOUS 11.1 Except as provided in this Section, this Agreement shall not be assignable by any party hereto without the prior written consent of the other parties. Buyer may assign this Agreement, without the consent of the other parties hereto, to a corporation, partnership or limited liability company controlled by Buyer, including a corporation, partnership or limited liability company to be formed at any time prior to the Closing Date, and to any person or entity who shall acquire all or substantially all of the assets of Buyer or of such corporation, partnership or limited liabilities company controlled by Buyer; provided said assignment shall be in writing and the assignee shall assume all obligations of Buyer hereunder, whereupon the assignee shall be substituted in lieu of Buyer named herein for all purposes, provided, however, that Buyer originally named herein shall continue to be liable with respect to its obligations hereunder. Buyer may assign this Agreement, without the consent of the other parties hereto, as collateral security, and the other parties hereto agree to execute and deliver any acknowledgment of such assignment by Buyer as may be required by any lender to Buyer. 11.2 The interpretation and construction of this Agreement, and all matters relating hereto, shall be governed by the laws of the State of South Carolina. 11.3 All accounting matters required or contemplated by this Agreement shall be in accordance with generally accepted accounting principles. 11.4 Except as otherwise specifically provided in this Agreement, each of the parties hereto shall be responsible for the payment of such party's fees, costs and expenses incurred in connection with the negotiation and consummation of the transactions contemplated hereby. 11.5 This Agreement, including the schedules and other documents referred to herein which form a part hereof, contains the entire understanding of the parties hereto with respect to the subject matter contained herein and therein. This Agreement may not be amended except by a writing executed by all of the parties hereto. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 11.6 Any party to this Agreement may, by written notice to the other parties hereto, waive any provision of this Agreement from which such party is entitled to receive a benefit. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of such provision or any other provision of this Agreement. 11.7 All notices, claims, certificates, requests, demands and other communications hereunder shall be given in writing and shall be delivered personally or sent by facsimile or by a nationally recognized overnight courier, postage prepaid, and shall be deemed to have been duly given when so delivered personally or by confirmed facsimile or one (1) business day after the date 21 of deposit with such nationally recognized overnight courier. All such notices, claims, certificates, requests, demands and other communications shall be addressed to the respective parties at the addresses set forth below or to such other address as the person to whom notice is to be given may have furnished to the others in writing in accordance herewith. If to Buyer, to: Sonic Automotive, Inc. 5401 E. Independence Boulevard Charlotte, North Carolina 28212 Telecopy No.: (704) 563-5116 Attention: Chief Financial Officer With a copy to: Parker, Poe, Adams & Bernstein L.L.P. 2500 Charlotte Plaza Charlotte, North Carolina 28244 Telecopy No.: (704) 334-4706 Attention: Edward W. Wellman, Jr. If to Seller or the Stockholder, to: Fairway Ford, Inc. 2323 Laurens Road Greenville, South Carolina 29607 Attention: A. Foster McKissick, III Telecopy No.: (864) 242-3222 With a copy to: Leatherwood Walker Todd & Mann, P.C. 100 East Coffee Street Greenville, South Carolina 29602-0087 Telecopy No.: (864) 240-2478 Attention: Harvey G. Sanders, Jr. 11.8 This Agreement may be executed in any number of counterparts. Each such counterpart hereof shall be deemed to be an original instrument, and all such counterparts together shall constitute but one agreement. 22 11.9 Whenever any representation or warranty of Seller or the Stockholder contained herein or in any other document executed and delivered in connection herewith is based upon the knowledge of Seller or the Stockholder, (i) such knowledge shall be deemed to include (A) the best actual knowledge, information and belief of Seller and the Stockholder and (B) any information which the Stockholder would reasonably be expected to be aware of in the prudent discharge of its duties in the ordinary course of business (including consultation with legal counsel) on behalf of Seller, and (ii) the knowledge of the Stockholder shall be deemed to be the knowledge of Seller. 23 IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written. FAIRWAY MANAGEMENT COMPANY By: /s/ A. Foster McKissick, III --------------------------------- Its: President --------------------------------- ATTEST: /s/ Murray McKissick - ----------------------------- Asst. Secretary [CORPORATE SEAL] FAIRWAY FORD, INC. By: /s/ A. Foster McKissick, III --------------------------------- Its: President --------------------------------- ATTEST: /s/ Murray McKissick - ----------------------------- Asst. Secretary [CORPORATE SEAL] SONIC AUTOMOTIVE, INC. By: /s/ O. Bruton Smith --------------------------------- Its: Chief Executive Officer --------------------------------- ATTEST: /s/ Theodore M. Wright - ----------------------------- Secretary [CORPORATE SEAL] 24 INDEX OF SCHEDULES AND EXHIBITS TO ASSET PURCHASE AGREEMENT Schedules Schedule 1.5 Contracts and Leases Schedule 2.4 Retained Liabilities Schedule 3.1 New Vehicles Schedule 3.2 Demonstrators Schedule 5.4 Fixtures and Equipment Schedule 6.2 Compliance re: Buyer Schedule 7.1 Shareholders Schedule 7.2 Compliance re: Seller and Stockholders Schedule 7.3 Pending or Threatened Actions, Suits or Proceedings Schedule 7.4 Encumbrances on the Assets Schedule 7.5 Permits and Approvals Schedule 7.8 Financial Statements Schedule 7.10 Compliance with Laws Exhibits A Statement of Rights and Preferences 25 EX-99 10 EXHIBIT 99.12 Exhibit 99.12 CONTRACT TO PURCHASE AND SELL REAL PROPERTY (Heritage Lincoln-Mercury-Jaguar) THIS CONTRACT TO PURCHASE AND SELL REAL PROPERTY (the "Purchase Contract") is made and entered into as of the 10th day of April, 1998, by and between FAIRWAY FORD, INC., a South Carolina Corporation ("Seller") and SONIC AUTOMOTIVE, INC., a Delaware ("Buyer"). W I T N E S S E T H: WHEREAS, Seller is the owner of certain real estate located at 2424 Laurens Road, in the City of Greenville, Greenville County, South Carolina, more particularly described and/or shown on Exhibit A attached (the "Land"). WHEREAS, Seller desires to sell to Buyer and Buyer desires to acquire from Seller the Real Property (defined below) together with the buildings and improvements (collectively, the "Improvements") thereon and which are presently utilized in the automobile dealership operations of Fairway Management Company, d/b/a Heritage Lincoln-Mercury-Jaguar in accordance with the terms and conditions hereinafter set forth in this Purchase Contract. NOW, THEREFORE, in consideration of the agreements and mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller do hereby covenant and agree as follows: 1. Definitions. In addition to the terms defined above, each of the following terms, when used herein with an initial capital letter, shall have the meaning ascribed to it as follows, unless such meanings are expressly modified, limited or expanded elsewhere in this Purchase Contract. 1. "Appraised Value" shall mean the value obtained by agreement of two (2) appraisers, one appointed by Seller, and one appointed by Buyer. Both appraisers shall have at least five (5) years experience valuing commercial real estate situated in Greenville, South Carolina. If the two (2) appraisers cannot agree on an Appraised Value within thirty (30) days after they have both been selected, the average of the two appraisals shall be the Appraised Value if the value established by the respective appraisals do not vary by more than ten percent (10%). If the value differs by more than ten percent (10%), the two appraisers shall appoint a third appraiser. The third appraiser shall determine the value of the Real Property within fifteen (15) days of his appointment. The Appraised Value for purposes of this Purchase Contract shall be the value as finally agreed upon by any two of the three appraisers. If two of the three appraisers do not agree within fifteen (15) days, the appraisers shall be dismissed and the appraisal process repeated. Seller and Buyer shall each pay the costs of the appraiser appointed by them, and one-half (1/2) of the cost of the third appraiser. If any party fails to appoint an appraiser within the time required herein, the Purchase Price determined by the appraiser appointed by the other party shall be conclusive and binding upon the parties. 2. "Asset Purchase Contract" shall mean that certain Asset Purchase Agreement dated the date hereof by and between Fairway Management Company and Buyer. 3. "Closing" shall mean the closing and consummation of the purchase and sale of the Real Property pursuant to this Purchase Contract. d. "Closing Date" shall mean the date of the Closing to be held on (i) the date of the closing under the Asset Purchase Contract; or (ii) such other date as mutually agreed upon by the parties hereto. e. "Deed" shall mean the duly executed and acknowledged general warranty deed conveying title to the Real Property from Seller to Buyer, the form of which is attached hereto as Exhibit C an original of which conveys the Real Property to be recorded in Greenville County, South Carolina. f. "Defect" or "Defects" shall mean a lien, claim, charge, security interest, encumbrance, easement, restriction or other such matter affecting title to the Real Property other than the Permitted Exceptions. g. "Effective Date" shall mean the later of: (i) the date in the heading of this Purchase Contract; and (ii) the date which the last of the parties to this Purchase Contract executes and delivers this Purchase Contract to the other party. h. "Environmental Review Period" shall mean a period of fifteen (15) business days after receipt of both a Phase I Environmental Evaluation and/or a Phase II Environmental Evaluation, as applicable. i. "Environmental Laws" shall mean any applicable current or future federal, state or local governmental law, regulation or ruling applicable to environmental conditions on, under or about the Real Property, including, without limitation, federal, state or local solid waste disposal rules, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, The Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, as amended, the Toxic Substances Act, as amended, the Water Pollution Control Act, as amended, or any other applicable federal, state or local laws, regulations or ordinances. j. "Evaluations" shall mean a Phase I Environmental Evaluation and a Phase II Environmental Evaluation of the Real Property prepared at Buyer's expense by environmental consultant(s) selected by Buyer. 2 k. "Hazardous Materials" means any waste, pollutant, chemical, hazardous substance, toxic substance, hazardous waste, solid waste, petroleum or petroleum-derived substance or waste, or any constituent or decomposition product of any such pollutant, material, substance or waste, regulated under or as defined by any Environmental Law(s). l. "Improvements" shall mean all buildings and improvements constructed upon the Land together with any fixtures or improvements related thereto. m. "Inspection Period" shall mean and refer to the period commencing on later of (i) the day following the Effective Date or (ii) the day following delivery of the materials referred to in Section 7.a. below, and continuing for fifteen (15) days thereafter. n. "Land" shall mean that certain parcel or tract of land owned by Seller located in or near the City of Greenville, South Carolina, as more particularly described on Exhibit A attached hereto and incorporated herein by reference, together with all and singular the rights and appurtenances pertaining thereto, including any right, title and interest of Seller in and to adjacent streets, easements or rights-of-way. o. "Owner's Title Policy" shall mean a standard ALTA form owner's policy of title insurance for the Real Property issued at standard rates as compared to comparable Real Property in Greenville County, South Carolina. p. "Permitted Exceptions" shall mean all matters described on Exhibit B attached hereto and incorporated herein by reference. q. "Purchase Price" shall mean the Appraised Value of the Real Property. r. "Real Property" shall mean the Land (including the Century Property and the Fairway Property) and the Improvements thereon. s. "Survey" shall mean a current boundary, topographical and/or physical survey of the Real Property prepared by a South Carolina Registered Land Surveyor. t. "Title Commitment" shall mean a current title binder or commitment issued by the Title Company for an owner. u. "Title Company" shall mean the title insurer of Buyer's choice. 2. Agreement to Sell and Purchase. Seller hereby agrees to sell and convey to Buyer, and Buyer hereby agrees to purchase from Seller, the Real Property pursuant to the terms and conditions of this Purchase Contract. 3 3. Purchase Price; Delivery of Possession. a. The Purchase Price shall be paid to Seller in immediately available funds at Closing, subject to the terms and conditions of this Purchase Contract. b. Seller shall deliver sole possession of the Real Property to Buyer at Closing. 4. Conveyance of Title. At Closing, Seller shall by the Deed convey to Buyer marketable fee simple title to all of the Real Property, free and clear of any and all liens, encumbrances, easements, assessments, restrictions, taxes and other conditions except for the Permitted Exceptions. 5. Survey. Buyer, at Buyer's sole cost and expense, prior to Closing may, at its election, obtain the Survey from which a legal description of the Real Property will be prepared and inserted in the Deed. Buyer, its employees and agents may, at any reasonable time prior to Closing, enter upon the Real Property for the purpose of obtaining the Survey. 6. Title and Title Insurance for the Real Property. a. Prior to the Closing Date, Buyer shall, at its sole cost and expense, obtain an owner's Title Commitment issued by the Title Company providing for the issuance at Closing to Buyer of an Owner's Title Policy for the Real Property. The Title Commitment shall set forth the state of title of the Real Property and all exceptions, including but not limited to, easements, restrictions, road rights-of-way, floodways, covenants, reservations and other conditions, if any, affecting the Real Property which would appear in an Owner's Title Policy if issued. b. At Closing, the Real Property shall be conveyed to Buyer by the Deed free and clear of all Defects and subject only to the Permitted Exceptions. 7. Inspections. a. On or prior to the Effective Date or within three (3) days thereafter, Seller shall provide to Buyer true, correct and complete copies of the following items: i. Seller's existing owner's and lender's title insurance policies for the Real Property (if any) together with legible copies of any exceptions set forth therein. ii. The most recently dated existing survey of the Real Property. iii. Any and all engineering reports, soil reports and environmental reports prepared by or for Seller with respect to the Real Property, if any. iv. All warranties, if any, related to the Improvements. 4 v. Attorneys' opinions, if any, on title to the Real Property and legible copies of deeds, mortgages, easements or restrictions, if any, affecting Property which Seller may possess. b. Buyer, its agents and contractors shall be entitled to go upon the Real Property during the Inspection Period to obtain financing, to inspect the Real Property to perform investigations, to determine the status of utilities thereon, to conduct title examinations, zoning investigations, feasibility studies and other studies or tests necessary to determine whether the Real Property is suitable for Buyer's intended use of the Real Property. If Buyer determines, in Buyer's reasonable discretion, that the Real Property is not suitable for Buyer's intended use, Buyer may terminate this Contract and shall be relieved of all obligations + hereunder by giving written notice to Seller prior to the end of the Inspection Period. However, Buyer does not waive its right to terminate this Contract, as set forth above, based on any restriction which may adversely affect the Real Property that has been revealed through documentation and/or other due diligence material in Buyer's possession prior to the execution of this Contract. c. Buyer may, at its sole expense, commission the Evaluations. The Evaluations shall be conducted in accordance with such standards and procedures as selected by Buyer and Buyer's consultant, and may include, without limitation, drilling and installation of ground water testing wells at locations specified by Buyer's consultant, soil samples at locations designated to detect environmental conditions and/or impacts from current or past operations, both ground water and soil analysis and investigation as to the presence of any asbestos materials on the Real Property. If, based upon the Evaluations, Buyer determines, in Buyer's reasonable discretion, that the Real Property is not free of Hazardous Materials, and that such Hazardous Materials materially adversely affect Buyer's intended use of the Real Property for the operation of an automobile dealership, or the value of the Real Property, then Buyer may terminate this Purchase Contract by notice in writing given to Seller prior to the expiration of the Environmental Review Period and the parties shall have no further rights or obligations under this Purchase Contract. If the Buyer chooses to terminate this Purchase Contract as a result of its review of the Evaluations, Buyer shall provide to Seller copies of all environmental reports relating to the Real Property which may be obtained by Buyer, and shall repair any damage to the Real Property resulting from the Evaluations. d. In addition to Buyer's rights set forth in Paragraph 7(c) above, in the event that any underground storage tanks or any other storage tanks are or have been located upon any portion of the Real Property, Seller, at its sole expense, shall: i. Remove any such tanks which remain on the Real Property; ii. Remediate any current or former tank sites and any surrounding portion of the Real Property and any adjacent property to the reasonable satisfaction of Buyer and Buyer's consultant. Notwithstanding the termination of the Inspection Period or the Environmental Review Period, if Buyer reasonably determines that Seller has failed to meet its obligations described in this Paragraph 7(d), then Buyer may either: iii. Terminate this Purchase Contract; or 5 iv. Remediate any such tank site(s) to the reasonable satisfaction of Buyer and Buyer's consultant and deduct the cost of any such remediation from the Purchase Price. In the event such remediation shall extend beyond the Closing Date set forth herein, Buyer shall have the option of extending the Closing Date to such time as may be necessary to complete any such remediation. 8. Costs and Prorations. Seller shall pay the cost to cancel any mortgage or other lien of record. Buyer shall pay any and all documentary stamp taxes, deed taxes or transfer taxes applicable to this transaction and any and all costs of the Survey, the title examination, the title insurance premiums, testing or inspections of the Real Property and recording costs for the Deed or any other documents to be recorded relating to the transfer of the Real Property. Each party shall pay its own attorney's fees. Seller shall pay any "roll-back" taxes or similar taxes based upon any change in use of the Real Property, whether such taxes are assessed before or after Closing. Seller's obligation to pay such taxes, if any, shall survive Closing. All prorations for real estate taxes, utilities and other such costs shall be prorated between Buyer and Seller as of the Closing Date on the basis of a 365-day year. Buyer and Seller hereby agree that if any of the aforesaid prorations cannot be calculated accurately on the proration date (or as soon as information sufficient to complete such prorations is available), then the same shall be calculated within thirty (30) days after the information necessary to make such prorations becomes available and either party owing the other party a sum of money based on such subsequent proration(s) shall promptly pay said sum to the other party. 9. Risk of Loss; Eminent Domain. a. If, after the Effective Date and prior to the Closing Date, the Real Property or any portion thereof is damaged or destroyed, Seller shall immediately notify Buyer in writing and Buyer shall elect, within ten (10) days from and after such notice, by written notice to Seller, either: i. to not close the transaction contemplated hereby, in which event the Purchase Contract shall be void and of no further force and effect; provided, however, Buyer shall not be entitled to elect under this item i. unless Buyer determines, in its reasonable judgment, that such damage or destruction cannot be restored within ninety (90) days; or ii. to close the transaction contemplated hereby in accordance with the terms and conditions contained herein, in which event the Purchase Price shall remain the same and Seller shall transfer and assign to Buyer at Closing all rights, title and interest to any insurance proceeds payable in connection with such damage or destruction. If Buyer elects to purchase the Real Property after receipt of such notice from Seller, all actions taken by Seller with regard to the repair or replacement of any such damaged or destroyed portion of the Real Property, including but not limited to, negotiations, litigation, settlement, appraisals and appeals, shall be subject to the approval of Buyer, 6 which approval shall not be unreasonably withheld. In no event shall Buyer have any responsibility to repair or rebuild the Improvements. b. If, after the Effective Date and prior to the Closing Date, Seller shall receive notice of the commencement or threatened commencement of eminent domain or other like proceedings against the Real Property or any portion thereof, Seller shall immediately notify Buyer in writing, and Buyer shall elect, within ten (10) days from and after such notice of such threatened or pending proceedings, by written notice to Seller, either: i. to not close the transaction contemplated hereby, in which event this Purchase Contract shall be void and of no further force and effect; provided, however, Buyer shall not be entitled to elect under this item i. unless more than 5% of the Real Property is taken and such taking materially interferes with the operation of an automobile dealership business substantially as operated before such taking; or ii. to close the transaction contemplated hereby in accordance with the terms and conditions contained herein, but subject to such proceedings, in which event the Purchase Price shall remain the same and Seller shall transfer and assign to Buyer at Closing all rights, title and interests to the proceeds of such eminent domain proceedings. If Buyer elects to purchase the Real Property after receipt of such notice, all actions taken by Seller with regard to such eminent domain or like proceedings, including but not limited to, negotiations, litigation, settlement, appraisals and appeals, shall be subject to the approval of Buyer, which approval shall not be unreasonably withheld. In no event shall Buyer have any responsibility to repair or rebuild the Improvements. 10. Notice. Each notice required or permitted to be given hereunder shall be in writing and shall comply with the requirements of this paragraph. Any notice by Buyer to Seller shall be deemed to be duly given if: (a) either (i) hand delivered to the person(s) listed below for Seller, or (ii) delivered or sent by telephone facsimile transmittal to the facsimile telephone numbers of Seller listed below, in which event proof of delivery shall be by telephone records, and (b) a duplicate of such notice shall be sent by registered or certified mail to Seller at the address set forth below (or at such other address as may hereafter be designated by Seller). Any notice by Seller to Buyer shall be deemed to be duly given if: (a) either (i) hand delivered to the person(s) listed below for Buyer, or (ii) delivered or sent by telephone facsimile transmittal to the facsimile telephone number of Buyer listed below, in which event proof of delivery shall be by telephone records, and (b) a duplicate of such notice shall be sent by registered or certified mail to Buyer at the address set forth below (or at such other address as may hereafter be designated by Buyer). Notice shall be deemed effective at the time of hand delivery or transmission of the telephone facsimile and upon deposit of the notice in the United States Mail for registered or certified delivery. The parties hereto reserve the right to change the addresses or telephone numbers to which notices are to be sent by giving notice to the other as herein provided. 7 The addresses and facsimile telephone numbers of the parties to which notices are to be sent shall be those set forth below: As to Buyer: Sonic Automotive, Inc. 5401 E. Independence Boulevard Charlotte, North Carolina 28212 Attention: Chief Financial Officer Telecopy No.: (704) 536-5116 With a Copy to: Edward W. Wellman, Jr., Esq. Parker, Poe, Adams & Bernstein L.L.P. 2500 Charlotte Plaza Charlotte, North Carolina 28244 Telecopy No.: (704) 334-4706 As to Seller: Fairway Ford, Inc. 2424 Laurens Road Greenville, SC 29607 Attention: A. Foster McKissick, III Telecopy No.: (864) 242-3222 With a Copy to: Harvey G. Sanders, Jr., Esq. Leatherwood Walker Todd & Mann, P.C. 100 East Coffee Street Greenville, SC 29602-0087 Telecopy No.: 864-240-2478 Any party shall have the right from time to time to change the address to which notices to it shall be sent by giving to the other party or parties at least five (5) days prior notice of the changed address. 11. Closing. Unless Buyer or Seller have otherwise elected hereunder to terminate this Purchase Contract, and subject to the satisfaction or written waiver of each of the conditions precedent to Closing set forth in Paragraph 12 hereof, the Closing of the sale and purchase of the Real Property shall be held at a mutually agreeable time on the Closing Date, at the offices of Leatherwood Walker Todd & Mann, P.C. at 9:00 a.m. 8 12. Conditions Precedent to Closing. a. Buyer's Conditions. Buyer's obligation to close the purchase of the Real Property is subject to the satisfactory performance, occurrence or written waiver by Buyer, in Buyer's sole discretion, of each of the following conditions: i. Seller shall have delivered to Buyer all of the documents, properly executed, as required by Paragraph 13(a) hereof; ii. No adverse change in the status of the title to the Real Property as set forth in the Title Commitment shall have occurred prior to the Closing Date; iii. No default by Seller shall exist under this Purchase Contract, this Purchase Contract shall not have terminated and Seller shall be ready, willing and able to close under the terms hereof; iv. The representations of Seller contained in this Purchase Contract shall be true, complete and correct in all material respects as of the Closing Date, without the necessity of any material amendment or modification, with the same force and effect as if made as of the Closing Date; v. The Inspection Period and Evaluation Review Period shall have expired; vi. Seller's obligations pursuant to Paragraph 7(d) shall have been met; vii. Buyer's confirmation, by a Phase I environmental inspection performed at Buyer's expense, and by a Phase II inspection if Buyer deems such inspection necessary, that the properties are free of environmentally hazardous or toxic substances that would materially adversely affect Buyer's use and possession of the respective properties for the operation of an automobile dealership, or the value of the Real Property; viii. Buyer's confirmation that as of the Closing Date there will be no contracts, leases or liabilities which will affect Buyer's ownership of the Real Property or right to use and possession thereof; ix. Buyer's confirmation that the Real Property is properly zoned for use as an automobile dealership; x. Buyer's confirmation that the Real Property is free and clear of mortgages, security agreements or other encumbrances; other than any Permitted Exception shown on Exhibit B; xi. Receipt by Buyer of all required waivers or approvals to Buyer's acquisition of the Real Property and approval by the Lincoln-Mercury Division of Ford 9 Motor Company and Jaguar Cars for Buyer's operation of a franchised Lincoln-Mercury and Jaguar dealership on the Real Property; xii. All required consents and approvals of the shareholders and directors of Seller shall have been obtained and provided to Buyer; and xiii. All conditions to Buyer's obligations at closing under the Asset Purchase Contract shall have been fully satisfied, unless waived in writing by Buyer. If any of the foregoing conditions have not been satisfied or waived within the times and in the manner required by this Purchase Contract, Buyer may terminate this Purchase Contract and seek any remedies available at law or equity, including without limitation, specific performance. b. Seller's Conditions. Seller's obligation to close the sale of the Real Property is subject to the satisfactory performance, occurrence or written waiver by Seller, in Seller's sole discretion, of each of the following conditions: i. Buyer shall pay the Purchase Price to Seller and shall have delivered to Seller all of the documents, properly executed, as required by Paragraph 13(b) hereof; ii. No default by Buyer shall exist under this Purchase Contract, this Purchase Contract shall not have been terminated, and Buyer shall be ready, willing and able to close under the terms hereof; iii. The representations of Buyer contained in this Purchase Contract shall be true, complete and correct in all material respects as of the Closing Date, without the necessity of any material amendment or modification, with the same force and effect as if made as of the Closing Date; and iv. All conditions to Fairway Management Company's obligations at closing under the Asset Purchase Contract shall have been fully satisfied unless waived in writing by Fairway Management Company. If any of the foregoing conditions have not been satisfied or waived within the times and in the manner required by this Purchase Contract, Seller may terminate this Purchase Contract and seek any remedies which are available at law or equity, including, without limitation, specific performance; provided, however, in the event of payment by Buyer of the "Buyer's Termination Fee" under the Asset Purchase Contract, Seller shall have no right to any other damages or relief of any kind or nature, whether at law or in equity (including, without limitation, specific performance). 10 13. Documents at Closing. a. Seller's Documents. Seller shall execute and/or deliver the following to Buyer at Closing: i. The Deed, duly executed by Seller and acknowledged. ii. A lien affidavit, duly executed by Seller, acceptable to the Title Company. iii. Affidavits and other documents, duly executed by Seller, to satisfy federal, state and local tax reporting and withholding requirements. iv. An affidavit, duly executed by Seller that Seller is not a "foreign person" within the meaning of Section 1445 of the Internal Revenue Code. v. A certificate, duly executed by Seller and notarized, that the representations of Seller contained in this Purchase Contract remain true, complete and correct in all material respects as of the Closing Date. vi. A settlement statement setting forth the amounts paid by or on behalf of and/or credited to each of Buyer and Seller pursuant to this Purchase Contract. vii. Such other customary documents and assurances as shall be reasonably required by Buyer's counsel. b. Buyer's Documents. Buyer shall pay the Purchase Price to Seller at Closing and the Buyer shall execute and/or deliver the following to Seller at Closing: i. A certificate, duly executed by Buyer and notarized, that the representations of Buyer contained in this Purchase Contract remain true, complete and correct in all material respects as of the Closing Date. ii. A settlement statement setting forth the amounts paid by or on behalf of and/or credited to each of Buyer and Seller pursuant to this Purchase Contract. iii. Such other customary documents and assurances as shall be reasonably required by Seller's counsel. 14. Representations and Warranties. a. Representations and Warranties by Seller. Seller hereby represents and warrants to Buyer that as of the Effective Date: i. Seller has no notice of any pending or threatened condemnation or similar proceeding or assessment affecting the Real Property, or any part thereof, nor to the best of its knowledge, is any such proceeding or assessment 11 contemplated by any governmental authority, nor to the best of its knowledge, is there any litigation pending or threatened which affects or could affect the Real Property. ii. Except as set forth on Schedule 14(a)(ii) attached hereto, (a) except in the ordinary course of business and in compliance with applicable law, Seller has not at any time generated, used, treated or stored Hazardous Materials on, or transported Hazardous Material to or from the Real Property or any property adjoining or adjacent to the Real Property and, to the knowledge of Seller, no party other than Seller has taken such actions on the Real Property, (b) Seller has not at any time released or disposed of Hazardous Materials on the Real Property or any property adjoining or adjacent to the Real Property, and to the knowledge of the Seller, no party other than Seller has taken any such actions on the Real Property, (c) Seller has not transported or arranged for the transportation of any Hazardous Materials to any site other than the Real Property, (d) Seller is in compliance with all Environmental Laws and the requirements of any permits issued under such Environmental Laws with respect to the Real Property, except where failure to comply would not have a material adverse effect on Seller's Real Property, (e) there are no past, pending or, to the knowledge of Seller, threatened environmental claims against Seller or the Real Property, (f) to the knowledge of Seller, there are no facts or circumstances, conditions or occurrences regarding the Real Property that could reasonably be anticipated (A) to form the basis of an environmental claim against Seller or (B) to cause the Real Property to be subject to any restrictions on its ownership, occupancy, use or transferability under any Environmental Law, and (g) there are not now, and to the knowledge of Seller, never have been any underground storage tanks located on the Real Property. iii. To the best of Seller's knowledge, Seller has complied in all material respects with all applicable laws, ordinances, regulations and statutes relating to the Real Property or any part thereof and is not in violation of any such laws as they relate to the Real Property. iv. This Purchase Contract and all documents executed by Seller which are to be delivered to Buyer at Closing are or at the time of delivery will be duly executed and delivered by Seller, and are or at the time of Closing, will be legal, valid, binding obligations of Seller, and do not and at Closing will not violate any provisions of any agreement or any applicable governmental law or regulation to which the Seller is a party or to which Seller is subject. v. There are no restrictions or applicable regulations which prevent the use of the Real Property for automobile dealership and servicing purposes. vi. The restrictive covenants encumbering the Real Property (if any) have not been violated and there are no assessments owed pursuant to such restrictions. 12 vii. Other than ad valorem real property taxes, there are no other taxes or assessments pending or periodically charged to Seller with respect to the Real Property. b. Representations and Warranties by Buyer. Buyer hereby represents and warrants to Seller that as of the Effective Date: i. Buyer is a duly organized and validly existing corporation under the laws of the State of Delaware and is authorized to acquire property in the State of South Carolina, and Buyer has the power and authority to enter into this Purchase Contract. ii. This Purchase Contract and all documents executed by Buyer which are to be delivered to Seller at Closing are or at the time of delivery will be duly authorized, executed and delivered by Buyer, and are or at the time of Closing, will be legal, valid, binding obligations of Buyer, and do not and at Closing will not violate any provisions of any agreement or any applicable governmental law or regulation to which Buyer is a party or to which it is subject. c. Indemnities. i. Buyer and Seller hereby agree that they have relied upon the representations and warranties given by the respective parties in Paragraph 14(a) and 14(b) of this Purchase Agreement. Buyer hereby agrees to indemnify and hold Seller harmless from and against any and all liabilities, losses, costs, damages, expenses, including reasonable attorneys' fees and costs of litigation, arising or resulting from the untruth of any of Buyer's representations and warranties set forth in Paragraph 14(b). Seller hereby indemnifies and holds Buyer harmless from and against any and all liabilities, losses, costs, damages and expenses, including reasonable attorneys' fees and costs of litigation, arising or resulting from the untruth of any of Seller's representations and warranties set forth in Paragraph 14(a). ii. To the extent caused by or resulting from the acts of Seller, its agents, servants, employees or contractors, Seller agrees to immediately clean up any Hazardous Materials found on or within any portion of the Real Property and to remediate the Real Property, to comply with any and all Environmental Laws, and to pay for all clean up and remediation costs at no cost to Buyer. To the extent caused by or resulting from the acts of Buyer, its agents, servants, employees, or contractors, Buyer agrees to immediately clean up any Hazardous Materials found on or within any portion of the Real Property and, with respect to such matters as described herein for which Buyer is responsible, to remediate the Real Property, to comply with any Environmental Laws, and to pay for all clean-up and remediation costs at 13 no cost to Seller. Each parties' respective clean-up and/or remediation efforts as described herein shall mean and refer to those actions which are necessary and required under the Environmental Laws. iii. To the extent that Seller is responsible for the same in accordance with Subparagraph (ii) above, Seller hereby agrees to indemnify, release and hold Buyer, its successors, assigns, tenants, subtenants, officers, directors, shareholders and employees, harmless from and against all Liabilities (defined below) incurred in connection therewith, suffered by, incurred by or assessed against such parties, their agents or other representatives, whether incurred as a result of legal action taken by any governmental entity or agency, taken by any private claimant, or taken by Buyer, before or after Closing as a result of the presence, disturbance, discharge, release, removal or cleanup of any Hazardous Materials upon or under, on or off site, associated with or flowing or originating from the Real Property. To the extent that Buyer is responsible for the same in accordance with Subparagraph (ii) above, Buyer hereby agrees to indemnify, release and hold Seller, its successors, assigns, officers, directors, shareholders and employees, harmless from and against all Liabilities, suffered by, incurred by or assessed against such parties, their agents or other representatives, whether incurred as a result of legal action taken by any governmental entity or agency, taken by any private claimant, or taken by Seller, before or after Closing as a result of the presence, disturbance, discharge, release, removal or clean-up of any Hazardous Materials upon or under, on or off site, associated with or flowing or originating from the Real Property. The term "Liabilities" as used in this paragraph is hereby defined as any and all liabilities, expenses, demands, damages, punitive or exemplary damages, consequential damages, costs, cleanup costs, response costs, losses, causes of action, claims for relief, attorneys and other legal fees, other professional fees, penalties, fines, assessments and charges. 15. Broker's Commission. Buyer and Seller represent and warrant to the other that neither of them have engaged or contracted with any person, firm or entity to serve or act as a broker, agent or finder for the purpose of the sale and purchase of the Real Property, and that no broker's or real estate or other similar commissions or fees are or shall be due in respect of the transaction contemplated by this Purchase Contract. The Buyer and Seller each agree to indemnify, defend and save harmless the other from and against any cost and expense, including reasonable attorney's fees, incurred by the other as a result of the untruth of any of the foregoing representations made by it. 16. Entire Agreement. This Purchase Contract constitutes the entire agreement between Buyer and Seller with respect to the Real Property and may not be amended except by written instrument executed by Buyer and Seller. Any other agreements, written or oral, between Buyer and Seller with respect to the Real Property are hereby superseded in their entirety by this Purchase Contract. 14 17. Captions. The paragraph captions are inserted for convenience only and are in no way intended to describe, interpret, define or limit the scope or content of this Purchase Contract or any provision hereof. 18. Construction. Words of any gender used in this Purchase Contract shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise. Any disputes regarding the interpretation of any portion of this Purchase Contract shall not be presumptively construed against the drafting party. 19. Remedies Cumulative. Except as specifically set forth above all rights, powers and privileges conferred hereunder upon the parties hereto shall be cumulative and in addition to those other rights, powers and remedies hereunder and those available at law or in equity. All such rights, powers and remedies may be exercised separately or at once, and no exercise of any right, power or remedy shall be construed to be an election of remedies or shall preclude the future exercise of any or all other rights, powers and remedies granted hereunder or available at law or in equity, except as expressly provided herein. 20. No Waiver. Neither the failure of either party to exercise any power given such party hereunder nor to insist upon strict compliance with its obligations hereunder, nor any custom or practice of the parties at variance with the terms hereof shall constitute a waiver of either party's right to demand exact compliance with the terms hereof. 21. Applicable Law. This Purchase Contract shall be construed and interpreted in accordance with the laws of the State of South Carolina. 22. Successors and Assigns. This Purchase Contract shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns. Buyer shall have the right and privilege to assign and transfer its interest hereunder to Mar Mar Realty Trust, a to-be-formed Maryland real estate investment trust, Mar Mar Realty L.P., a to-be-formed Maryland limited partnership (each to be formed by affiliates of Buyer), or to an existing corporation, partnership, limited liability company or other business entity, or to a corporation, partnership, limited liability company or business entity formed for the purpose of consummating this transaction in which Buyer has an ownership interest or is affiliated by common ownership. 23. Counterparts. This Purchase Contract may be executed in two (2) or more counterparts. 24. Survival. Seller's and Buyer's representations and warranties and indemnities set forth in Paragraphs 14 and 15 shall survive Closing. 15 IN WITNESS WHEREOF, the parties have executed the Purchase Contract pursuant to authority duly given the day and year first above written. SONIC AUTOMOTIVE, INC. By: /s/ O. Bruton Smith Its: Chief Executive Officer FAIRWAY FORD, INC. By: /s/ A. Foster McKissick, III Its: President EX-99 11 EXHIBIT 99.13 Exhibit 99.13 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT dated as of April 30, 1998 (this "AGREEMENT") among SONIC AUTOMOTIVE, INC., a Delaware corporation (the "BUYER"), and ALDO B. PARET (the "SELLER"), and CASA FORD OF HOUSTON, INC., a Texas corporation (the "CORPORATION"). WITNESSETH: WHEREAS, the Seller owns in the aggregate 6,125 shares of common stock, par value $1.00 per share (the "SHARES"), of the Corporation, which shares represent all of the issued and outstanding shares of capital stock of the Corporation and are owned of record and beneficially by the Seller; and WHEREAS, the Buyer desires to purchase the Shares from the Seller, and the Seller is willing to sell the Shares to the Buyer, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual covenants and representations hereinafter stated, and intending to be legally bound hereby, the parties agree as follows: ARTICLE 1 PURCHASE AND SALE 1.1 AGREEMENT OF PURCHASE AND SALE. On the terms and subject to the conditions of this Agreement and in reliance upon the representations and warranties of the parties herein, at the closing referred to in Article 2 hereof (the "CLOSING"), the Seller shall sell, transfer, convey and deliver to the Buyer, and the Buyer shall purchase from the Seller, the Shares. 1.2 PURCHASE PRICE. (a) INITIAL PURCHASE PRICE. As the initial purchase price to be paid by the Buyer for the Shares, the Buyer shall pay to the Seller the sum of (i) $11,250,000 less (ii) the aggregate total of the Affiliate Payables and Excluded Indebtedness (each as defined in Section 1.2(c) below) both outstanding as of the Closing Date (as defined in Article 2 below) as well as paid after the Effective Closing Date (as defined in Section 1.2(c) below), subject to adjustment as provided in Section 1.2(c) below (as so adjusted, the "INITIAL PURCHASE PRICE"). (b) PAYMENT OF INITIAL PURCHASE PRICE. The Initial Purchase Price shall be paid as follows: (1) At the Closing, the Seller shall deliver to the Buyer a certificate signed by the Seller setting forth the aggregate total of the Affiliate Payables and Excluded Indebtedness both outstanding as of the Closing Date as well as paid after the Effective Closing Date. At the Closing, the sum of $8,937,000, minus the amount of any Affiliate Payables and 1 Excluded Indebtedness both outstanding as of the Closing Date as well as paid after the Effective Closing Date, shall be payable by the Buyer to the Seller by wire transfer of immediately available funds to the account or accounts of the Seller, which shall be designated by the Seller in writing at least one full Business Day prior to the Closing Date. For purposes of this Agreement, a "BUSINESS DAY" is a day other than a Saturday, a Sunday or a day on which banks are required to be closed in the State of North Carolina. (2) (A) At the Closing, the Buyer shall issue to the Seller 2,313 shares of the Buyer's Class A Convertible Preferred Stock, Series III (the "PREFERRED STOCK"). The Preferred Stock will be convertible into shares of the Buyer's Class A Common Stock as provided in the Statement of Rights and Preferences attached as Exhibit A hereto. At the Closing, 1,813 shares of the Preferred Stock will be delivered to the Seller and 500 shares of the Preferred Stock (the "ESCROW SHARES") shall be placed in escrow with NationsBank of Texas, N.A. or another entity mutually acceptable to the Buyer and the Seller (the "ESCROW AGENT") by the Buyer in accordance with the escrow agreement in the form of Exhibit B hereto, with such other changes thereto as the Escrow Agent shall reasonably request (the "ESCROW AGREEMENT"). (B) The term of the Escrow Agreement shall be until February 1, 1999 (or such longer period of time as shall be necessary to complete the determination of Net Current Assets pursuant to Section 1.2(c) below). If, as of February 1, 1999 (or such later date as shall be necessary to complete the determination of the Net Current Assets), the Buyer shall have made no claims in respect of any Net Current Assets Shortfall (as defined in Section 1.2(c) below) or for indemnification pursuant to the terms of this Agreement, the Buyer will execute a joint instruction pursuant to the Escrow Agreement to instruct the Escrow Agent to deliver all of the Escrow Shares to the Seller pursuant to the terms of the Escrow Agreement. (C) At the Seller's option, exercisable by written notice to the Buyer by the Seller, at or prior to the Closing (the "REGISTRATION NOTICE"), the Buyer shall be obligated to use its reasonable best efforts to register under the Securities Act of 1933, as amended (the "SECURITIES ACT"), on or before December 31, 1998, the shares (the "COMMON SHARES") of the Buyer's Class A Common Stock which are issuable upon conversion of the Preferred Stock. (D) If requested by the managing or lead managing underwriter for any such registered offering of the Common Shares which is an underwritten public offering, the Seller shall execute and deliver such underwriting agreement with the managing or lead managing underwriter in such form as is customarily used by such underwriter with any modifications as the parties thereto shall agree. In connection with any such registration, the Seller shall supply to the Buyer such information as may be reasonably requested by the Buyer in connection with the preparation and filing of a registration statement with the Securities and Exchange Commission. The Seller shall not supply any information to the Buyer for inclusion in such registration statement that will, taken as a whole, at the time the registration statement becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Provided that the Buyer shall have timely completed such registration of the Common Shares, the Seller shall promptly convert the Preferred Stock into the Common Shares. 2 (E) In the event that the Buyer fails to timely complete such registration of the Common Shares, the Seller may, at his option exercisable by written notice to the Buyer not later than January 31, 1999, require the Buyer to purchase up to all of the Preferred Stock held by the Seller at the price of $1,000 per share. Such notice to the Buyer shall specify the number of shares of Preferred Stock held by the Seller required to be purchased and a closing date for such purchase which shall be not sooner than fifteen (15) days and not longer than thirty (30) days from the date of delivery of such notice. At the closing of such purchase, the Buyer shall deliver to the Seller the applicable purchase price in the same manner that the cash portion of the Purchase Price paid at Closing was paid against delivery by the Seller of (i) the certificates for the shares of Preferred Stock of the Seller being purchased, duly endorsed for transfer to the Buyer, and (ii) a certificate signed by the Seller to the effect that such Preferred Stock of the Seller is being sold free and clear of all encumbrances and claims of third persons. The foregoing "put" right of the Seller shall also apply to the shares of the Preferred Stock which are included in the Escrow Shares; PROVIDED, HOWEVER, the obligation of the Buyer to purchase such shares of Preferred Stock shall arise only if, as and when such shares of the Preferred Stock are delivered to the Seller pursuant to the Escrow Agreement. (F) In the event the Seller does not timely deliver a Registration Notice, the Buyer shall have no obligation to register the Common Shares. Thereafter, the Buyer's sole obligation with respect to the Preferred Stock and the Common Shares, other than to honor any "put" by the Seller under Paragraph (E) immediately above, shall be to use its reasonable best efforts to make available current public information with respect to the Buyer within the meaning of Subsection (c)(1) of Securities and Exchange Commission Rule 144 ("RULE 144") to the extent necessary to facilitate public resales by the Seller of the Common Shares pursuant to Rule 144. (c) ADJUSTMENT PROCEDURES. (1) As used in this Agreement, the term "NET CURRENT ASSETS" shall mean (i) all of the assets of the Corporation as of the Effective Closing Date which would, in conformity with generally accepted accounting principles consequently applied ("GAAP"), be included under current assets on a balance sheet as of such Date, MINUS (ii) all of the liabilities of the Corporation as of the Effective Closing Date which would, in conformity with GAAP, be included under current liabilities on a balance sheet as of such Date. Not later than 60 days after the Closing Date, the Buyer will prepare and deliver to the Seller an unaudited balance sheet (the "CLOSING BALANCE SHEET") of the Corporation as of the close of business on April 30, 1998 (the "EFFECTIVE CLOSING DATE") consisting of computations of (A) the Net Current Assets and (B) the net book value of the other tangible assets and liabilities of the Corporation as of the Effective Closing Date, all as determined in accordance with GAAP; PROVIDED, HOWEVER, that (A) used vehicle inventories shall be valued as mutually agreed by the Buyer and the Seller, based upon a physical inventory to be conducted by them not later than the Business Day immediately preceding the Effective Closing Date, with any used vehicles as to which the Buyer and the Seller cannot reach agreement as to value being valued by a mutually acceptable third party engaged in the business of appraising and valuing inventories for automobile dealerships not later than the Business Day immediately preceding the Effective Closing Date, (B) parts inventories shall include only Ford returnable parts, which shall be valued based on the value of 3 such returnable parts under applicable returnable parts plans with Ford, and salable non-Ford parts shall be valued at net book value, (C) no amounts owing to the Corporation from the Seller or any Affiliate (as hereinafter defined) thereof, or from any of the Corporation's officers or employees, shall be included, (D) no amounts payable to the Seller or to any officers and directors or other Affiliates (as hereinafter defined) of the Corporation (all the foregoing amounts payable being, collectively, "AFFILIATE PAYABLES") shall be included, (E) no liabilities or obligations (including, without limitation, principal, interest, penalties, fees or other expenses) under lines of credit (including, without limitation the Corporation's working capital line with Ford Motor Credit) and other long and short term indebtedness to financial institutions and other similar financings (all the foregoing liabilities and obligations being, collectively, "EXCLUDED INDEBTEDNESS") shall be included, except for new, used and rental vehicle "floor planning" lines, which shall be included, and (F) there shall be included appropriate write-offs for doubtful accounts receivable and bad debts and for damaged, spoiled, obsolete or slow-moving inventory. For purposes of this Agreement, the term "AFFILIATE" shall mean any entity directly or indirectly controlling, controlled by or under common control with the specified person, whether by stock ownership, agreement or otherwise, or any parent, child or sibling of such specified person and the concept of "CONTROL" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such person or entity, whether through the ownership of voting securities, by contract or otherwise. (2) If within 30 days following delivery of the Closing Balance Sheet (or the next Business Day if such 30th day is not a Business Day), the Seller has not given the Buyer notice of the Seller's objection to the computation of the Net Current Assets as set forth in the Closing Balance Sheet (such notice to contain a statement in reasonable detail of the nature of the Seller's objection), then the Net Current Assets reflected in the Closing Balance Sheet will be deemed mutually agreed by the Buyer and the Seller. If the Seller shall have given such notice of objection in a timely manner, then the issues in dispute will be submitted to a "Big Six" accounting firm mutually acceptable to the Buyer and the Seller (the "ACCOUNTANTS") for resolution. If issues in dispute are submitted to the Accountants for resolution: (A) each party will furnish to the Accountants such workpapers and other documents and information relating to the disputed issues as the Accountants may request and are available to the party or its subsidiaries (or its independent public accountants), and will be afforded the opportunity to present to the Accountants any material relating to the determination and to discuss the determination with the Accountants; (B) the Accountants will be instructed to determine the Net Current Assets based upon their resolution of the issues in dispute; (C) such determination by the Accountants of the Net Current Assets, as set forth in a notice delivered to both parties by the Accountants, will be binding and conclusive on the parties; and (D) the Buyer and the Seller shall each bear 50% of the fees and expenses of the Accountants for such determination. (3) To the extent that Net Current Assets, as deemed mutually agreed by the parties or as determined by the Accountants, as aforesaid, equals or exceeds $1,800,000 (any such excess being called the "NET CURRENT ASSETS EXCESS"), the Buyer shall be obligated to (A) execute and deliver to the Escrow Agent a joint instruction to deliver the Escrow Shares to the Seller pursuant to the Escrow Agreement (except to the extent of any pending indemnification claim by the Buyer pursuant to this Agreement), and (B) pay any Net Current Assets Excess promptly to the Seller, together with interest on the amount of the Net Current Assets Excess at the Buyer's floor plan financing rate from time to time in effect (the "INTEREST 4 RATE") from the Closing Date to the date of such payment. To the extent that the Net Current Assets, as deemed mutually agreed by the parties or as determined by the Accountants, as aforesaid, is less than $1,800,000 (the "NET CURRENT ASSETS SHORTFALL"), the Seller shall be obligated to pay the amount of the Net Current Assets Shortfall promptly to the Buyer. In furtherance of such obligation of the Seller, the parties shall execute and deliver to the Escrow Agent a joint instruction to deliver up to all of the Escrow Shares to the Buyer at the rate of one Escrow Share for each $1,000 of Net Current Assets Shortfall. To facilitate administration of the Escrow Shares, no fractional shares of the Preferred Stock shall be delivered. To the extent that the Net Current Assets Shortfall exceeds the value (at $1,000 per share) of the Escrow Shares so delivered to the Buyer, the Seller shall be obligated to pay the amount of such excess promptly to the Buyer, together with interest on the amount of such excess at the Interest Rate from the Closing Date to the date of such payment. (d) CONTINGENT PURCHASE PRICE. (1) As used in this Agreement, (i) the term "CONTINGENT PURCHASE PRICE" shall mean an amount equal to the amounts payable pursuant to paragraph (2) below; (ii) the term "FIRST CALCULATION PERIOD " shall mean calendar year 1998; (iii) the term "SECOND CALCULATION PERIOD" shall mean calendar year 1999; (iv) the term "SUBJECT BUSINESS" shall mean the business of the Corporation acquired by the Buyer pursuant to this Agreement; (v) the term "EARNINGS BEFORE TAXES" shall mean the earnings before taxes of the Subject Business for the First Calculation Period or the Second Calculation Period, as the case may be, as more fully provided in paragraph (3) below; (vi) the term "PRO FORMA EARNINGS BEFORE TAXES" shall mean Earnings Before Taxes for the First Calculation Period subject to the following adjustments to reflect compensation to Aldo B. Paret pursuant to the Employment Agreement in the form of Exhibit E hereto as if such Employment Agreement were the sole source and basis for any and all payments to him from January 1, 1998; and (vii) the term "MARKET PRICE" shall mean the average closing price per share of the Buyer's Class A Common Stock on the New York Stock Exchange for the twenty (20) consecutive trading days immediately preceding the date of determination. (2) Subject to the provisions of Section 9.7 below, not later than 90 days after the end of the First Calculation Period or the Second Calculation Period, as the case may be, the Buyer shall pay to the Seller an installment of the Contingent Purchase Price calculated as follows: (i) The installment of the Contingent Purchase Price for the First Calculation Period shall be an amount equal to five (5) times the excess, if any, of Pro Forma Earnings Before Taxes in excess of $2,500,000; and (ii) The installment of the Contingent Purchase Price for the Second Calculation Period shall be an amount equal to five (5) times the excess, if any, of Earnings Before Taxes for the Second Calculation Period in excess of the greater of (A) $2,500,000, or (B) the Pro Forma Earnings Before Taxes. An amount equal to 100% of each installment of the Contingent Purchase Price, up to $2,500,000, shall be paid to the Seller by the issuance and delivery to the Seller of shares of 5 Preferred Stock at the rate of one share of Preferred Stock for every $1,000 of such Contingent Purchase Price or, at the sole discretion of Buyer, registered shares of the Buyer's Class A Common Stock having an aggregate Market Price on the date of payment of $2,500,000. Payment of each installment of the Contingent Purchase Price in excess of $2,500,000 will be paid to the Seller 65% in cash and 35% in shares of Preferred Stock at the rate of one share of Preferred Stock for every $1,000 of such Contingent Purchase Price, or, at the sole discretion of Buyer shares of such registered Class A Common Stock of the Buyer having an aggregate Market Price on the date of payment equal to the applicable number of shares of Preferred Stock (valued at $1,000 per share of such Preferred Stock). Fractional shares of Preferred Stock may be issued in connection with the payment of the Contingent Purchase Price; HOWEVER, no fractional shares of the Buyer's Class A Common Stock shall be issued upon conversion of the Preferred Stock. (3) Earnings Before Taxes shall be calculated by the Buyer in accordance with GAAP and subject to the following special rules: (i) No deduction shall be taken for federal and state income taxes, or for state franchise taxes based on corporate income, owed by the Corporation; (ii) No deduction shall be taken for any interest expenses (including acquisition debt) of the Corporation other than floor plan financing interest attributable to the Subject Business and other interest expenses directly attributable to the operations of the Subject Business; (iii) Earnings Before Taxes shall be determined before any expense chargeable with respect to the Non-Competition Agreement (as defined in Section 1.4(a) below) or any management fee expense allocation from the Buyer in respect of management fees payable to the Buyer; (iv) No deduction shall be taken for any amortization of goodwill included in the Initial Purchase Price; (v) Overhead expenses or other expenses which have been incurred by the Corporation which are allocated to the Corporation but do not directly relate to the operation of the Subject Business, or that portion so allocated which is not reasonably related to the operation of the Subject Business, shall not be deducted in determining Earnings Before Taxes; (vi) Earnings Before Taxes shall be determined prior to calculation of the Contingent Purchase Price; and (vii) Income on warranty and insurance products shall not be deducted in determining Earnings Before Taxes. At the time of the making of the payment of an installment of the Contingent Purchase Price, the Buyer shall deliver to the Seller a statement in writing setting forth in reasonable detail the manner in which the respective installment of Contingent Purchase Price was determined. 6 1.3 DELIVERY OF THE SHARES. (a) At the Closing, the Seller shall deliver to the Buyer a certificate or certificates representing the Shares, duly endorsed in blank or with a fully executed stock power attached, all in proper form for transfer with all transfer taxes, if any, paid by the Seller. (b) The Shares shall be delivered to the Buyer free and clear of all liens, pledges, encumbrances, claims, security interests, charges, voting trusts, voting agreements, other agreements, rights, options, warrants or restrictions or claims of any kind, nature or description (collectively, "ENCUMBRANCES"). 1.4 NON-COMPETITION AGREEMENT; EMPLOYMENT AGREEMENT. (a) NON-COMPETITION AGREEMENT. At the Closing, the Seller will enter into a non-competition agreement with the Buyer and the Corporation substantially in the form of Exhibit C hereto (the "NON-COMPETITION AGREEMENT"). (b) EMPLOYMENT AGREEMENT. At the Closing, the Seller and the Corporation will enter into an employment agreement substantially in the form of Exhibit D hereto (the "EMPLOYMENT AGREEMENT"). ARTICLE 2 CLOSING The Closing shall take place at the offices of Parker, Poe, Adams & Bernstein, L.L.P., 201 S. College Street, Suite 2500, Charlotte, North Carolina, at 9:30 a.m., local time, on the Closing Date. The Closing Date shall be the fifth (5th) Business Day, or such shorter period as the Buyer may choose, following the date the Buyer gives notice of the Closing to the Seller, but in no event later than July 1, 1998 (the "CLOSING DATE DEADLINE"); PROVIDED, HOWEVER, if as of the Closing Date Deadline, the consents or approvals of all applicable automobile manufacturers and distributors contemplated in Section 7.10 shall not have been obtained and/or the audited financial statements contemplated in Section 7.14 shall not have been completed, the Buyer may, so long as it is using its reasonable best efforts to obtain such consents or approvals and/or complete such financial statements, elect to extend the Closing Date Deadline for up to an additional 60 days. The date upon which the Closing shall take place is hereinafter called the "CLOSING DATE." ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER The Seller hereby represents and warrants to the Buyer as follows: 3.1 OWNERSHIP OF SHARES. The Seller owns of record and beneficially all of the Shares. The Seller has, and will have at the time of the Closing, good and valid title to the Shares, free and clear of all Encumbrances. 7 3.2 SELLER'S POWER AND AUTHORITY; CONSENTS AND APPROVALS. (a) The Seller has full capacity, right, power and authority to execute and deliver this Agreement and the other agreements, documents and instruments to be executed and delivered by the Seller in connection herewith, to consummate the transactions contemplated hereby and thereby and to perform his obligations hereunder and thereunder. (b) Except as set forth on Schedule 3.2(b) hereto, no authorization, approval or consent of, or notice to or filing or registration with, any governmental agency or body, or any other third party, is required in connection with the execution and delivery by the Seller of this Agreement and the other agreements, documents and instruments to be executed and delivered by the Seller in connection herewith, the consummation of the transactions contemplated hereby and thereby and the performance by the Seller of his obligations hereunder and thereunder. 3.3 EXECUTION AND ENFORCEABILITY. This Agreement and the other agreements, documents and instruments to be executed by the Seller in connection herewith, and the consummation by the Seller of the transactions contemplated hereby and thereby, have been duly authorized, executed and delivered by the Seller and constitute, and the other agreements, documents and instruments contemplated hereby, when executed and delivered by the Seller, shall constitute, the legal, valid and binding obligations of the Seller, enforceable against the Seller in accordance with their respective terms, except to the extent that enforceability may be limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally. 3.4 LITIGATION REGARDING SELLER. There are no actions, suits, claims, investigations or legal, administrative or arbitration proceedings pending or, to the Seller's knowledge, threatened or probable of assertion, against the Seller relating to the Shares, this Agreement or the transactions contemplated hereby before any court, governmental or administrative agency or other body. The Seller does not know of any basis for the institution of any such suit or proceeding. No judgment, order, writ, injunction, decree or other similar command of any court or governmental or administrative agency or other body has been entered against or served upon the Seller relating to the Shares, this Agreement or the transactions contemplated hereby. 3.5 INTEREST IN COMPETITORS AND RELATED ENTITIES; CERTAIN TRANSACTIONS. (a) Except as set forth on Schedule 3.5 hereto, neither the Seller nor any Affiliate of the Seller (i) has any direct or indirect interest in any person or entity engaged or involved in any business which is competitive with the business of the Corporation, (ii) has any direct or indirect interest in any person or entity which is a lessor of assets or properties to, material supplier of, or provider of services to, the Corporation, or (iii) has a beneficial interest in any contract or agreement to which the Corporation is a party; PROVIDED, HOWEVER, that the foregoing representation and warranty shall not apply to any person or entity, or any interest or agreement with any person or entity, which is a publicly held corporation in which the Seller individually owns less than 3% of the issued and outstanding voting stock. (b) Except as set forth in Schedule 3.5 hereto, there are no transactions between the Corporation and the Seller (including the Seller's Affiliates), or any of the directors, officers 8 or salaried employees of the Corporation, or the family members or Affiliates of any of the above (other than for services as employees, officers and directors), including, without limitation, any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from, the Seller, or any such officer, director or salaried employee, family member, or Affiliate or any corporation, partnership, trust or other entity in which such family member, Affiliate, officer, director or employee has a substantial interest or is a shareholder, officer, director, trustee or partner. 3.6 SELLER NOT FOREIGN PERSON. The Seller is a "United States person" as that term is defined in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended (the "CODE"), and the regulations promulgated thereunder. 3.7 ORGANIZATION; GOOD STANDING; QUALIFICATIONS; AND POWER. The Corporation is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Corporation is qualified to do business as a foreign corporation and is in good standing in each of the jurisdictions listed on Schedule 3.7 hereto, which are the only jurisdictions where the nature of its business and assets requires such qualification. 3.8 CAPITALIZATION. The authorized capital stock of the Corporation consists of 6,125 shares of common stock, par value $1.00 per share, of which 6,125 are issued and outstanding and constitute the Shares. All of the Shares are duly authorized, validly issued, fully paid and non-assessable and are held by the Seller. Except as set forth on Schedule 3.8 hereto, there are no preemptive rights, whether at law or otherwise, to purchase any of the securities of the Corporation and there are no outstanding options, warrants, "phantom" stock plans, subscriptions, agreements, plans or other commitments pursuant to which the Corporation is or may become obligated to sell or issue any shares of its capital stock or any other debt or equity security, and there are no outstanding securities convertible into shares of such capital stock or any other debt or equity security. 3.9 SUBSIDIARIES AND INVESTMENTS. The Corporation does not own or maintain, directly or indirectly, any capital stock of or other equity or ownership or proprietary interest in any other corporation, partnership, association, trust, joint venture or other entity and does not have any commitment to contribute to the capital of, make loans to, or share in the losses of, any such entity. 3.10 NO VIOLATION; CONFLICTS. Except as set forth on Schedule 3.10 hereto, the execution and delivery by the Seller of this Agreement and the other agreements, documents and instruments to be executed and delivered by the Seller in connection herewith, the consummation by the Seller of the transactions contemplated hereby and thereby and the performance by the Seller of his obligations hereunder and thereunder do not and will not (a) conflict with or violate any of the terms of the Articles of Incorporation or By-Laws of the Corporation, (b) violate or conflict with any law, ordinance, rule or regulation, or any judgment, order, writ, injunction, decree or similar command of any court, administrative or governmental agency or other body, 9 applicable to the Corporation, (c) violate or conflict with the terms of, or result in the acceleration of, any indebtedness or obligation of the Corporation under, or violate or conflict with or result in a breach of, or constitute a default under, any indenture, mortgage, deed of trust, agreement or instrument to which the Corporation is a party or by which the Corporation or any of its assets or properties is bound or affected, (d) result in the creation or imposition of any Encumbrance of any nature upon any of the assets or properties of the Corporation, (e) constitute an event permitting termination of any agreement, license or other right of the Corporation, or (f) require any authorization, approval or consent of, or any notice to or filing or registration with, any governmental agency or body, or any other third party, applicable to the Corporation or any of its properties or assets. 3.11 TITLE TO ASSETS; RELATED MATTERS. The Corporation has good and valid title to all assets, rights, interests and other properties, real, personal and mixed, tangible and intangible, owned by it (collectively, the "ASSETS"), free and clear of all Encumbrances, except those specified on Schedule 3.11 and liens for taxes not yet due and payable. The Assets (a) include all properties and assets (real, personal and mixed, tangible and intangible) owned by the Corporation; (b) do not include (i) any contracts for future services, prepaid items or deferred charges the full value or benefit of which will not be usable by or transferable to the Buyer, or (ii) any goodwill, organizational expense or other similar intangible asset. 3.12 POSSESSION. The tangible assets included within the Assets are in the possession or control of the Corporation and no other person or entity has a right to possession or claims possession of all or any part of such Assets, except the rights of lessors of Leased Equipment and Leased Premises (each as defined in Section 3.16 hereof) under their respective contracts and leases. 3.13 FINANCIAL STATEMENTS. (a) The Seller has delivered to the Buyer prior to the date hereof the financial statements listed on Schedule 3.13 hereto (hereinafter collectively referred to as the "FINANCIAL STATEMENTS"); (b) The Financial Statements (i) are in accordance with the books and records of the Corporation, which books and records are true, correct and complete, (ii) fully and fairly present the financial position of the Corporation as of the dates indicated and the results of operation, stockholders' equity and changes in cash flows of the Corporation for the periods indicated, and (iii) except as set forth in Schedule 3.13, have been prepared in accordance with GAAP on an FIFO basis. 3.14 ACCOUNTS RECEIVABLE. All accounts receivable of the Corporation are collectible at the aggregate recorded amounts thereof, subject to the reserve for doubtful accounts maintained by the Corporation in the ordinary course of business, and are not subject to any known counterclaims or setoffs. An adequate reserve for doubtful accounts for the Corporation has been established and such reserve is consistent with both the operation of the Corporation in the ordinary course of business and past practice. 10 3.15 INVENTORIES. All inventories of the Corporation consist of items of a quality and quantity usable and saleable in the ordinary course of business of the Corporation, and the levels of inventories are consistent with the levels maintained by the Corporation in the ordinary course consistent with past practice and the Corporation's obligations under its agreements with all applicable vehicle manufacturers and distributors. The values at which such inventories are carried are based on the FIFO method and are stated in accordance with generally accepted accounting principles consistently applied by the Seller at the lower of historic cost or market. An adequate reserve has been established by the Corporation for damaged, spoiled, obsolete, defective, or slow-moving goods and such reserve is consistent with both the operation of the Corporation in the ordinary course of business and past practice. 3.16 LEASED PREMISES; MACHINERY AND EQUIPMENT. (a) OWNED REAL PROPERTY. The Corporation does not own any real property of any kind. (b) LEASED PREMISES. Schedule 3.16(b) hereto contains a complete list and description (including buildings and other structures thereon) of all real property of which the Corporation is a tenant (herein collectively referred to as the "LEASED PREMISES" and sometimes collectively referred to as the "REAL PROPERTY"). True, correct and complete copies of all leases of all Leased Premises (the "LEASES") have been delivered to the Buyer. The Leased Premises are in good physical condition and, with respect to each Lease, no event or condition currently exists which would give rise to a material repair or restoration obligation if such Lease were to terminate. The Seller has no knowledge of any event or condition which currently exists which would create a legal or other impediment to the use of the Leased Premises as currently used, or would increase the additional charges or other sums payable by the tenant under any of the Leases (including, without limitation, any pending tax reassessment or other special assessment affecting the Leased Premises). The improvements and building systems which comprise a part of the Leased Premises as to which the Corporation is responsible for the maintenance and repair thereof are in good condition, maintenance and repair. (c) CLAIMS. There has been no work performed, services rendered or materials furnished in connection with repairs, improvements, construction, alteration, demolition or similar activities with respect to the Real Property for at least ninety (90) days before the date hereof; there are no outstanding claims or persons entitled to any claim or right to a claim for a mechanics' or materialman's lien against the Real Property; and there is no person or entity other than the Corporation in or entitled to possession of the Real Property. (d) EASEMENTS, ETC. The Corporation has all easements and rights, including, but not limited to, easements for power lines, water lines, sewers, roadways and other means of ingress and egress, necessary to conduct the business the Corporation now conducts, all such easements and rights are perpetual, unconditional appurtenant rights to the Real Property, and none of such easements or rights are subject to any forfeiture or divestiture rights. (e) CONDEMNATION. Neither the whole nor any portion of any of the Real Property has been condemned, expropriated, ordered to be sold or otherwise taken by any public 11 authority, with or without payment or compensation therefor, and the Seller does not know of any such condemnation, expropriation, sale or taking, or have any grounds to anticipate that any such condemnation, expropriation, sale or taking is threatened or contemplated. The Seller has no knowledge of any pending assessments which would affect the Real Property. (f) ZONING, ETC. None of the Real Property is in violation of any public or private restriction or any law or any building, zoning, health, safety, fire or other law, ordinance, code or regulation, and no notice from any governmental body has been served upon the Corporation or upon any of the Real Property claiming any violation of any such law, ordinance, code or regulation or requiring or calling to the attention of the Corporation the need for any work, repair, construction, alterations or installation on or in connection with said properties which has not been complied with. All improvements which comprise a part of the Real Property are located within the record lines of the Real Property and none of the improvements located on the Real Property encroach upon any adjoining property or any easements or rights of way and no improvements located on any adjoining property encroach upon any of the Real Property or any easements or rights of way servicing the Real Property. (g) OWNED EQUIPMENT. Schedule 3.16(g) hereto sets forth a list of all material machinery, equipment, motor vehicles, furniture and fixtures owned by the Corporation (collectively, the "OWNED EQUIPMENT"). (h) LEASED EQUIPMENT. Schedule 3.16(h) hereto contains a list of all leases or other agreements, whether written or oral, under which the Corporation is lessee of or holds or operates any items of machinery, equipment, motor vehicles, furniture and fixtures or other property (other than real property) owned by any third party (collectively, the "LEASED EQUIPMENT"). (i) MAINTENANCE OF EQUIPMENT. The Owned Equipment and the Leased Equipment are in good operating condition, maintenance and repair in accordance with industry standards taking into account the age thereof. 3.17 PATENTS; TRADEMARKS; TRADE NAMES; COPYRIGHTS; LICENSES, ETC. (a) Except as set forth on Schedule 3.17 hereto, there are no patents, trademarks, trade names, service marks, service names and copyrights, and there are no applications therefor or licenses thereof, inventions, trade secrets, computer software, logos, slogans, proprietary processes and formulae and all other proprietary information, know-how and intellectual property rights, whether patentable or unpatentable, that are owned or leased by the Corporation or used in the conduct of the Corporation's business. The Corporation is not a party to, nor pays a royalty to anyone under, any license or similar agreement. There is no existing claim, or, to the knowledge of the Seller, any basis for any claim, against the Corporation that any of its operations, activities or products infringe the patents, trademarks, trade names, copyrights or other property rights of others or that the Corporation is wrongfully or otherwise using the property rights of others. 12 (b) The Corporation has the right to use the names "Casa Ford" and/or "Casa Ford of Houston" in the Houston, Texas Metropolitan Statistical Area (as defined by the Office of Management and Budget) and, to the knowledge of the Seller, no person uses, or has the right to use, in such Area, such name or any derivation thereof in connection with the manufacture, sale, marketing or distribution of products or services commonly associated with an automobile dealership. 3.18 CERTAIN LIABILITIES. (a) All accounts payable by the Corporation to third parties as of the date hereof arose in the ordinary course of business and none are delinquent or past-due. (b) Schedule 3.18 hereto sets forth a list of all indebtedness of the Corporation, other than accounts payable, as of the close of business on the day preceding the date hereof, including, without limitation, money borrowed, indebtedness of the Corporation owed to stockholders and former stockholders, the deferred purchase price of assets, letters of credit and capitalized leases, indicating, in each case, the name or names of the lender, the date of maturity, the rate of interest, any prepayment penalties or premiums and the unpaid principal amount of such indebtedness as of such date. 3.19 NO UNDISCLOSED LIABILITIES. The Corporation does not have any material liabilities or obligations of any nature, known or unknown, fixed or contingent, matured or unmatured, other than those (a) reflected in the Financial Statements, (b) incurred in the ordinary course of business since the date of the Financial Statements and of the type and kind reflected in the Financial Statements, or (c) disclosed specifically on Schedule 3.19 hereto. 3.20 ABSENCE OF CHANGES. Since December 31, 1997, the business of the Corporation has been operated in the ordinary course, consistent with past practices and, except as set forth on Schedule 3.20 hereto, there has not been incurred, nor has there occurred: (a) Any damage, destruction or loss (whether or not covered by insurance), adversely affecting the business or assets of the Corporation in excess of $50,000; (b) Any strikes, work stoppages or other labor disputes involving the employees of the Corporation; (c) Any sale, transfer, pledge or other disposition of any of the Assets of the Corporation having an aggregate book value of $50,000 or more (except sales of vehicles and parts inventory in the ordinary course of business); (d) Any declaration or payment of any dividend or other distribution in respect of its capital stock or any redemption, repurchase or other acquisition of its capital stock, (e) any amendment, termination, waiver or cancellation of any Material Agreement (as defined in Section 3.29 hereof) or any termination, amendment, waiver or cancellation of any material right or claim of the Corporation under any Material Agreement (except in each case in the ordinary course of business and consistent with past practice); (f) Any (1) general uniform increase in the compensation of the employees of the Corporation (including, without limitation, any increase pursuant to any bonus, pension, profit-sharing, deferred compensation or other plan or commitment), (2) increase in any such compensation payable to any individual officer, director, consultant or agent thereof, or (3) loan or commitment therefor made by the Corporation to any officer, director, stockholder, employee, consultant or agent of the Corporation; (g) Any change in the accounting methods, procedures 13 or practices followed by the Corporation or any change in depreciation or amortization policies or rates theretofore adopted by the Corporation; (h) Any material change in policies, operations or practices of the Corporation with respect to business operations followed by the Corporation, including, without limitation, with respect to selling methods, returns, discounts or other terms of sale, or with respect to the policies, operations or practices of the Corporation concerning the employees of the Corporation; (i) Any capital appropriation or expenditure or commitment therefor on behalf of the Corporation in excess of $50,000 individually or $100,000 in the aggregate; (j) Any write-down or write-up of the value of any inventory or equipment of the Corporation or any increase in inventory levels in excess of historical levels for comparable periods; (k) Any account receivable in excess of $50,000 or note receivable in excess of $50,000 owing to the Corporation which (1) has been written off as uncollectible, in whole or in part, (2) has had asserted against it any claim, refusal or right of setoff, or (3) the account or note debtor has refused to, or threatened not to, pay for any reason, or such account or note debtor has become insolvent or bankrupt; (l) Any other change in the condition (financial or otherwise), business operations, assets, earnings, business or prospects of the Corporation which, in the judgment of the Seller, has, or could reasonably be expected to have, a material adverse effect on the assets, business or operations of the Corporation; or (m) Any agreement, whether in writing or otherwise, for the Corporation to take any of the actions enumerated in this Section 3.20. 3.21 TAX MATTERS. (a) All federal, state and local tax returns and tax reports required as of the date hereof to be filed by the Corporation for taxable periods ending prior to the date hereof have been duly and timely filed prior to the due date thereof (as such due date may have been lawfully extended) by the Corporation with the appropriate governmental agencies, and all such returns and reports are true, correct and complete. (b) All federal, state and local income, profits, franchise, sales, use, occupation, property, excise, payroll, withholding, employment, estimated and other taxes of any nature, including interest, penalties and other additions to such taxes ("TAXES"), payable by, or due from, the Corporation for all periods prior to the date hereof have been fully paid or adequately reserved for by the Corporation or, with respect to Taxes required to be accrued, the Corporation has properly accrued or will properly accrue such Taxes in the ordinary course of business consistent with past practice of the Corporation. (c) Set forth on Schedule 3.21 hereto are the tax years for which the federal income tax returns of the Corporation have been examined by the Internal Revenue Service ("IRS") and accepted. Except as set forth on Schedule 3.21 hereto, the Corporation has not received any notice of any assessed or proposed claim or deficiency against it in respect of, or of any present dispute between it and any governmental agency concerning, any Taxes. Except as set forth on Schedule 3.21 hereto, no examination or audit of any tax return or report of the Corporation by any applicable taxing authority is currently in progress and there are no outstanding agreements or waivers extending the statutory period of limitation applicable to any tax return or report of the Corporation. Copies of all federal, state and local tax returns and reports required to be filed by the Corporation since the date of its incorporation (i.e., for the years ended 1997, 1996, 1995 and 1994), together with all schedules and attachments thereto, have been delivered by the Seller to the Buyer. 14 (d) The Corporation is not now, and has never been, a member of a consolidated group for federal income tax purposes or a consolidated, combined or similar group for state tax purposes. No consent under Code Section 341 has been made affecting the Corporation. The Corporation is not a party to any agreement or arrangement that would result in the payment of any "excess parachute payments" under Code Section 280G. The Corporation is not required to make any adjustment under Code Section 481(a). No power of attorney relating to Taxes is currently in effect affecting the Corporation. 3.22 COMPLIANCE WITH LAWS, ETC. The Corporation has conducted its operations and business in compliance with, and all of the Assets (including all of the Real Property) comply with, (i) all applicable laws, rules, regulations and codes (including, without limitation, any laws, rules, regulations and codes relating to anticompetitive practices, contracts, discrimination, employee benefits, employment, health, safety, fire, building and zoning, but excluding Environmental Laws which are the subject of Section 3.36 hereof) and (ii) all applicable orders, rules, writs, judgments, injunctions, decrees and ordinances. The Corporation has not received any notification of any asserted present or past failure by it to comply with such laws, rules or regulations, or such orders, writs, judgments, injunctions, decrees or ordinances. Set forth on Schedule 3.22 hereto are all orders, writs, judgments, injunctions, decrees and other awards of any court or governmental agency applicable to the Corporation or its business or operations. The Seller has delivered to the Buyer copies of all reports, if any, of the Corporation required to be submitted under the Federal Occupational Safety and Health Act of 1970, as amended, and under all other applicable health and safety laws and regulations. The deficiencies, if any, noted on such reports have been corrected by the Corporation and any deficiencies noted by inspection through the Closing Date will have been corrected by the Corporation by the Closing Date. 3.23 LITIGATION REGARDING THE CORPORATION. Except as set forth on Schedule 3.23 hereto, there are no actions, suits, claims, investigations or legal, administrative or arbitration proceedings pending, or, to the Seller's knowledge, threatened or probable of assertion, against the Corporation or relating to its assets, business or operations or the transactions contemplated by this Agreement, and the Seller does not know of any basis for the institution of any such suit or proceeding. No order, writ, judgment, injunction, decree or similar command of any court or any governmental or administrative agency or other body has been entered against or served upon the Corporation relating to the Corporation or its assets, business or operations. 3.24 PERMITS, ETC. Set forth on Schedule 3.24 hereto is a list of all governmental licenses, permits, approvals, certificates of inspection and other authorizations, filings and registrations that are necessary for the Corporation to own and operate its business as presently conducted (collectively, the "PERMITS"). All such Permits have been duly and lawfully secured or made by the Corporation and are in full force and effect. There is no proceeding pending, or, to the Seller's knowledge, threatened or probable of assertion, to revoke or limit any such Permit. None of the transactions contemplated by this Agreement will terminate, violate or limit the effectiveness of any such Permit. 3.25 EMPLOYEES; LABOR RELATIONS. As of the date hereof, the Corporation employed a total of approximately 110 employees. As of the date hereof, (a) the Corporation is not delinquent in the payment (i) to or on behalf of its past or present employees of any wages, salaries, commissions, bonuses, benefit plan contributions or other compensation for all periods 15 prior to the date hereof, or (ii) of any amount which is due and payable to any state or state fund pursuant to any workers' compensation statute, rule or regulation or any amount which is due and payable to any workers' compensation claimant; (b) there are no collective bargaining agreements currently in effect between the Corporation and labor unions or organizations representing any employees of the Corporation; (c) no collective bargaining agreement is currently being negotiated by the Corporation; (d) to the knowledge of the Seller, there are no union organizational drives in progress and there has been no formal or informal request to the Corporation for collective bargaining or for an employee election from any union or from the National Labor Relations Board; and (e) no dispute exists between the Corporation and any of its sales representatives or, to the knowledge of the Seller, between any such sales representatives with respect to territory, commissions, products or any other terms of their representation. 3.26 COMPENSATION. Schedule 3.26 contains a schedule of all employees (including sales representatives) and consultants of the Corporation whose individual cash compensation for the year ended December 31, 1997, is in excess of $100,000, together with the amount of total compensation paid to each such person for the twelve month period ended December 31, 1997 and the current aggregate base salary or hourly rate (including any bonus or commission) for each such person. 3.27 EMPLOYEE BENEFITS. (a) The Seller has listed on Schedule 3.27 and has delivered to the Buyer true and complete copies of all Employee Plans (as defined below) and related documents, established, maintained or contributed to by the Corporation (which shall include for this purpose and for the purpose of all of the representations in this Section 3.27, the Seller and all employers, whether or not incorporated, that are treated together with the Corporation as a single employer with the meaning of Section 414 of the Code). The term "EMPLOYEE PLAN" shall include all plans described in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and also shall include, without limitation, any deferred compensation, stock, employee or retiree pension benefit, welfare benefit or other similar fringe or employee benefit plan, program, policy, contract or arrangement, written or oral, qualified or nonqualified, funded or unfunded, foreign or domestic, covering employees or former employees of the Corporation and maintained or contributed to by the Corporation. (b) Where applicable, each Employee Plan (i) has been administered in material compliance with the terms of such Employee Plan and the requirements of ERISA and the Code; and (ii) is in material compliance with the reporting and disclosure requirements of ERISA and the Code. The Corporation does not maintain or contribute to, and has never maintained or contributed to, an Employee Plan subject to Title IV of ERISA or a "multiemployer plan." There are no facts relating to any Employee Plan that (i) have resulted in a "prohibited transaction" of a material nature or have resulted or is reasonably likely to result in the imposition of a material excise tax, penalty or liability pursuant to Section 4975 of the Code, (ii) have resulted in a material breach of fiduciary duty or violation of Part 4 of Title I of ERISA, or (iii) have resulted or could result in any material liability (whether or not asserted as of the date hereof) of the Corporation or any ERISA affiliate pursuant to Section 412 of the Code arising under or related to any event, act or omission occurring on or prior to the date hereof. Each Employee Plan that is intended to qualify under Section 401(a) or to be exempt under Section 16 501(c)(g) of the Code is so qualified or exempt as of the date hereof in each case as such Employee Plan has received favorable determination letters from the Internal Revenue Service with respect thereto. To the knowledge of the Seller, the amendments to and operation of any Employee Plan subsequent to the issuance of such determination letters do not adversely affect the qualified status of any such Employee Plan. No Employee Plan has an "accumulated funding deficiency" as of the date hereof, whether or not waived, and no waiver has been applied for. The Corporation has made no promises or incurred any liability under any Employee Plan or otherwise to provide health or other welfare benefits to former employees of the Corporation, except as specifically required by law. There are no pending or, to the best knowledge of the Seller, threatened claims (other than routine claims for benefit) or lawsuits with respect to any of the Corporation's Employee Plans. As used in this Section 3.27, all technical terms enclosed in quotation marks shall have the meaning set forth in ERISA. 3.28 POWERS OF ATTORNEY. There are no persons, firms, associations, corporations or business organizations or entities holding general or special powers of attorney from the Corporation. 3.29 MATERIAL AGREEMENTS. (a) LIST OF MATERIAL AGREEMENTS. Set forth on Schedule 3.29(a) hereto is a list or, where indicated, a brief description of all leases and all other contracts, agreements, documents, instruments, guarantees, plans, understandings or arrangements, written or oral, which are material to the Corporation or its business or assets (collectively, the "MATERIAL AGREEMENTS"). True copies of all written Material Agreements and written summaries of all oral Material Agreements described or required to be described on Schedule 3.29(a) have been furnished to the Buyer. (b) PERFORMANCE, DEFAULTS, ENFORCEABILITY. The Corporation has in all material respects performed all of its obligations required to be performed by it to the date hereof, and is not in default or alleged to be in default in any material respect, under any Material Agreement, and there exists no event, condition or occurrence which, after notice or lapse of time or both, would constitute such a default. To the knowledge of the Seller, no other party to any Material Agreement is in default in any respect of any of its obligations thereunder. Each of the Material Agreements is valid and in full force and effect and enforceable against the parties thereto in accordance with their respective terms, and, except as set forth in Schedule 3.29(b) hereto, the consummation of the transactions contemplated by this Agreement will not (i) require the consent of any party thereto or (ii) constitute an event permitting termination thereof. 3.30 BROKERS' OR FINDERS' FEES, ETC. No agent, broker, investment banker, person or firm acting on behalf of the Corporation or the Seller or any person, firm or corporation affiliated with the Seller or under his authority is or will be entitled to any brokers' or finders' fee or any other commission or similar fee directly or indirectly from any of the parties hereto in connection with the sale of the Shares contemplated hereby, other than the fee or commission, to be paid solely by the Seller, to NCM Associates, Inc. 17 3.31 BANK ACCOUNTS, CREDIT CARDS, SAFE DEPOSIT BOXES AND CELLULAR TELEPHONES. Schedule 3.31 hereto lists all bank accounts, credit cards and safe deposit boxes in the name of, or controlled by, the Corporation, and all cellular telephones provided and/or paid for by the Corporation, and details about the persons having access to or authority over such accounts, credit cards, safe deposit boxes and cellular telephones. 3.32 INSURANCE. (a) Schedule 3.32(a) hereto contains a list of all policies of liability, theft, fidelity, life, fire, product liability, workmen's compensation, health and any other insurance and bonds maintained by, or on behalf of, the Corporation on its properties, operations, inventories, assets, business or personnel (specifying the insurer, amount of coverage, type of insurance, policy number and any pending claims in excess of $5,000 thereunder). Each such insurance policy identified therein is and shall remain in full force and effect on and as of the Closing Date and the Corporation is not in default with respect to any provision contained in any such insurance policy and has not failed to give any notice or present any claim under any such insurance policy in a due and timely fashion. The insurance maintained by, or on behalf of, the Corporation is adequate in accordance with the standards of business of comparable size in the industry in which the Corporation operates and no notice of cancellation or termination has been received with respect to any such policy. The Corporation has not, during the last three (3) fiscal years, been denied or had revoked or rescinded any policy of insurance. (b) Set forth on Schedule 3.32(b) hereto is a summary of information pertaining to material property damage and personal injury claims in excess of $5,000 against the Corporation during the past five (5) years, all of which are fully satisfied or are being defended by the insurance carrier and involve no exposure to the Corporation. 3.33 WARRANTIES. Set forth on Schedule 3.33 hereto are descriptions or copies of the forms of all express warranties and disclaimers of warranty made by the Corporation (separate and distinct from any applicable manufacturers', suppliers' or other third-parties' warranties or disclaimers of warranties) during the past five (5) years to customers or users of the vehicles, parts, products or services of the Corporation. There have been no breach of warranty or breach of representation claims against the Corporation during the past five (5) years which have resulted in any cost, expenditure or exposure to the Corporation of more than $100,000 individually or in the aggregate. 3.34 DIRECTORS AND OFFICERS. Set forth on Schedule 3.34 hereto is a true and correct list of the names and titles of each director and officer of the Corporation. 3.35 SUPPLIERS AND CUSTOMERS. The Corporation is not required to provide bonding or any other security arrangements in connection with any transactions with any of its respective customers and suppliers. To the knowledge of the Seller, no such supplier, customer or creditor intends or has threatened, or reasonably could be expected, to terminate or modify any of its relationships with the Corporation. 18 3.36 ENVIRONMENTAL MATTERS. (a) For purposes of this Section 3.36, the following terms shall have the following meaning: (i) "ENVIRONMENTAL LAW" means all present and future federal, state and local laws, statutes, regulations, rules, ordinances and common law, and all judgments, decrees, orders, agreements, or permits, issued, promulgated, approved or entered thereunder by any government authority relating to pollution, Hazardous Materials, worker safety or protection of human health or the environment. (ii) "HAZARDOUS MATERIALS" means any waste, pollutant, chemical, hazardous material, hazardous substance, toxic substance, hazardous waste, special waste, solid waste, petroleum or petroleum-derived substance or waste (regardless of specific gravity), or any constituent or decomposition product of any such pollutant, material, substance or waste, including, but not limited to, any hazardous substance or constituent contained within any waste and any other pollutant, material, substance or waste regulated under or as defined by any Environmental Law. (b) The Corporation has obtained all permits, licenses and other authorizations or approvals required under Environmental Laws for the conduct and operation of the Assets and the business of the Corporation ("ENVIRONMENTAL PERMITS"). All such Environmental Permits are in good standing, the Corporation is and has been in compliance with the terms and conditions of all such Environmental Permits, and no appeal or any other action is pending or threatened to revoke any such Environmental Permit. (c) The Corporation and its business, operations and assets are and have been in compliance with all Environmental Laws. (d) Neither the Corporation nor the Seller has received any written or oral order, notice, complaint, request for information, claim, demand or other communication from any government authority or other person, whether based in contract, tort, implied or express warranty, strict liability, or any other common law theory, or any criminal or civil statute, arising from or with respect to (i) the presence, release or threatened release of any Hazardous Material or any other environmental condition on, in or under the Real Property or any other property formerly owned, used or leased by the Corporation, (ii) any other circumstances forming the basis of any actual or alleged violation by the Corporation or the Seller of any Environmental Law or any liability of the Corporation or the Seller under any Environmental Law, (iii) any remedial or removal action required to be taken by the Corporation or the Seller under any Environmental Law, or (iv) any harm, injury or damage to real or personal property, natural resources, the environment or any person alleged to have resulted from the foregoing, nor is the Seller aware of any facts which might reasonably give rise to such notice or communication. Neither the Corporation nor the Seller has entered into any agreements concerning any removal or remediation of Hazardous Materials. (e) No lawsuits, claims, civil actions, criminal actions, administrative proceedings, investigations or enforcement or other actions are pending or threatened under any Environmental Law with respect to the Corporation, the Seller or the Real Property. (f) No Hazardous Materials are or have been released, discharged, spilled or disposed of onto, or migrated onto, the Real Property or any other property previously owned, 19 operated or leased by the Corporation, and no environmental condition exists (including, without limitation, the presence, release, threatened release or disposal of Hazardous Materials) related to the Real Property, to any property previously owned, operated or leased by the Corporation, or to the Corporation's past or present operations, which would constitute a violation of any Environmental Law or otherwise give rise to costs, liabilities or obligations under any Environmental Law. (g) Neither the Corporation nor the Seller, nor any of their respective predecessors in interest, has transported or disposed of, or arranged for the transportation or disposal of, any Hazardous Materials to any location (i) which is listed on the National Priorities List, the CERCLIS list under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or any similar federal, state or local list, (ii) which is the subject of any federal, state or local enforcement action or other investigation, or (iii) about which either the Corporation or the Seller has received or has reason to expect to receive a potentially responsible party notice or other notice under any Environmental Law. (h) No environmental lien has attached or is threatened to be attached to the Real Property. (i) No employee of the Corporation in the course of his or her employment with the Corporation has been exposed to any Hazardous Materials or other substance, generated, produced or used by the Corporation which could give rise to any claim (whether or not such claim has been asserted) against the Corporation. (j) Except as set forth on Schedule 3.36 hereto, the Real Property does not contain any: (i) septic tanks into which process wastewater or any Hazardous Materials have been disposed; (ii) asbestos; (iii) polychlorinated biphenyls (PCBs); (iv) underground injection or monitoring wells; or (v) underground storage tanks. (k) Except as set forth on Schedule 3.36, there have been no environmental studies or reports made relating to the Real Property or any other property or facility previously owned, operated or leased by the Corporation. (l) The Corporation has not agreed to assume, defend, undertake, guarantee, or provide indemnification for, any liability, including, without limitation, any obligation for corrective or remedial action, of any other person under any Environmental Law for environmental matters or conditions. 3.37 BUSINESS GENERALLY. The Seller is not aware of the existence of any conditions, including, without limitation, any actual or potential competitive factors in the markets in which the Corporation participates, which have not been disclosed in writing to the Buyer and which could reasonably be expected to have an adverse effect on the business and operations of the Corporation, other than general business and economic conditions generally affecting the industry and markets in which the Corporation participates. 3.38 MISSTATEMENTS AND OMISSIONS. No representation and warranty by the Seller contained in this Agreement, and no statement contained in any certificate or Schedule furnished 20 or to be furnished by the Seller to the Buyer in connection with this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make such representation and warranty or such statement not misleading. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE BUYER The Buyer hereby represents and warrants to the Seller as follows: 4.1 ORGANIZATION AND GOOD STANDING. The Buyer is a corporation duly organized and validly existing and in good standing under the laws of the State of Delaware. 4.2 BUYER'S POWER AND AUTHORITY; CONSENTS AND APPROVALS. (a) The Buyer has all requisite corporate power and authority to execute and deliver this Agreement and the other agreements, documents and instruments to be executed and delivered by the Buyer in connection herewith, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. (b) Except as set forth in Schedule 4.2(b) hereto, no authorization, approval or consent of, or notice to or filing or registration with, any governmental agency or body, or any other third party, is required in connection with the execution and delivery by the Buyer of this Agreement and the other agreements, documents and instruments to be executed by the Buyer in connection herewith, the consummation by the Buyer of the transactions contemplated hereby or thereby or the performance by the Buyer of its obligations hereunder and thereunder. 4.3 EXECUTION AND ENFORCEABILITY. This Agreement and the other agreements, documents and instruments to be executed and delivered by the Buyer in connection herewith, and the consummation by the Buyer of the transactions contemplated hereby and thereby, have been duly and validly authorized, executed and delivered by all necessary corporate action on the part of the Buyer and this Agreement constitutes, and the other agreements, documents and instruments to be executed and delivered by the Buyer in connection herewith, when executed and delivered by the Buyer, shall constitute the legal, valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their respective terms, except to the extent that enforceability may be limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally and general equity principles. 4.4 LITIGATION REGARDING BUYER. There are no actions, suits, claims, investigations or legal, administrative or arbitration proceedings pending or, to the Buyer's knowledge, threatened or probable of assertion against the Buyer relating to this Agreement or the transactions contemplated hereby before any court, governmental or administrative agency or other body, and no judgment, order, writ, injunction, decree or other similar command of any court or governmental or administrative agency or other body has been entered against or served upon the Buyer relating to this Agreement or the transactions contemplated hereby. 21 4.5 NO VIOLATION; CONFLICTS. The execution and delivery by the Buyer of this Agreement and the other agreements, documents and instruments to be executed and delivered by the Buyer in connection herewith, the consummation by the Buyer of the transactions contemplated hereby and thereby and the performance by the Buyer of its obligations hereunder and thereunder do not and will not (a) conflict with or violate any of the terms of the Certificate of Incorporation or By-Laws of the Buyer, or (b) violate or conflict with any domestic law, ordinance, rule or regulation, or any judgement, order, writ, injunction or decree of any court, administrative or governmental agency or other body, material to the Buyer. 4.6 BROKERS' OR FINDERS' FEES, ETC. No agent, broker, investment banker, person or firm acting on behalf of the Buyer or any person, firm or corporation affiliated with the Buyer or under its authority is or will be entitled to any brokers' or finders' fee or any other commission or similar fee directly or indirectly from any of the parties hereto in connection with the sale of the Shares contemplated hereby. 4.7 MISSTATEMENTS AND OMISSIONS. No representation and warranty by the Buyer contained in this Agreement, and no statement contained in any certificate or Schedule furnished or to be furnished by the Buyer to the Seller in connection with this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make such representation and warranty or such statement not misleading. ARTICLE 5 PRE-CLOSING COVENANTS OF THE SELLER The Seller hereby covenants and agrees that, from and after the date hereof until the Closing: 5.1 PROVIDE ACCESS TO INFORMATION; COOPERATION WITH BUYER. (a) ACCESS. The Seller shall afford, and cause the Corporation to afford, to the Buyer, its attorneys, accountants, and representatives, free and full access at all reasonable times, and upon reasonable prior notice, to the properties, books and records of the Corporation, and to interview personnel, suppliers and customers of the Corporation, in order that the Buyer may have a full opportunity to make such investigation (including the Environmental Audit contemplated by Section 5.11 below) as it shall reasonably desire of the assets, business and operations of the Corporation (including, without limitation, any appraisals or inspections thereof), and provide to the Buyer and its representatives such additional financial and operating data and other information as to the business and properties of the Corporation as the Buyer shall from time to time reasonably request. (b) COOPERATION IN OBTAINING CONSENTS. The Seller shall use reasonable best efforts in cooperating with the Buyer in the preparation of and delivery to all applicable automobile manufacturers or distributors, as soon as practicable after the date hereof, of an application and other information necessary to obtain such automobile manufacturer's or distributor's consent to or the approval of the transactions contemplated by this Agreement. 22 5.2 OPERATION OF BUSINESS OF THE CORPORATION. The Seller shall cause the Corporation to (a) maintain its corporate existence in good standing, (b) operate its business substantially as presently operated and only in the ordinary course and consistent with past operations and its obligations under any existing agreements with all applicable automobile manufacturers or distributors, (c) use its best efforts to preserve intact its present business organizations and employees and its relationships with persons having business dealings with them, including, but not limited to, all applicable automobile manufacturers or distributors and any floor plan financing creditors, (d) comply in all respects with all applicable laws, rules and regulations, (e) maintain its insurance coverages, (f) pay all Taxes, charges and assessments when due, subject to any valid objection or contest of such amounts asserted in good faith and adequately reserved against, (g) make all debt service payments when contractually due and payable, (h) pay all accounts payable and other current liabilities when due, (i) maintain the Employee Plans and each plan, agreement and arrangement listed on Schedule 3.27, and (j) maintain its property, plant and equipment in good operating condition in accordance with industry standards taking into account the age thereof. 5.3 BOOKS OF ACCOUNT. The Seller shall cause the Corporation to maintain its books and records of account in the usual, regular and ordinary manner. 5.4 EMPLOYEES. The Seller shall (i) use his reasonable best efforts to encourage such personnel of the Corporation as the Buyer may designate in writing to remain employees of the Corporation after the date of the Closing, and (ii) not take any action, or permit the Corporation to take any action, to encourage any of the personnel of the Corporation to leave their positions with the Corporation. 5.5 CERTAIN PROHIBITIONS. The Seller shall not permit the Corporation to (i) issue any equity or debt security or any options or warrants, (ii) enter into any subscriptions, agreements, plans or other commitments pursuant to which the Corporation is or may become obligated to issue any of its debt or equity securities, (iii) otherwise change or modify its capital structure, (iv) engage in any reorganization or similar transaction, (v) sell or otherwise dispose of any of its assets, other than sales of inventory in the ordinary course of business, (vi) declare or make payment of any dividend or other distribution in respect of its capital stock or redeem, repurchase or otherwise acquire any of its capital stock, or (vii) agree to take any of the foregoing actions. 5.6 OTHER CHANGES. The Seller shall not permit the Corporation to take, cause, agree to take or cause to occur any of the actions or events set forth in Section 3.20 of this Agreement. 5.7 ADDITIONAL INFORMATION. The Seller shall furnish and cause the Corporation to furnish to the Buyer such additional information with respect to any matters or events arising or discovered subsequent to the date hereof which, if existing or known on the date hereof, would have rendered any representation or warranty made by the Seller or any information contained in any Schedule hereto or in other information supplied in connection herewith then inaccurate or incomplete. The receipt of such additional information by the Buyer shall not operate as a waiver by the Buyer of the obligations of the Seller to satisfy the conditions to Closing set forth in Section 7.1 hereof. 23 5.8 PUBLICITY. Except as may be required by law or the applicable rules or regulations of any securities exchange, the Seller shall not (i) make or permit the Corporation to make any press release or other public announcement relating to this Agreement or the transactions contemplated hereby, without the prior written approval of the Buyer, and (ii) otherwise disclose the existence and nature of their discussions or negotiations regarding the transactions contemplated hereby to any person or entity other than their accountants, attorneys and similar professionals, all of whom shall be subject to this nondisclosure obligation as agents of the Seller, as the case may be. The Seller shall cooperate with the Buyer in the preparation and dissemination of any public announcements of the transactions contemplated by this Agreement. 5.9 OTHER NEGOTIATIONS. The Seller shall not pursue, initiate, encourage or engage in, nor shall any of their respective Affiliates or agents pursue, initiate, encourage or engage in, and the Seller shall cause the Corporation and its Affiliates, directors, officers and agents not to pursue, initiate, encourage or engage in, any negotiations or discussions with, or provide any information to, any other person or entity (other than the Buyer and its representatives and Affiliates) regarding the sale of the assets or capital stock of the Corporation or any merger or similar transaction involving the Corporation. 5.10 CLOSING CONDITIONS. The Seller shall use all reasonable best efforts to satisfy promptly the conditions to Closing set forth in Article 7 hereof required herein to be satisfied by the Seller prior to the Closing. 5.11 ENVIRONMENTAL AUDIT. The Seller shall cause the Corporation to allow an environmental consulting firm selected by the Buyer (the "ENVIRONMENTAL AUDITOR") to have prompt access to the Real Property in order to conduct an environmental investigation, satisfactory to the Buyer in scope (such scope being sufficient to result in a Phase I environmental audit report and a Phase II environmental audit report, if desired by the Buyer), of, and to prepare a report with respect to, the Real Property (the "ENVIRONMENTAL AUDIT"). The Seller shall cause the Corporation to provide to the Environmental Auditor: (i) reasonable access to all its existing records concerning the matters which are the subject of the Environmental Audit; and (ii) reasonable access to the employees of the Corporation and the last known addresses of former employees of the Corporation who are most familiar with the matters which are the subject of the Environmental Audit (the Seller agreeing to use reasonable efforts to have such former employees respond to any reasonable requests or inquiries by the Environmental Auditor). The Seller shall otherwise cooperate and cause the Corporation to cooperate with the Environmental Auditor in connection with the Environmental Audit. The Buyer and the Seller shall each bear 50% of the costs, fees and expenses incurred in connection with the preparation of the Environmental Audit. 5.12 AUDITED FINANCIAL STATEMENTS. The Seller shall allow, cooperate with and assist Buyer's accountants, and shall instruct the Corporation's accountants to cooperate, in the preparation of audited financial statements of the Corporation as necessary for any required filings by the Buyer with the Securities and Exchange Commission or with the Buyer's lenders; PROVIDED that the expense of such audit shall be borne by the Buyer. 24 5.13 HART-SCOTT-RODINO. Subject to the determination by the Buyer that any of the following actions is not required, the Seller shall promptly prepare and file Notification and Report Forms under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT") with the Federal Trade Commission (the "FTC") and the Antitrust Division of the Department of Justice (the "ANTITRUST DIVISION"), and respond as promptly as practicable to all inquiries received from the FTC or the Antitrust Division for additional information or documentation. ARTICLE 6 PRE-CLOSING COVENANTS OF BUYER The Buyer hereby covenants and agrees that, from and after the date hereof until the Closing: 6.1 PUBLICITY. Except as may be required by law or by the rules of the New York Stock Exchange, or as necessary in connection with the transactions contemplated hereby, the Buyer shall not (i) make any press release or other public announcement relating to this Agreement or the transactions contemplated hereby, without the prior written approval of the Seller, or (ii) otherwise disclose the existence and nature of its discussions or negotiations regarding the transactions contemplated hereby to any person or entity other than its accountants, attorneys and similar professionals, all of whom shall be subject to this nondisclosure obligation as agents of the Buyer. 6.2 CLOSING CONDITIONS. The Buyer shall use all reasonable best efforts to satisfy promptly the conditions to Closing set forth in Article 8 hereof required herein to be satisfied by the Buyer prior to the Closing. 6.3 APPLICATION TO AUTOMOBILE MANUFACTURERS AND DISTRIBUTORS. Subject to the reasonable cooperation of the Seller, the Buyer shall provide to all applicable automobile manufacturers and distributors as promptly as practicable after the execution and delivery of this Agreement any application or other information with respect to such application necessary in connection with the seeking of the consents of such manufacturers and distributors to the transactions contemplated by this Agreement. 6.4 HART-SCOTT-RODINO. Subject to the determination by the Buyer that any of the following actions is not required, the Buyer shall promptly prepare and file Notification and Report Forms under the HSR Act with the FTC and the Antitrust Division, respond as promptly as practicable to all inquiries received from the FTC or the Antitrust Division for additional information or documentation, and the Buyer shall pay all filing fees in connection therewith. 6.5 ACCESS. The Buyer shall afford to the Seller, his attorneys, accountants, and representatives, free and full access at all reasonable times, and upon reasonable prior notice, to the properties, books and records of the Buyer, and to interview personnel, suppliers and customers of the Buyer, in order that the Seller may have a full opportunity to make such investigation as he shall reasonably desire of the assets, business and operations of the Buyer. 25 ARTICLE 7 CONDITIONS TO OBLIGATIONS OF THE BUYER AT THE CLOSING The obligations of the Buyer to perform this Agreement at the Closing are subject to the satisfaction at or prior to the Closing of the following conditions, unless waived in writing by the Buyer: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties made by the Seller in this Agreement shall be true and correct in all material respects at and as of the date of this Agreement and at and as of the Closing as though made at and as of the Closing. 7.2 PERFORMANCE OF OBLIGATIONS OF THE SELLER. The Seller shall have performed all obligations required to be performed by the Seller under this Agreement, and complied with all covenants for which compliance by the Seller is required under this Agreement, prior to or at the Closing, including, without limitation, delivery of the stock certificates and stock powers for the Shares described in Section 1.3 hereof. 7.3 CLOSING DOCUMENTATION. The Buyer shall have received the following documents, agreements and instruments from the Seller: (a) a certificate signed by the Seller and dated the date of the Closing certifying as to the satisfaction of the conditions set forth in Sections 7.1 and 7.2 hereof; (b) such duly signed resignations of directors and officers of the Corporation as the Buyer shall have previously requested; (c) an opinion of Daniel C. Pappas, P.C., counsel for the Seller, dated the date of the Closing and addressed to the Buyer, in form and substance reasonably acceptable to the Buyer and its counsel; (d) copies of all authorizations, approvals, consents, notices, registrations and filings referred to in Schedules 3.2(b), 3.10 and 3.29(b) hereof including, without limitation, any required consents of the landlords under the Leases necessary to enable the Corporation to continue as the tenant thereunder at the same lease rentals and on the same terms as existed prior to the Closing; (e) a certificate dated as of a recent date from (i) the Secretary of State of the State of Texas to the effect that the Corporation is duly incorporated and in good standing in such state and stating that the Corporation owes no franchise taxes in such state and listing all documents of the Corporation on file with said Secretary of State, and (ii) one or more certificates of officials from the jurisdictions listed on Schedule 3.7 hereto to the effect that the Corporation is duly qualified as a foreign corporation and is in good standing in such jurisdictions; (f) a copy of the Corporation's Articles of Incorporation, including all amendments thereto, certified as of a recent date by the Secretary of State of the State of Texas; 26 (g) evidence, reasonably satisfactory to the Buyer, of the authority and incumbency of the persons acting on behalf of the Corporation in connection with the execution of any document delivered in connection with this Agreement; (h) Uniform Commercial Code Search Reports on Form UCC-11 with respect to the Corporation from the states and local jurisdictions where the principal places of business of the Corporation and its assets are located; (i) a certificate of the Seller as to the Seller's non-foreign status in appropriate form; (j) the corporate minute books and stock record books of the Corporation, and all other books and records of, or pertaining to, the business and operations of the Corporation; (k) estoppel letter[s] of lender[s] to the Corporation, in form and substance reasonably satisfactory to the Buyer, with respect to amounts owing by the Corporation as of the Closing; and (l) such other instruments and documents as the Buyer shall reasonably request not inconsistent with the provisions hereof. 7.4 APPROVAL OF LEGAL MATTERS. The form of all instruments, certificates and documents to be executed and delivered by the Seller to the Buyer pursuant to this Agreement and all legal matters in respect of the transactions as herein contemplated shall be reasonably satisfactory to the Buyer and its counsel, none of whose approval shall be unreasonably withheld or delayed. 7.5 NO LITIGATION. No action, suit or other proceeding shall be pending or threatened before any court, tribunal or governmental authority seeking or threatening to restrain or prohibit the consummation of the transactions contemplated by this Agreement, or seeking to obtain damages in respect thereof, or involving a claim that consummation thereof would result in the violation of any law, decree or regulation of any governmental authority having appropriate jurisdiction, and no order, decree or ruling of any governmental authority or court shall have been entered challenging the legality, validity or propriety of, or otherwise relating to, this Agreement or the transactions contemplated hereby, or prohibiting, restraining or otherwise preventing the consummation of the transactions contemplated hereby. 7.6 NO MATERIAL ADVERSE CHANGE OR UNDISCLOSED LIABILITY. There shall have been no material adverse change or development in the business, prospects, properties, earnings, results of operations or financial condition of the Corporation, or any of its assets. 7.7 NO ADVERSE LAWS. There shall not have been enacted, adopted or promulgated any statute, rule, regulation or order which materially adversely affects the business or assets of the Corporation. 27 7.8 AFFILIATE AND OTHER TRANSACTIONS. All amounts owing to the Corporation from the Seller or any Affiliate thereof or from any of the Corporation's officers and employees shall have either been paid in full or written off by the Corporation, in either case, prior to the Effective Closing Date. 7.9 ESCROW AGREEMENT. The Seller and the Escrow Agent shall have duly executed and delivered to the Buyer the Escrow Agreement. 7.10 FORD MOTOR COMPANY APPROVALS. Ford Motor Company shall have given any required approval of the transfer of the Shares to the Buyer and shall have given any required approval of O. Bruton Smith or his designee as the authorized dealer operator of the Corporation's Ford dealership franchise, and Ford Motor Company shall have executed any required dealer agreements and/or amendments or supplements thereto in connection with the foregoing. 7.11 NON-COMPETITION AGREEMENT. The Seller shall have duly executed and delivered to the Buyer and the Corporation the Non-Competition Agreement. 7.12 EMPLOYMENT AGREEMENT. The Seller shall have duly executed and delivered to the Buyer the Employment Agreement. 7.13 CANCELLATION OF STOCK OPTIONS. All outstanding options, warrants, "phantom" stock options and other plans, agreements or arrangements of the Corporation with respect to the purchase, or the issuance of, any capital stock or other securities of the Corporation shall have been canceled and terminated prior to the Closing at no expense to the Buyer, and the Buyer shall have received reasonably satisfactory evidence thereof. 7.14 AUDITED FINANCIAL STATEMENTS. The Buyer shall have completed preparation of such audited financial statements of the Corporation as may be required by applicable regulations of the Securities and Exchange Commission or by any of the Buyer's lenders. 7.15 HART-SCOTT-RODINO WAITING PERIOD. All applicable waiting periods under the HSR Act shall have expired without any indication by the Antitrust Division or the Federal Trade Commission that either of them intends to challenge the transactions contemplated hereby or, if any such challenge or investigation is made or commenced, the conclusion of such challenge or investigation permits the transactions contemplated hereby in all material respects. ARTICLE 8 CONDITIONS TO OBLIGATIONS OF THE SELLER AT THE CLOSING The obligation of the Seller to perform this Agreement at the Closing is subject to the satisfaction at or prior to the Closing of the following conditions, unless waived in writing by the Seller: 28 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties made by the Buyer in this Agreement shall be true and correct in all material respects at and as of the date of this Agreement and at and as of the Closing as though made at and as of the Closing. 8.2 PERFORMANCE OF OBLIGATIONS OF THE BUYER. The Buyer shall have performed all obligations required to be performed by it under this Agreement, and complied with all covenants for which compliance by it is required under this Agreement, prior to or at the Closing, including, without limitation, payment of the Initial Purchase Price pursuant to Section 1.2(b) hereof. 8.3 CLOSING DOCUMENTATION. The Seller shall have received the following documents, agreements and instruments from the Buyer: (a) a certificate signed by a duly authorized signatory of the Buyer and dated as of the Closing Date certifying as to the satisfaction of the conditions set forth in Sections 8.1 and 8.2 hereof; (b) an opinion of Parker, Poe, Adams & Bernstein L.L.P., counsel for the Buyer, dated as of the Closing Date and addressed to the Seller, in form and substance reasonably satisfactory to the Seller and his counsel; (c) such resolutions of the Buyer, as sole shareholder of the Corporation, and the directors of the Corporation electing directors and appointing officers, respectively, of the Corporation, effective upon the Closing; (d) certificates dated as of a recent date from the Secretary of State of the State of Delaware to the effect that the Buyer is duly incorporated and in good standing in such state; (e) a copy of the Buyer's Certificate of Incorporation, including all amendments thereto, certified by the Secretary of State of the State of Delaware; (f) evidence, reasonably satisfactory to the Seller, of the authority and incumbency of the persons acting on behalf of the Buyer in connection with the execution of any document delivered in connection with this Agreement; and (g) such other instruments and documents as the Seller shall reasonably request not inconsistent with the provisions hereof. 8.4 APPROVAL OF LEGAL MATTERS. The form of all certificates, instruments and documents to be executed or delivered by the Buyer to the Seller pursuant to this Agreement and all legal matters in respect of the transactions as herein contemplated shall be reasonably satisfactory to the Seller and his counsel, none of whose approval shall be unreasonably withheld or delayed. 29 8.5 NO LITIGATION. No action, suit or other proceeding shall be pending or threatened before any court, tribunal or governmental authority seeking or threatening to restrain or prohibit the consummation of the transactions contemplated by this Agreement, or seeking to obtain substantial damages in respect thereof, or involving a claim that consummation thereof would result in the violation of any law, decree or regulation of any governmental authority having appropriate jurisdiction, and no order, decree or ruling of any governmental authority or court shall have been entered challenging the legality, validity or propriety of, or otherwise relating to, this Agreement or the transactions contemplated hereby, or prohibiting, restraining or otherwise preventing the consummation of the transactions contemplated hereby. 8.6 ESCROW AGREEMENT. The Buyer and the Escrow Agent shall have duly executed and delivered to the Seller the Escrow Agreement. 8.7 EMPLOYMENT AGREEMENT. The Corporation shall have duly executed and delivered to the Seller the Employment Agreement. 8.8 HART-SCOTT-RODINO WAITING PERIOD. All applicable waiting periods under the HSR Act shall have expired without any indication of the Antitrust Division or the Federal Trade Commission that either of them intends to challenge the transactions contemplated hereby, or, if any such challenge or investigation is made or commenced, the conclusion of such challenge or investigation permits the transactions contemplated hereby in all material respects. ARTICLE 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION, ETC. 9.1 SURVIVAL. All statements contained in any Schedule or certificate delivered hereunder or in connection herewith by or on behalf of any of the parties pursuant to this Agreement shall be deemed representations and warranties by the respective parties hereunder unless otherwise expressly provided herein. The representations and warranties of the Seller or the Buyer contained in this Agreement, including those contained in any Schedule or certificate delivered hereunder or in connection herewith, shall survive the Closing for a period of three years with the exception of (i) the representations and warranties of the Seller contained in Section 3.21, which shall survive the Closing until the expiration of the applicable tax statutes of limitation plus a period of sixty (60) days, and (ii) the representations and warranties of the Seller contained in Sections 3.11, 3.19 and 3.36, which shall survive the Closing indefinitely. As to each representation and warranty of the parties hereto, the date to which such representation and warranty shall survive is hereinafter referred to as the "SURVIVAL DATE". 9.2 AGREEMENT TO INDEMNIFY BY SELLER. Subject to the terms and conditions of Sections 9.4 and 9.5 hereof, the Seller hereby agrees to indemnify and save the Buyer, the Corporation and their respective shareholders, officers, directors, employees, successors and assigns (each, a "BUYER INDEMNITEE") harmless from and against, for and in respect of, any and all damages, losses, obligations, liabilities, demands, judgments, injuries, penalties, claims, actions or causes of action, encumbrances, costs, and expenses (including, without limitation, reasonable attorneys' fees and expert witness fees), suffered, sustained, incurred or required to 30 be paid by any Buyer Indemnitee (collectively, "BUYER'S DAMAGES") arising out of, based upon, in connection with, or as a result of: (a) the untruth, inaccuracy or breach of any representation and warranty of the Seller contained in or made pursuant to this Agreement, including in any Schedule or certificate delivered hereunder or in connection herewith, excluding any breach of representation and warranty contained in Section 3.19 or in the certificate of the Seller (regarding Affiliate Payables and Excluded Indebtedness contemplated by Section 1.2(b)(1) hereof); PROVIDED, HOWEVER, that with respect to the foregoing indemnification obligation of the Seller contained in this paragraph (a), the Seller shall not have any indemnification obligation until (and only to the extent that) Buyer's Damages in respect of all claims for indemnity pursuant to this paragraph (a) shall exceed a cumulative aggregate total of $50,000; (b) the untruth, inaccuracy or breach of any representation and warranty of the Seller contained in or made pursuant to Section 3.19, including in any Schedule or certificate delivered hereunder in connection therewith; (c) the Affiliate Payables and/or the Excluded Indebtedness; (d) the breach or nonfulfillment of any covenant or agreement of the Seller contained in this Agreement or in any other agreement, document or instrument delivered hereunder or pursuant hereto; (e) any loss of life, injury to persons or property, or damage to natural resources caused by the actual, alleged, or threatened release, storage, transportation, treatment or generation, of Hazardous Materials generated, stored, used, disposed of, treated, handled or shipped by the Corporation on or before the Closing Date; (f) any cleanup of Hazardous Materials released, disposed of or discharged: (i) on, beneath or adjacent to the Real Property prior to or on the date of the Closing; or (ii) at any other location if such substances were generated, used, stored, treated, transported or released by the Corporation prior to or on the Closing Date; (g) all known or unknown environmental liabilities and claims of the Corporation or arising out of the ownership the Shares prior to the Closing, including, without limitation, the presence, release or threatened release of Hazardous Materials and any liabilities or obligations arising under any Environmental Law, including but not limited to the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), as amended; or (h) any and all costs of installing pollution control equipment or other equipment to bring any of the Real Property into compliance with any Environmental Law if such equipment is installed because any of the Real Property was not in compliance with any Environmental Laws as of the date of the Closing. With respect to the Seller's obligations to pay Buyer's Damages pursuant to Section 9.2 of this Agreement, the Buyer shall be entitled (but shall not be obligated) to make 31 demand for payment under the Escrow Agreement and/or to postpone, offset and reduce the Contingent Purchase Price as provided in Section 9.7 below. 9.3 AGREEMENT TO INDEMNIFY BY BUYER. Subject to the terms and conditions of Sections 9.4 and 9.5 hereof, the Buyer hereby agrees to indemnify and save the Seller and his successors and assigns (each, a "SELLER INDEMNITEE") harmless from or against, for and in respect of, any and all damages, losses, obligations, liabilities, demands, judgments, injuries, penalties, claims, actions or causes of action, encumbrances, costs, and expenses (including, without limitation, reasonable attorneys' fees and expert witness fees) suffered, sustained, incurred or required to be paid by any Seller Indemnitee arising out of, based upon or in connection with or as a result of: (a) the untruth, inaccuracy or breach of any representation and warranty of the Buyer contained in or made pursuant to this Agreement, including in any Schedule or certificate delivered hereunder or in connection herewith; or (b) the breach or nonfulfillment of any covenant or agreement of the Buyer contained in this Agreement or in any other agreement, document or instrument delivered hereunder or pursuant hereto. 9.4 CLAIMS FOR INDEMNIFICATION. No claim for indemnification with respect to a breach of a representation and warranty shall be made under this Agreement after the applicable Survival Date unless prior to such Survival Date the Buyer Indemnitee or the Seller Indemnitee, as the case may be, shall have given the Seller or the Buyer, as the case may be, written notice of such claim for indemnification based upon actual loss sustained, or potential loss anticipated, as a result of the existence of any claim, demand, suit, or cause of action against such Buyer Indemnitee or Seller Indemnitee, as the case may be. 9.5 PROCEDURES REGARDING THIRD PARTY CLAIMS. The procedures to be followed by the Buyer and the Seller with respect to indemnification hereunder regarding claims by third persons which could give rise to an indemnification obligation hereunder shall be as follows: (a) Promptly after receipt by any Buyer Indemnitee or Seller Indemnitee, as the case may be, of notice of the commencement of any action or proceeding (including, without limitation, any notice relating to a tax audit) or the assertion of any claim by a third person which the person receiving such notice has reason to believe may result in a claim by it for indemnity pursuant to this Agreement, such person (the "INDEMNIFIED PARTY") shall give a written notice of such action, proceeding or claim to the party against whom indemnification pursuant hereto is sought (the "INDEMNIFYING PARTY"), setting forth in reasonable detail the nature of such action, proceeding or claim, including copies of any documents and written correspondence from such third person to such Indemnified Party. (b) The Indemnifying Party shall be entitled, at its own expense, to participate in the defense of such action, proceeding or claim, and, if (i) the action, proceeding or claim involved seeks (and continues to seek) solely monetary damages, (ii) the Indemnifying Party confirms, in writing, its obligation hereunder to indemnify and hold harmless the Indemnified 32 Party with respect to such damages in their entirety pursuant to Sections 9.2 or 9.3 hereof, as the case may be, and (iii) the Indemnifying Party shall have made provision which, in the reasonable judgment of the Indemnified Party, is adequate to satisfy any adverse judgment as a result of its indemnification obligation with respect to such action, proceeding or claim, then the Indemnifying Party shall be entitled to assume and control such defense with counsel chosen by the Indemnifying Party and approved by the Indemnified Party, which approval shall not be unreasonably withheld or delayed. The Indemnified Party shall be entitled to participate therein after such assumption, the costs of such participation following such assumption to be at its own expense. Upon assuming such defense, the Indemnifying Party shall have full rights to enter into any monetary compromise or settlement which is dispositive of the matters involved; PROVIDED, that such settlement is paid in full by the Indemnifying Party and will not have any direct or indirect continuing material adverse effect upon the Indemnified Party. (c) With respect to any action, proceeding or claim as to which (i) the Indemnifying Party does not have the right to assume the defense or (ii) the Indemnifying Party shall not have exercised its right to assume the defense, the Indemnified Party shall assume and control the defense of and contest such action, proceeding or claim with counsel chosen by it and approved by the Indemnifying Party, which approval shall not be unreasonably withheld. The Indemnifying Party shall be entitled to participate in the defense of such action, proceeding or claim, the cost of such participation to be at its own expense. The Indemnifying Party shall be obligated to pay the reasonable attorneys' fees and expenses of the Indemnified Party to the extent that such fees and expenses relate to claims as to which indemnification is due under Sections 9.2 or 9.3 hereof, as the case may be. The Indemnified Party shall have full rights to dispose of such action, proceeding or claim and enter into any monetary compromise or settlement; PROVIDED, HOWEVER, in the event that the Indemnified Party shall settle or compromise any action, proceeding or claim for which indemnification is due under Sections 9.2 or 9.3 hereof, as the case may be, it shall act reasonably and in good faith in doing so. (d) Both the Indemnifying Party and the Indemnified Party shall cooperate fully with one another in connection with the defense, compromise or settlement of any such action, proceeding or claim, including, without limitation, by making available to the other all pertinent information and witnesses within its control. 9.6 EFFECTIVENESS. The provisions of this Article 9 shall be effective upon consummation of the Closing, and prior to the Closing, shall have no force and effect. 9.7 POSTPONEMENT, OFFSET AND REDUCTION OF CONTINGENT PURCHASE PRICE. If, as of the date of the payment of an installment of the Contingent Purchase Price (hereinafter called a "CONTINGENT PAYMENT DATE"), any Buyer Indemnitee shall have previously made a claim or claims for Buyer's Damages and such claim or claims shall not have been resolved prior to such Contingent Payment Date, either by mutual written agreement between the Seller and the Buyer or by a decision of the arbitrators pursuant to Section 12.13 below, then the amount of such installment of Contingent Purchase Price shall only be paid to the extent that such amount (together with the amount of any prior installment of Contingent Purchase Price which has been postponed pursuant to this Section 9.7) exceeds the aggregate total of Buyer's Damages as to which claims for indemnification shall have been made on or prior to such Contingent Payment Date and not resolved on or prior thereto, and payment of the remainder of the Contingent 33 Purchase Price which would otherwise be payable on or before such Contingent Payment Date shall be postponed until the resolution of all such claims for indemnification. The Seller hereby acknowledges and agrees that the Buyer shall be entitled to set off against and to reduce the amount of the Contingent Purchase Price by the amount of Buyer's Damages which is either agreed to in writing by the Seller and the Buyer or determined pursuant to a decision of the arbitrators referred to in Section 12.13 below. To the extent that such arbitrators shall determine that the postponement of any portion of the Contingent Purchase Price by the Buyer was not warranted, the Buyer shall promptly pay such portion to the Seller, together with interest thereon at the Interest Rate (as defined in Section 1.2(c) above) from the applicable Contingent Payment Date. Any amount of postponement, setoff and reduction of the Contingent Purchase Price contemplated by this Section 9.7 shall be allocated first to the cash portion of such Contingent Purchase Price and second to the Preferred Stock (or Common Stock) portion of such Contingent Purchase Price. ARTICLE 10 TERMINATION 10.1 TERMINATION. Notwithstanding any other provision herein contained to the contrary, this Agreement may be terminated at any time prior to the Closing Date: (a) by the written mutual consent of the Buyer and the Seller; (b) At any time after the Closing Date Deadline (as the same may have been extended pursuant to Article 2 hereof), by written notice by the Buyer or the Seller to the other party hereto if the Closing shall not have been completed on or before the Closing Date Deadline (as the same may have been extended pursuant to Article 2 hereof); PROVIDED, HOWEVER, no party may terminate this Agreement pursuant to this Section 10.1(b) if such party is in breach of any material representation, warranty or covenant of such party contained in this Agreement; (c) By the Buyer if, after any initial HSR Act filing, the FTC makes a "second request" for information, or the FTC or the Antitrust Division challenges the transactions contemplated hereby; PROVIDED, that the Buyer delivers a written notice to the Seller of its termination hereunder within 30 days of the Buyer's receipt of such second request or of notice of such challenge; (d) By the Buyer, by written notice to the Seller, in the event that approval by any applicable automobile manufacturer or distributor of the transactions contemplated by this Agreement is not received by the Closing Date Deadline (as the same may have been extended pursuant to Article 2 hereof); (e) By the Buyer, by written notice to the Seller, in the event that any applicable automobile manufacturer or distributor (or any person claiming by, through or under it) shall exercise any right of first refusal, preemptive right or other similar right, with respect to the dealership business of the Corporation; or 34 (f) By the Buyer, on written notice to the Seller within 30 days after the date hereof, if, and only if, the Buyer is not satisfied, in its discretion, with the results of the Buyer's due diligence investigation contemplated by Section 5.1(a) hereof. 10.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of termination of this Agreement pursuant to Section 10.1, this Agreement shall be of no further force or effect; PROVIDED, HOWEVER, that any termination pursuant to Section 10.1 shall not relieve (i) the Buyer of any liability under Section 10.3 below, (ii) the Seller of any liability under Section 10.4 below, (iii) the Buyer or the Seller of any liability or obligation under Section 12.14 below, (iv) the Corporation of any liability under Section 10.6 below, or (v) any party hereto of any liability for breach of any representation and warranty, covenant or agreement hereunder occurring prior to such termination. In addition, in the event of any such termination, all filings, applications and other submissions made pursuant to this Agreement or prior to the execution of this Agreement in contemplation thereof shall, to the extent practicable, be withdrawn from the agency or other entity to which made. 10.3 PAYMENT OF BUYER'S TERMINATION FEE . If this Agreement is terminated by the Seller pursuant to Section 10.1(b) above and the failure to complete the Closing on or before the Closing Date Deadline shall have been due to the Buyer's breach of its material representations and warranties or its material covenants or obligations under this Agreement, then the Buyer shall, upon demand of the Seller, promptly pay to the Seller in immediately available funds, as liquidated damages for the loss of the transaction, a termination fee of $150,000 (the "BUYER'S TERMINATION FEE"). 10.4 PAYMENT OF SELLER'S TERMINATION FEE. If this Agreement is terminated by the Buyer pursuant to Section 10.1(b) above and the failure to complete the Closing on or before the Closing Date Deadline shall have been due to the Seller's breach of any of their material representations and warranties or any of their material covenants or obligations under this Agreement, then the Seller shall, upon demand of the Buyer, promptly pay to the Buyer in immediately available funds, as liquidated damages for the loss of the transaction, a termination fee of $150,000 (the "SELLER'S TERMINATION FEE"). 10.5 TERMINATION FEES EXCLUSIVE REMEDIES FOR DAMAGES. The respective rights of the parties to terminate this Agreement under Section 10.1(b) and to be paid the Seller's Termination Fee or the Buyer's Termination Fee, as the case may be, shall be the respective parties' sole and exclusive remedies for damages; in the event of such termination by either party, such party shall have no right to equitable relief for any breach or alleged breach of this Agreement, other than for specific performance for the payment of the Seller's Termination Fee or the Buyer's Termination Fee, as the case may be. Nothing contained in this Agreement shall prevent any party from electing not to exercise any right it may have to terminate this Agreement and, instead, seeking any equitable relief to which it would otherwise be entitled in the event of breach by any other party hereto. 10.6 SPECIAL TERMINATION PAYMENT. As an inducement to the Buyer to negotiate and enter into this Agreement and to undertake the further cost and expense of conducting its due diligence investigation and preparing to satisfy its obligations at the Closing, the Corporation 35 hereby agrees to pay to the Buyer the sum of $150,000 in the event that this Agreement is terminated by the Buyer pursuant to Section 10.1(e) above. Such payment shall be made promptly upon demand by the Buyer therefor in immediately available funds. The Corporation is a party to this Agreement solely for the purpose of this Section 10.6. ARTICLE 11 CERTAIN TAXES AND EXPENSES 11.1 CERTAIN TAXES AND EXPENSES. (a) All sales, use, transfer, intangible, excise, documentary stamp, recording, gross income, gross receipts and other similar taxes or fees which may be due or payable in connection with the consummation of the transactions contemplated hereby shall be paid by the Seller. (b) Except as otherwise herein provided, the Seller and the Buyer shall be responsible for the payment of their respective fees, costs and expenses incurred in connection with the negotiation and consummation of the transactions contemplated hereby and shall not be liable to the other party or parties for the payment of any such fees, costs and expenses. ARTICLE 12 MISCELLANEOUS 12.1 CERTAIN TAX RETURNS. The Seller shall cooperate with and provide assistance to the Buyer and the Corporation in connection with the preparation and filing of all federal, state, local and foreign income tax returns which relate to the Corporation and to periods prior to Closing but which are not required to be filed until after the Closing. 12.2 PARTIES IN INTEREST; NO THIRD-PARTY BENEFICIARIES. Subject to Section 12.4 hereof, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the respective successors and assigns of the parties hereto. Nothing in this Agreement, expressed or implied, is intended or shall be construed to confer upon or give to any employee of the Corporation or the Buyer, or any other person, firm, corporation or legal entity, other than the parties hereto and their successors and assigns, any rights, remedies or other benefits under or by reason of this Agreement. 12.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement (including all Exhibits and Schedules hereto) and the other writings referred to herein or delivered pursuant hereto contain the entire understanding of the parties hereto with respect to its subject matter. There are no representations, promises, warranties, covenants or undertakings other than as expressly set forth herein or therein. This Agreement supersedes all prior agreements and understandings between the parties hereto with respect to its subject matter. This Agreement may be amended or modified only by a written instrument duly executed by the parties hereto. 12.4 ASSIGNMENT. This Agreement shall not be assignable by any party hereto without the prior written consent of the other parties; PROVIDED, HOWEVER, the Buyer may assign its rights 36 and obligations hereunder to any Affiliate of the Buyer presently existing or hereafter formed and to any person or entity that shall acquire all or substantially all of the assets of the Buyer or the Corporation (including any such acquisition by merger or consolidation); PROVIDED, FURTHER, that no such assignment shall release the Buyer from its obligations hereunder without the consent of the Seller. Nothing contained in this Agreement shall prohibit its assignment by the Buyer as collateral security and the Seller hereby agrees to execute any acknowledgment of such assignment by the Buyer as may be required by any lender to the Buyer. 12.5 REMEDIES. Except as expressly provided in this Agreement to the contrary, each of the parties to this Agreement is entitled to all remedies in the event of breach provided at law or in equity, specifically including, but not limited to, specific performance. 12.6 HEADINGS. The Article and Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 12.7 NOTICES. All notices, claims, certificates, requests, demands and other communications hereunder shall be given in writing and shall be delivered personally or sent by a nationally recognized overnight courier, postage prepaid, and shall be deemed to have been duly given when so delivered personally or one (1) business day after the date of deposit with such nationally recognized overnight courier. All such notices, claims, certificates, requests, demands and other communications shall be addressed to the respective parties at the addresses set forth below or to such other address as the person to whom notice is to be given may have furnished to the others in writing in accordance herewith. If to the Buyer, to: Sonic Automotive, Inc. 5401 E. Independence Boulevard Charlotte, North Carolina 28212 Attention: Theodore M. Wright, Chief Financial Officer With a copy to: Parker, Poe, Adams & Bernstein L.L.P. 2500 Charlotte Plaza Charlotte, North Carolina 28244 Attention: Edward W. Wellman, Jr., Esq. 37 If to the Seller or the Corporation, to: Aldo B. Paret Casa Ford of Houston, Inc. c/o Daniel C. Pappas, P.C. 4615 Southwest Freeway, Suite 600 Houston, Texas 77027 Attn: Monte S. Donaldson, Esq. 12.8 COUNTERPARTS. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, and all such counterparts together shall constitute but one agreement. 12.9 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina, without giving effect to its rules governing conflict of laws. 12.10 WAIVERS. Any party to this Agreement may, by written notice to the other parties hereto, waive any provision of this Agreement from which such party is entitled to receive a benefit. The waiver by any party hereto of a breach by another party of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by such other party of such provision or any other provision of this Agreement. 12.11 SEVERABILITY. In the event that any provision, or part thereof, in this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions, or parts thereof, shall not in any way be affected or impaired thereby. 12.12 KNOWLEDGE. Whenever any representation or warranty of the Seller contained herein (other than the representations and warranties set forth in Sections 3.1 through 3.6 hereof) or in any other document executed and delivered in connection herewith is based upon the knowledge of the Seller, such knowledge shall be deemed to include (i) the best actual knowledge, information and belief of the Seller and (ii) any information which the Seller would reasonably be expected to be aware of in the prudent discharge of his duties in the ordinary course of business (including consultation with legal counsel) on behalf of the Corporation. 12.13 JURISDICTION; ARBITRATION. (a) Subject to the other provisions of this Section 12.13, any judicial proceeding brought with respect to this Agreement must be brought in any court of competent jurisdiction in the State of North Carolina, and, by execution and delivery of this Agreement, each party hereto (i) accepts, generally and unconditionally, the exclusive jurisdiction of such courts and any related appellate court, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement, and (ii) irrevocably waives any objection it may now or hereafter have as to the venue of any such suit, action or proceeding brought in such court or that such court is an inconvenient forum. 38 (b) Any dispute, claim or controversy arising out of or relating to this Agreement (except for accounting matters provided for in Section 1.2(c) hereto), or the interpretation or breach hereof (including, without limitation, any of the foregoing based upon a claim to any termination fee hereunder), shall be resolved by binding arbitration under the commercial arbitration rules of the American Arbitration Association (the "AAA RULES") to the extent such AAA Rules are not inconsistent with this Agreement. Judgment upon the award of the arbitrators may be entered in any court having jurisdiction thereof or such court may be asked to judicially confirm the award and order its enforcement, as the case may be. The demand for arbitration shall be made by any party hereto within a reasonable time after the claim, dispute or other matter in question has arisen, and in any event shall not be made after the date when institution of legal proceedings, based on such claim, dispute or other matter in question, would be barred by the applicable statute of limitations. The arbitration panel shall consist of three (3) arbitrators, one of whom shall be appointed by each party hereto within thirty (30) days after any request for arbitration hereunder. The two arbitrators thus appointed shall choose the third arbitrator within thirty (30) days after their appointment; PROVIDED, HOWEVER, that if the two arbitrators are unable to agree on the appointment of the third arbitrator within 30 days after their appointment, either arbitrator may petition the American Arbitration Association to make the appointment. The place of arbitration shall be Charlotte, North Carolina. The arbitrators shall be instructed to render their decision within sixty (60) days after their selection and to allocate all costs and expenses of such arbitration (including legal and accounting fees and expenses of the respective parties) to the parties in the proportions that reflect their relative success on the merits (including the successful assertion of any defenses). (c) Nothing contained in this Section 12.13 shall prevent any party hereto from seeking any equitable relief to which it would otherwise be entitled from a court of competent jurisdiction. 12.14 CONFIDENTIALITY. (a) The Buyer agrees that it will keep confidential and not disclose without the prior written consent of the Seller, and will not use for any reason other than the conduct of its due diligence investigation contemplated by Section 5.1 of this Agreement, all information regarding the Corporation and its business received from the Seller or the Corporation. The foregoing prohibition shall not apply to information which (i) is generally available to the public other than due to an act or omission of the Buyer, (ii) is available to the Buyer on a non- confidential basis from a source other than the Seller or the Corporation, provided that such source is not bound by a confidentiality agreement with, or other duty of non-disclosure to, the Seller or the Corporation, or (iii) was already known by the Buyer at the time of the receipt thereof. The provisions of this Section 12.14(a) shall survive the termination of this Agreement. (b) The Seller agrees that it will keep confidential and not disclose without the prior written consent of the Buyer, and will not use for any reason other than the conduct of its due diligence investigation contemplated by Section 6.5 of this Agreement, all information regarding the Buyer and its business received from the Buyer. The foregoing prohibition shall not apply to information which (i) is generally available to the public other than due to an act or omission of the Seller, (ii) is available to the Seller on a non-confidential basis from a source other than the Buyer, provided that such source is not bound by a confidentiality agreement with, 39 or other duty of non-disclosure to, the Buyer, or (iii) was already known by the Seller at the time of the receipt thereof. The provisions of this Section 12.14(b) shall survive the termination of this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered on the date first above written. SONIC AUTOMOTIVE, INC. By: /s/ O. Bruton Smith ------------------------------------ Name: O. Bruton Smith Title: Chief Executive Officer /s/ Aldo B. Paret ------------------------------------ Aldo B. Paret CASA FORD OF HOUSTON, INC. (solely for purposes of Section 10.6) By: /s/ Aldo B. Paret ------------------------------------ Name: Aldo B. Paret Title: President 40 EXHIBITS Exhibit A - Statement of Rights and Preferences of Preferred Stock Exhibit B - Form of Escrow Agreement Exhibit C - Form of Non-Competition Agreement Exhibit D - Form of Employment Agreement 41 SCHEDULES Schedule 3.2(b) Consents and Approvals for the Seller Schedule 3.5 Interest in other Entities Schedule 3.7 Qualification Schedule 3.8 Capitalization Schedule 3.10 No Violation; Conflicts Schedule 3.11 Encumbrances Schedule 3.13 Financial Statements Schedule 3.16(b) Leased Premises Schedule 3.16(g) Owned Equipment Schedule 3.16(h) Leased Equipment Schedule 3.17 Intellectual Property Schedule 3.18 Certain Liabilities Schedule 3.19 No Undisclosed Liabilities Schedule 3.20 Absence of Changes Schedule 3.21 Tax Matters Schedule 3.22 Compliance with Laws Schedule 3.23 Litigation Regarding Corporation Schedule 3.24 Permits, Etc. Schedule 3.26 Compensation Schedule 3.27 Employee Benefits Schedule 3.29(a) Material Agreements Schedule 3.29(b) Required Consents for Transfers of Material Agreements Schedule 3.31 Bank Accounts, Credit Cards and Safe Deposit Boxes Schedule 3.32(a) Insurance Policies Schedule 3.32(b) Property Damage and Personal Injury Claims Schedule 3.33 Warranties Schedule 3.34 Directors and Officers Schedule 3.36 Environmental Matters Schedule 4.2(b) Consents and Approvals for the Buyer 42 STOCK PURCHASE AGREEMENT AMONG SONIC AUTOMOTIVE, INC. AND CASA FORD OF HOUSTON, INC. AND ALDO B. PARET DATED AS OF APRIL 30, 1998 TABLE OF CONTENTS Page ARTICLE 1 PURCHASE AND SALE............................................................................1 1.1 Agreement of Purchase and Sale..........................................................1 1.2 Purchase Price..........................................................................1 1.3 Delivery of the Shares..................................................................7 1.4 Non-Competition Agreement; Employment Agreement.........................................7 ARTICLE 2 CLOSING......................................................................................7 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER.................................................8 3.1 Ownership of Shares.....................................................................8 3.2 Seller's Power and Authority; Consents and Approvals....................................8 3.3 Execution and Enforceability............................................................8 3.4 Litigation Regarding Seller.............................................................8 3.5 Interest in Competitors and Related Entities; Certain Transactions......................8 3.6 Seller Not Foreign Person...............................................................9 3.7 Organization; Good Standing; Qualifications; and Power..................................9 3.8 Capitalization..........................................................................9 3.9 Subsidiaries and Investments............................................................9 3.10 No Violation; Conflicts................................................................10 3.11 Title to Assets; Related Matters.......................................................10 3.12 Possession.............................................................................10 3.13 Financial Statements...................................................................10 3.14 Accounts Receivable....................................................................11 3.15 Inventories............................................................................11 3.16 Leased Premises; Machinery and Equipment...............................................11 3.17 Patents; Trademarks; Trade Names; Copyrights; Licenses, Etc............................12 3.18 Certain Liabilities....................................................................13 3.19 No Undisclosed Liabilities.............................................................13 3.20 Absence of Changes.....................................................................13 3.21 Tax Matters............................................................................14 3.22 Compliance with Laws, Etc..............................................................15 3.23 Litigation Regarding the Corporation...................................................15 3.24 Permits, Etc...........................................................................15 3.25 Employees; Labor Relations.............................................................16 3.26 Compensation...........................................................................16 3.27 Employee Benefits......................................................................16 3.28 Powers of Attorney.....................................................................17 3.29 Material Agreements....................................................................17 3.30 Brokers' or Finders' Fees, Etc.........................................................18 3.31 Bank Accounts, Credit Cards, Safe Deposit Boxes and Cellular Telephones ............................................................................18
3.32 Insurance..............................................................................18 3.33 Warranties.............................................................................18 3.34 Directors and Officers.................................................................18 3.35 Suppliers and Customers................................................................19 3.36 Environmental Matters..................................................................19 3.37 Business Generally.....................................................................20 3.38 Misstatements and Omissions............................................................21 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE BUYER.................................................21 4.1 Organization and Good Standing.........................................................21 4.2 Buyer's Power and Authority; Consents and Approvals....................................21 4.3 Execution and Enforceability...........................................................21 4.4 Litigation Regarding Buyer.............................................................21 4.5 No Violation; Conflicts................................................................22 4.6 Brokers' or Finders' Fees, Etc.........................................................22 4.7 Misstatements and Omissions............................................................22 ARTICLE 5 PRE-CLOSING COVENANTS OF THE SELLER.........................................................22 5.1 Provide Access to Information; Cooperation with Buyer..................................22 5.2 Operation of Business of the Corporation...............................................23 5.3 Books of Account.......................................................................23 5.4 Employees..............................................................................23 5.5 Certain Prohibitions...................................................................23 5.6 Other Changes..........................................................................23 5.7 Additional Information.................................................................23 5.8 Publicity..............................................................................24 5.9 Other Negotiations.....................................................................24 5.10 Closing Conditions.....................................................................24 5.11 Environmental Audit....................................................................24 5.12 Audited Financial Statements...........................................................25 5.13 Hart-Scott-Rodino......................................................................25 ARTICLE 6 PRE-CLOSING COVENANTS OF BUYER..............................................................25 6.1 Publicity..............................................................................25 6.2 Closing Conditions.....................................................................25 6.3 Application to Automobile Manufacturers and Distributors...............................25 6.4 Hart-Scott-Rodino......................................................................25 6.5 Access.................................................................................26 ARTICLE 7 CONDITIONS TO OBLIGATIONS OF THE BUYER AT THE CLOSING.......................................26 7.1 Representations and Warranties.........................................................26 7.2 Performance of Obligations of the Seller...............................................26 7.3 Closing Documentation..................................................................26 7.4 Approval of Legal Matters..............................................................27 7.5 No Litigation..........................................................................27 7.6 No Material Adverse Change or Undisclosed Liability....................................28 7.7 No Adverse Laws........................................................................28 7.8 Affiliate and Other Transactions.......................................................28 7.9 Escrow Agreement.......................................................................28 7.10 Ford Motor Company Approvals. ........................................................28 7.11 Non-Competition Agreement..............................................................28 7.12 Employment Agreement...................................................................28 7.13 Cancellation of Stock Options..........................................................28 7.14 Audited Financial Statements...........................................................28 7.15 Hart-Scott-Rodino Waiting Period.......................................................28 ARTICLE 8 CONDITIONS TO OBLIGATIONS OF THE SELLER AT THE CLOSING......................................29 8.1 Representations and Warranties.........................................................29 8.2 Performance of Obligations of the Buyer................................................29 8.3 Closing Documentation..................................................................29 8.4 Approval of Legal Matters..............................................................30 8.5 No Litigation..........................................................................30 8.6 Escrow Agreement.......................................................................30 8.7 Employment Agreement...................................................................30 ARTICLE 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION, ETC...................................................................................................30 9.1 Survival...............................................................................30 9.2 Agreement to Indemnify by Seller.......................................................31 9.3 Agreement to Indemnify by Buyer........................................................32 9.4 Claims for Indemnification.............................................................32 9.5 Procedures Regarding Third Party Claims................................................32 9.6 Effectiveness..........................................................................33 ARTICLE 10 TERMINATION................................................................................34 10.1 Termination............................................................................34 10.2 Procedure and Effect of Termination....................................................35 10.3 Payment of Buyer's Termination Fee ....................................................35 10.4 Payment of Seller's Termination Fee....................................................35 10.5 Termination Fees Exclusive Remedies for Damages........................................35 10.6 Special Termination Payment. .........................................................36 ARTICLE 11 CERTAIN TAXES AND EXPENSES.................................................................36 11.1 Certain Taxes and Expenses.............................................................36 ARTICLE 12 MISCELLANEOUS..............................................................................36 12.1 Certain Tax Returns....................................................................36 12.2 Parties in Interest; No Third-Party Beneficiaries......................................36 12.3 Entire Agreement; Amendments...........................................................36 12.4 Assignment.............................................................................37 12.5 Remedies...............................................................................37 12.6 Headings...............................................................................37 12.7 Notices................................................................................37 12.8 Counterparts...........................................................................38 12.9 Governing Law..........................................................................38 12.10 Waivers................................................................................38 12.11 Severability...........................................................................38 12.12 Knowledge..............................................................................38 12.13 Jurisdiction; Arbitration..............................................................38
EX-99 12 EXHIBIT 99.14 Exhibit 99.14 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into as of this 7th day of July, 1998, by and among SONIC AUTOMOTIVE, INC., a Delaware corporation (the "Buyer"), and HMC FINANCE CORPORATION, INC. a Florida corporation ("HMC"), HALIFAX FORD-MERCURY, INC., a Florida corporation ("Halifax"), HIGGINBOTHAM AUTOMOBILES, INC., a Florida corporation ("HAI"), HIGGINBOTHAM CHEVROLET-OLDSMOBILE, INC., a Florida corporation ("HCO"), and SUNRISE AUTO WORLD, INC., a Florida corporation ("Sunrise" and, together with HMC, HALIFAX, HAI, and HCO, collectively, the "Sellers" and each, individually, a "Seller"), and DENNIS D. HIGGINBOTHAM (the "Stockholder"). WITNESSETH: WHEREAS, the Sellers are the owners of certain assets used in connection with the Sellers' automobile dealership businesses (collectively, the "Businesses" and, individually as to each Seller, as applicable, the "Business"), operated at the Real Property (as defined below); WHEREAS, the Sellers desire to sell and the Buyer desires to buy, or to cause one or more subsidiaries or affiliates of the Buyer to buy, certain assets pertaining to the Businesses, subject to the terms and conditions of this Agreement; WHEREAS, contemporaneously with the execution of this Agreement, the Buyer has entered into Contracts to Purchase and Sell Real Property (the "Real Property Purchase Agreements") with the various owners thereof named therein (the "Owners"), whereby the Buyer has agreed to buy, and the Owners have agreed to sell, the land, buildings and improvements located at the Real Property (as defined in the respective Real Property Purchase Agreements); and WHEREAS, the consummation of the transactions contemplated by each of this Agreement and the Real Property Purchase Agreements is subject to the consummation of the transactions contemplated by each of such other Agreements; NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the receipt and legal sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereby agree as follows: ARTICLE I CERTAIN DEFINITIONS "Assets" shall mean: the New Vehicles (as defined in Section 3.1 hereof); the Demonstrators (as defined in Section 3.2 hereof); the Used Vehicles (as defined in Section 3.5 hereof); the Parts (as defined in Section 4.3 hereof); the Miscellaneous Inventories (as defined in Section 5.1 hereof); the Work in Progress (as defined in Section 5.3 hereof); the Fixtures and Equipment (as defined in Section 5.4 hereof); the Miscellaneous Assets (as defined in Section 5.5 hereof); the HMC Receivables (as defined in Section 5.9 hereof); and all goodwill of the Businesses. "Closing Date" shall mean the date, not later than the Closing Date Deadline (as hereinafter defined), of the closing of the purchase and sale of the Assets (the "Closing") which shall be a date designated by the Buyer not later than fifteen (15) days after the approvals set forth in Section 8.13 hereof and all other conditions precedent set forth in Articles VIII and IX have been satisfied (or waived by the Buyer or the Sellers, as applicable), or such other date as is mutually agreed upon by the parties hereto. The Closing shall be held at the offices of Cobb, Cole & Bell, 150 Magnolia Avenue, Daytona Beach, Florida, at 9:00 a.m. on the Closing Date. "Closing Date Deadline" shall mean September 1, 1998; provided, however, if as of August 20, 1998, any of the approvals set forth in Section 8.13 hereof shall not have been obtained and/or the audited financial statements contemplated by Section 10.14 hereof shall not have been completed, the Buyer may, by written notice to the Sellers' Agent not later than August 25, 1998, elect to extend the Closing Date Deadline for up to an additional thirty (30) days. "Inventory Date" shall mean the date of completion of the Inventory (as defined in Section 4.1 hereof), which shall be not sooner than five (5) days prior to the Closing Date, or such later date prior to the Closing as is mutually agreed by the Sellers' Agent and the Buyer. "Liabilities" shall mean (i) all continuing obligations of the Sellers, arising in the ordinary course of business after the Closing Date and not as a result of any breach or default, under those contracts and leases of Sellers set forth in Part I of Schedule 2.4 attached hereto, (ii) the HMC Payable as defined and described in Section 2.5 hereof, and (iii) the Inducement Fee as provided for in Section 2.7 hereof. "Manufacturers" shall mean Ford Motor Company, the Chevrolet Motor Division of General Motors Corporation, Mercedes-Benz of North America, Inc., and American Honda Motor Co., Inc. "Retained Liabilities" shall have the meaning assigned to it in Section 2.4 hereof. "Sellers' Agent" shall mean Dennis D. Higginbotham, as agent for the Sellers hereunder. 2 ARTICLE II SALE AND PURCHASE OF THE ASSETS 2.1 Upon the terms and subject to the conditions hereinafter set forth, at the Closing, the Sellers will sell, transfer and convey the Assets to the Buyer and the Buyer will purchase the Assets from the Sellers for the consideration set forth in this Agreement. The sale, transfer and conveyance of the Assets will be made by execution and delivery at the Closing of bills of sale in substantially the form of Exhibit A hereto (the "Bills of Sale") and such other instruments of assignment, transfer and conveyance as the Buyer shall reasonably request. Except to the extent specifically included within the Assets or as mutually agreed between the Buyer and the Sellers, the Sellers will not sell, and the Buyer will not purchase, any other tangible or intangible assets of the Sellers. 2.2 The aggregate purchase price (the "Purchase Price") to be paid for the Assets shall consist of Eighteen Million Seven Hundred Thousand Dollars ($18,700,000), as the purchase price for the Businesses and intangible assets included in the Assets (the "Business and Intangible Assets Purchase Price"), which shall be allocated among the Sellers in accordance with Part I of Schedule 2.2 hereto, plus the sum of: (i) the New Vehicle Purchase Price (as defined in Section 3.1 hereof); (ii) the Demonstrator Purchase Price (as defined in Section 3.2 hereof); (iii) the Used Vehicle Purchase Price, (as defined in Section 3.5 hereof); (iv) the Parts Purchase Price (as defined in Section 4.3 hereof); (v) the Miscellaneous Inventories Purchase Price (as defined in Section 5.1 hereof); (vi) the Work in Progress Purchase Price (as defined in Section 5.3 hereof); (vii) the F&E Purchase Price (as defined in Section 5.4 hereof); and (viii) the HMC Receivables Purchase Price (as defined in Section 5.9 hereof). Each of the components of the Purchase Price, other than the Business and Intangible Assets Purchase Price, shall be allocated among the Sellers in accordance with their respective Assets hereto, upon which such components are based, as reflected in a revised Part I of Schedule 2.2 hereto, to be completed by the Buyer and the Sellers at least three (3) days prior to the Closing Date. The parties acknowledge that the New Vehicle Purchase Price, the Parts Purchase Price and the Miscellaneous Inventories Purchase Price, and the HMC Receivables Purchased Price will be based upon information contained in Schedule 3.1, the Inventory (as defined in Section 4.1) and Schedule 5.9, respectively, all of which are to be delivered prior to the Closing Date. The parties also acknowledge that adjustments to those categories of Assets will have to be made to reflect ordinary course increases or decreases in those assets between the time of delivery of such Schedules and the Inventory and the Closing Date, and that the related components of the Purchase Price will have to be adjusted to reflect any such adjustments to those Assets. All of the foregoing adjustments (with appropriate payments by the parties) will be made as promptly as possible after the Closing. Each party will use the Purchase Price and Liabilities allocations described in Part II of Schedule 2.2 hereto in all reporting to, and tax returns filed with, the Internal Revenue Service and other state and local taxing authorities. 2.3 Upon the terms and subject to the conditions hereinafter set forth, at the Closing, the Buyer shall pay the Purchase Price as follows: 3 (a) At the Closing, the Buyer shall wire transfer to an account or accounts designated by the Sellers' Agent at least one (1) day prior to the Closing, an amount equal to the Purchase Price minus Eight Million Two Hundred Fifty Thousand Dollars ($8,250,000), such amount to be allocated to the Sellers in the respective amounts set forth opposite their names on Part III of Schedule 2.2 hereto, to be delivered to the Buyer by the Sellers' Agent at least three (3) days prior to the Closing Date. (b) (1) At the Closing, the Buyer shall issue and deliver to the Sellers, in the respective amounts set forth opposite their names on Part III of Schedule 2.2 hereto, to be delivered by the Sellers' Agent at least three (3) days prior to the Closing Date, 8,250 shares (the "Preferred Shares") of the Buyer's Class A Convertible Preferred Stock, Series III (the "Preferred Stock"). The Preferred Shares shall have such rights and preferences as are set forth in the Statement of Rights and Preferences of Preferred Stock attached hereto as Exhibit B (the "Statement of Rights and Preferences"). (2) At the option of the Sellers' Agent, exercisable by written notice to the Buyer within thirty (30) days after the closing (the "Registration Notice"), the Buyer shall be obligated to use its reasonable best efforts to register under the Securities Act of 1933, as amended (the "Securities Act"), on or before December 31, 1998, that percentage (up to and including 100%) of the shares of Class A Common Stock (the "Common Shares") which are issuable upon conversion of the Preferred Shares as specified in the Registration Notice (such percentage of the Common Shares being hereinafter called the "Registrable Common Shares"). (3) If requested by the managing or lead managing underwriter for any such registration which is an underwritten registered public offering, the Sellers and the Stockholder shall execute and deliver an underwriting agreement with the managing or lead managing underwriter in such form as is customarily used by such underwriter with any modifications as the parties thereto shall agree. In connection with any such registration, the Sellers and the Stockholder shall supply to the Buyer such information as may be reasonably requested by the Buyer in connection with the preparation and filing of a registration statement with the Securities and Exchange Commission. The Sellers and the Stockholder shall not supply any information to the Buyer for inclusion in such registration statement that will, taken as a whole, at the time the registration statement becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Provided that the Buyer shall have timely completed such registration, the Sellers shall promptly convert the applicable number of the Preferred Shares into the Registrable Common Shares. (4) In the event that the Buyer fails to timely complete the registration contemplated by the preceding paragraph, the Sellers and the Stockholder shall be entitled to have "piggyback" registration rights with respect to the Registrable Common Shares. In such case, the provisions of paragraph (3) immediately above shall be applicable. Furthermore, such piggyback registration rights shall be subject to customary provisions, including those regarding expenses and 4 underwriter cut-backs, and shall terminate at such time as the holder of such registration rights shall be free to sell all of such holder's Registrable Common Shares under Rule 144 (as defined in paragraph (5) below). (5) In the event that the Sellers' Agent does not timely deliver a Registration Notice, the Buyer shall have no obligation to register any of the Common Shares. Notwithstanding the foregoing, the Buyer shall use its reasonable best efforts to make available current public information with respect to the Buyer within the meaning of Subsection (c)(1) of Securities and Exchange Commission Rule 144 ("Rule 144") to the extent necessary to facilitate public resales by the Sellers or the Stockholder of the Common Shares, pursuant to Rule 144. The Buyer shall remove any and all stop transfer instructions and shall remove any restrictive legend on the certificates with respect to any Common Shares then owned by the Sellers or the Stockholder to the extent that either (i) such Common Shares may hereafter be registered under the Securities Act and under any applicable state securities or blue sky laws, or (ii) the Buyer has received an opinion of counsel reasonably satisfactory to the Buyer, in form and substance reasonably satisfactory to the Buyer, that such registration is not required for the sale of such Common Shares under Rule 144. 2.4 At the Closing, the Sellers will assign to the Buyer and the Buyer will assume and agree to perform and discharge the Liabilities pursuant to separate assignment and assumption agreements with the respective Sellers in a form reasonably satisfactory to the Sellers' counsel (the "Assumption Agreements"). Notwithstanding anything herein to the contrary, except as expressly provided in this Section 2.4 and in Sections 2.5 and 2.7 and in the Assumption Agreements, the Buyer does not and will not assume or become liable for any obligations or liabilities of the Sellers of any kind whatsoever, fixed or contingent, known or unknown (collectively, the "Retained Liabilities"), as a result of the transactions contemplated by this Agreement. The Sellers shall retain, and hereby agree to satisfy and discharge, all of the Retained Liabilities, including those set forth on Part II of Schedule 2.4. 2.5 At the Closing, the Buyer will pay in full all amounts outstanding as of the Closing under that certain promissory note from HMC to Dennis D. Higginbotham, a copy of which is attached as Schedule 2.5 hereto (the "HMC Payable"). HMC hereby represents and warrants that as of the date of this Agreement, the HMC Payable totals, and as of the Closing will not exceed, Two Million Eight Hundred Fifty-Seven Thousand Seven Hundred Ninety-Two Dollars ($2,857,792). 2.6 At the Closing, (a) each of the Sellers and Dennis D. Higginbotham shall enter into a non-competition agreement with the Buyer in substantially the form of Exhibit C hereto (the "Non-Competition Agreement"), and (b) the Buyer and Dennis D. Higginbotham will enter into an Employment Agreement in substantially the form of Exhibit D hereto (the "Employment Agreement"). 2.7 As an inducement to the Buyer to negotiate and enter into this Agreement and to undertake the further cost and expense of conducting its due diligence investigation and preparing 5 to satisfy its obligations at the Closing, the Sellers hereby agree, jointly and severally, to pay to the Buyer not later than November 1, 1998, the sum of $500,000 (the "Inducement Fee"). The Inducement Fee will be included in the Liabilities and will become an obligation of the Buyer or any other person (including any holder of a right of first refusal, preemptive right or other similar right, with respect to any of the Assets) who purchases the Assets, or any portion thereof, as a result of the execution and delivery by the Sellers of this Agreement. The Inducement Fee will be canceled if this Agreement is terminated for any reason other than the exercise of a right of first refusal, preemptive right or other similar right, by an applicable automobile manufacturer or distributor or any person claiming by, through or under it. ARTICLE III NEW VEHICLES; DEMONSTRATORS AND USED VEHICLES 3.1 At the Closing, the Buyer shall purchase all of the Sellers' untitled new 1998 motor vehicles, and up to five (5) 1997 new Chevrolet motor vehicles, in the Sellers' inventories as of the Closing Date and which are listed on Schedule 3.1 hereto, which the Sellers' Agent shall deliver to the Buyer not later than three (3) days prior to the Closing (all such vehicles are collectively referred to hereinafter as the "New Vehicles"). The purchase price to be paid by Buyer for each New Vehicle shall be the price at which the New Vehicle was invoiced to the respective Seller by the applicable Manufacturer, as adjusted pursuant to this Article III (the sum of all such amounts to be paid for New Vehicles as determined by this Article III is herein referred to as the "New Vehicle Purchase Price"). Schedule 3.1 shall set forth each New Vehicle's model, invoice cost, odometer reading and all other information necessary to calculate the New Vehicle Purchase Price with respect to such New Vehicle. At the Closing, the Sellers shall assign to the Buyer, without any additional consideration therefor, by appropriate documents reasonably satisfactory to the Buyer, all unfilled retail orders and deposits made thereon. 3.2 At the Closing, the Buyer shall purchase all of the Sellers' untitled new 1998 motor vehicles in Sellers' inventories as of the Closing Date which are used in the ordinary course of business for the purpose of demonstration and which are listed on Schedule 3.2 hereto, which the Sellers' Agent shall deliver to the Buyer not later than three (3) days prior to the Closing (all such vehicles are collectively referred to herein as the "Demonstrators"). For purposes of this Agreement, any motor vehicle with more than 9,000 miles on its odometer shall be deemed to be "used" rather than a "Demonstrator". The purchase price to be paid by the Buyer for each Demonstrator shall be the price at which the Demonstrator was invoiced to the respective Seller by the applicable Manufacturer, as adjusted pursuant to this Article III and as reduced as follows: if such Demonstrator's odometer reflects total mileage of more than six thousand (6,000) miles but less than nine thousand (9,000) miles, an amount equal to ten cents ($.10) multiplied by the total mileage on such odometer (the sum of all such amounts to be paid for Demonstrators hereunder is herein referred to as the "Demonstrator Purchase Price"). Schedule 3.2 shall set forth each Demonstrator's model, invoice cost, odometer reading and all other information necessary to calculate the Demonstrator Purchase Price with respect to such Demonstrator. 6 3.3 The purchase price paid for each New Vehicle and each Demonstrator purchased under this Article III shall be (a) increased by the respective Seller's actual cost of (i) dealer-installed equipment and accessories and (ii) any "VIP" package added to such New Vehicle or Demonstrator, and (b) decreased by (i) the Seller's actual cost of any equipment and accessories which have been removed from such vehicles, and (ii) all paid or unpaid rebates, discounts, holdback for dealer account and other factory incentives (including without limitation rebates applied for and paid but unearned, incentive monies claimed on pre-reported units and carryover allowances on 1997 models). 3.4 In the event any New Vehicle or Demonstrator shall have been damaged prior to the Inventory Date, or is otherwise in a condition such that it cannot reasonably be presented as being in a first-class saleable condition, the Sellers' Agent and the Buyer will attempt to agree on the cost to cover such repairs or some other equitable reduction in value to reflect such condition, which amount shall be deducted from the price to be paid for such New Vehicle or Demonstrator. In the event that the Buyer and the Sellers' Agent cannot agree on the cost of repairs or the amount of reduction, the Buyer shall have no obligation to purchase any such damaged New Vehicle or Demonstrator. With respect to any New Vehicle or Demonstrator which has been damaged and repaired prior to the Inventory Date, the Sellers' Agent and the Buyer will attempt to agree on an adjustment to the price to reflect any decrease in the wholesale value of such New Vehicle or Demonstrator resulting from such damage and repair. In the event that the Buyer and the Sellers' Agent cannot agree on such adjustment, the Buyer shall have no obligation to purchase such New Vehicle or Demonstrator. 3.5 The Sellers' Agent and the Buyer shall perform an inventory of the Sellers' used vehicles as of the Inventory Date and, in connection with such inventory, the Sellers' Agent and the Buyer shall attempt to assign a mutually agreed price to each used vehicle owned by the Sellers as of the Inventory Date. All such used vehicles as to which the Sellers' Agent and the Buyer shall agree upon a price are collectively referred to herein as the "Used Vehicles." At the Closing, the Buyer shall purchase from the Sellers all Used Vehicles owned by the Sellers as of the Closing Date. The sum of all prices assigned to such Used Vehicles purchased by the Buyer pursuant to the terms of this Section 3.5 shall be referred to herein as the "Used Vehicle Purchase Price". ARTICLE IV PARTS/ACCESSORIES 4.1 The Buyer and the Sellers' Agent shall engage a mutually acceptable third party engaged in the business of appraising, valuing and preparing inventories for automobile dealerships (hereinafter referred to as the "Inventory Service") to prepare an inventory list (the "Inventory") of the parts and accessories, as well as the Miscellaneous Inventories, used by the Sellers in the Businesses. The Inventory (insofar as it relates to parts and accessories) shall be posted to the respective Manufacturers' approved systems of inventory control. The cost of the Inventory shall be borne entirely by the Buyer. The Inventory shall be completed by the Inventory Date. 7 4.2 The Inventory shall classify parts and accessories as "returnable" or "nonreturnable". For purposes of this Agreement, the terms "returnable parts" and "returnable accessories" shall describe and include only those new parts and new accessories for vehicles which are listed (coded) in the latest current Master Parts Price List Suggested List Prices and Dealer Prices, or other applicable similar price lists, of the respective Manufacturers, with any applicable supplements, in effect as of the Inventory Date (as applicable to each Manufacturer, the "Master Price List") as returnable to the respective Manufacturer at not less than the purchase price reflected in the Master Price List. The purchase price for each "returnable part" and "returnable accessory"will be the price listed in the Master Price List. All parts and accessories not falling within the definition of "returnable" shall be classified as "nonreturnable". The purchase price for each "nonreturnable" part and accessory, of which type a Seller has made no sales during the ninety (90) day period prior to the Inventory Date, shall be sixty percent (60%) of the price listed therefor in the most recent applicable price list in which such part appears. The purchase price for each "nonreturnable" part and accessory, of which type a Seller has made retail sales to one or more customers during the ninety (90) day period prior to the Inventory Date, shall be one hundred percent (100%) of the price therefor listed in the most recent applicable price list in which such part appears. The purchase price for all "Jobber" and/or "NPN" parts shall be equal to the respective Seller's original cost of such parts. The purchase price for all nuts, bolts and any other parts not addressed in this Section 4.2 shall equal the fair market value thereof as determined by the Inventory Service. 4.3 At the Closing, the Buyer shall purchase all parts and accessories owned by the respective Sellers at the Closing Date and listed on the Inventory (the "Parts") provided, however, that Buyer shall not be obligated to purchase any damaged parts or accessories, parts and accessories with component parts missing, superseded or obsolete parts or accessories, or used parts or accessories. The Sellers agree that if parts and accessories that the Buyer is not obligated to purchase hereunder are not removed from the Real Property within thirty (30) days after the Closing Date, they shall become the property of the Buyer without the payment of any consideration in addition to the consideration otherwise provided herein. The purchase price for the Parts will equal the value of such items shown on the Inventory (the "Parts Purchase Price"). 4.4 The Sellers shall assign to the Buyer at the Closing any net parts return privileges under the respective Manufacturers' parts return plans that may have accrued to the Sellers prior to the Closing (and any other special parts return authorizations which may have been granted to the Sellers by the respective Manufacturers). ARTICLE V MISCELLANEOUS INVENTORIES; WORK IN PROGRESS; FIXTURES AND EQUIPMENT 5.1 At the Closing, the Buyer shall purchase all useable gas, oil and grease, all undercoat material and body materials in unopened cans and such miscellaneous useable and saleable articles in unbroken lots which (i) are on the Sellers' dealership premises, (ii) are owned by the Sellers on 8 the Closing Date, and (iii) are identified in the Inventory taken by the Inventory Service on the Inventory Date (collectively referred to herein as the "Miscellaneous Inventories"). The purchase price for the Miscellaneous Inventories shall be equal to the replacement cost of the Miscellaneous Inventories as determined by the Inventory Service and set forth on the Inventory (the sum of all prices of the Miscellaneous Inventories pursuant to the terms of this Section 5.1 shall be referred to herein as the "Miscellaneous Inventories Purchase Price"). 5.2 The Buyer shall have no obligation to purchase any such miscellaneous items that are not included in the Miscellaneous Inventories. The Sellers agree that any miscellaneous items that are not included in the Miscellaneous Inventories and are not removed from the Real Property within the thirty (30) days after the Closing Date, shall become the property of the Buyer without the payment of any consideration in addition to the consideration otherwise provided herein. 5.3 At the Closing, the Buyer shall buy at the Sellers' cost for parts and labor such shop labor and sublet repairs as the respective Sellers shall have caused to be performed on any repair orders which are in process at the close of business on the Closing Date (the "Work in Progress") (the sum of all costs of the Sellers for the Work in Progress pursuant to the terms of this Section 5.3 shall be referred to herein as the "Work in Progress Purchase Price"). The Buyer shall complete such repair work and shall be entitled to the entire proceeds to be collected for such services. 5.4 At the Closing, the Buyer shall purchase all fixtures, machinery, equipment (including special tools and shop equipment), furniture, signs and office equipment owned by the Sellers as of the Closing Date and used or held for use in connection with the Businesses, including the items listed on the Book Depreciation Schedule included as Schedule 5.4 hereto, which the Sellers' Agent shall deliver to the Buyer not later than five (5) days prior to the Closing (collectively referred to herein as the "Fixtures and Equipment"). The purchase price for each item of Fixtures and Equipment shall equal the depreciated book value of such item, determined in accordance with generally accepted accounting principles, and based upon Schedule 5.4 (the sum of all prices assigned to the Fixtures and Equipment pursuant to the terms of this Section 5.4 shall be referred to herein as the "F&E Purchase Price"). 5.5 At the Closing, and without payment of any additional consideration, the Buyer shall acquire all of the Sellers' (i) unused shop repair orders, parts sales tickets, accounting forms, binders, office and shop supplies and such shop reference manuals, parts reference catalogs, non-accounting file copies for all sales of the Sellers for the three (3) years preceding the Closing Date, (ii) copies of new and used car sales records and specifically wholesale parts sales records, new and used parts sales records, and service sales records for the three (3) years preceding the Closing Date, (iii) product sales training material and reference books on hand as of the Closing Date, (iv) customer and registration lists pertaining to the sale of motor vehicles, service files, repair orders, owner follow-up lists and similar records relating to the operation of the Businesses, (v) telephone numbers and listings used by the Sellers in connection with the Businesses, (vi) names and addresses of the Sellers' service customers and prospective purchasers, (vii) the Sellers' rights to the Sellers' names and to the trade names "Car Mart" and "Truck Mart," or any similar variation of any thereof, and (viii) such other licenses, contracts, agreements, files, instruments and papers 9 as are required for the conduct of the Businesses (all the foregoing items collectively referred to herein as the "Miscellaneous Assets"). 5.6 The Sellers may retain all original Florida Department of Revenue blanket resale certificates (but shall provide copies thereof to the Buyer) and all other corporate records, financial records and correspondence which are not necessary for the continued operation of the Businesses by the Buyer, and all derivations and extensions thereof. 5.7 The Buyer shall have no responsibility to perform any services required under any warranties issued by the Sellers on the vehicles sold by the Sellers on or prior to the Closing Date, unless authorized in writing by the respective Sellers accompanied by arrangements in writing satisfactory to the Buyer to assure the Buyer of payment for all work performed by the Buyer, and, if so authorized by a Seller, such Seller shall reimburse the Buyer for all of the Buyer's costs for parts and labor in connection therewith at established internal rates for parts and labor. At the Closing Date, the Sellers shall supply the Buyer with a list to which such warranties and guaranties are applicable, which list shall include the names of the purchasers, the make and year model of the vehicles purchased and the date of purchase. The Sellers shall also supply to the Buyer at or prior to the Closing Date an address for and a designation of the person or persons who will be responsible for authorizing Buyer to perform any services under any warranties issued by the Sellers on vehicles sold by them prior to the Closing Date. The respective Sellers shall reimburse the Buyer promptly upon demand for all sums due or payable by the respective Sellers to the Buyer hereunder. 5.8 Except as provided in Section 5.9 below, the Sellers shall retain all accounts receivable of the Sellers as of the Closing Date and the Buyer shall retain all accounts receivable arising out of sales and/or services of the Businesses from and after the Closing Date. The Buyer shall send out the invoices for, and otherwise reasonably assist the Sellers with respect to the invoicing of, the Seller's accounts receivable arising out of sales and/or services of the Business prior to the Closing Date, based upon information supplied by the Sellers. Otherwise, except for the additional accounting assistance contemplated in Section 11.14, the Buyer shall have no responsibilities or obligations with respect to the documentation or collection of the Sellers' accounts receivable, except that the Buyer, on the Sellers' behalf, shall accept payment of the Sellers' accounts receivable arising out of the operation of the Businesses prior to the Closing Date, at no charge to the Sellers, and the Buyer shall forward to the Sellers' Agent, or to such of the Sellers designated by him, from time to time, all of the money so accepted on said accounts receivable. 5.9 (a) At the Closing, the Buyer shall purchase from HMC all of HMC's trade accounts receivable as of the Closing Date (other than those receivable from employees of the Sellers and their affiliates, and their respective officers, directors or shareholders) and which are listed on Schedule 5.9 hereto, which HMC shall deliver to the Buyer not later than one (1) day prior to the Closing (collectively, the "HMC Receivables"). The purchase price for the HMC Receivables (the "HMC Receivables Purchase Price") shall be (a) the aggregate face amount of the HMC Receivables, as reflected on said Schedule 5.9, less a reserve for doubtful accounts of 10 fifteen percent (15%) of such aggregate face amount (the "HMC Reserve"), MINUS (b) the amount of the HMC Payable paid by the Buyer pursuant to Section 2.5 hereof. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BUYER The Buyer represents and warrants to the Sellers as follows: 6.1 The Buyer is a corporation duly organized and existing and in good standing under the laws of the State of Delaware, is duly qualified to do business and is in good standing in every jurisdiction in which the nature of its business makes such qualification necessary and has the corporate power to own its properties and to carry on its business as now being conducted. The Board of Directors of the Buyer has duly approved this Agreement, all other agreements, certificates and documents executed or to be executed by the Buyer in connection herewith, and the transactions contemplated hereby and thereby. The Buyer has full corporate power and authority to execute and deliver this Agreement and all other agreements, certificates and documents executed or to be executed by the Buyer in connection herewith, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. This Agreement, and all other agreements, certificates and documents executed or to be executed by the Buyer in connection herewith, constitute or, when executed and delivered, will constitute legal, valid and binding agreements of the Buyer enforceable against the Buyer in accordance with their respective terms. 6.2 Except as set forth on Schedule 6.2 attached hereto, the consummation of the transactions contemplated by this Agreement and compliance with the provisions hereof will not conflict with or result in a breach of the terms, conditions or provisions of, or constitute a breach or default under, any provision of law, any order of any court or other agency of government, the charter or bylaws of the Buyer or any note, debenture, mortgage, loan agreement or other instrument to which the Buyer is a party or by which it or any of its properties or assets is bound. 6.3 There are no actions, suits or proceedings pending, or, to the knowledge of the Buyer, threatened against or affecting the Buyer which might adversely affect the power or authority of the Buyer to carry out the transactions to be performed by it hereunder. 6.4 The issuance of the Preferred Shares, as well as the Common Shares issuable upon conversion of the Preferred Shares, has been duly authorized by all necessary corporate action of the Buyer. Upon the issuance of the Preferred Shares pursuant to this Agreement, and upon the issuance of Common Shares upon conversion of any of the Preferred Shares, such Preferred Shares and/or Common Shares, as the case may be, shall be validly issued, fully paid and non-assessable. 6.5 The authorized capital stock of the Buyer consists of: 11 (a) 3,000,000 shares of Preferred Stock, par value $0.10 per share, of which 300,000 shares are designated Class A Convertible Preferred Stock and are, in turn, divided into 100,000 shares of Series I (the "Series I Preferred Stock"), 100,000 shares of Series II (the "Series II Preferred Stock") and 100,000 shares of Series III (the "Series III Preferred Stock"); as of June 1, 1998, approximately [19,125] shares of Series I Preferred Stock are issued and outstanding and/or are committed to be issued by the Buyer, approximately [10,000] shares of Series II Preferred Stock are issued and outstanding and/or are committed to be issued by the Buyer, and approximately [6,500] shares of Series III Preferred Stock are issued and outstanding and/or are committed to be issued by the Buyer; (b) 50,000,000 shares of Class A Common Stock, par value $0.01 per share, of which 5,000,000 shares are issued and outstanding; and (c) 15,000,000 shares of Class B Common Stock, par value $0.01 per share, of which 6,250,000 shares are issued and outstanding. All outstanding capital stock of the Buyer is duly authorized, validly issued, fully paid and non-assessable and has been issued in conformity with all applicable federal and state securities laws. 6.6 The Buyer has delivered to the Sellers' Agent copies of (i) the Prospectus dated November 10, 1997 (the "Prospectus"), (ii) the Buyer's Annual Report on Form 10-K for the Fiscal Year ended December 31, 1997, (iii) the Buyer's Quarterly Report on Form 10-Q for the three-month period ended March 31, 1998, and (iv) any Current Reports on Form 8-K, filed in 1998, each in the form (excluding exhibits) filed with the Securities and Exchange Commission ("SEC") (collectively, such Forms 10-K, 10-Q and 8-K being hereinafter referred to as its "Reports"). Neither the Prospectus nor any of the Reports contained, at the time of filing thereof with the SEC, any untrue statement of any material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE SELLERS The Sellers, jointly and severally, represent and warrant to the Buyer as follows: 7.1 Each Seller is a corporation duly organized and existing and in good standing under the laws of the State of Florida, is duly qualified to do business and is in good standing in every jurisdiction in which the nature of its business makes such qualification necessary and has the corporate power to own its properties and to carry on its business as now being conducted. Except as set forth on Schedule 7.1 attached hereto, the Stockholder is the only person owning shares of the Sellers. The Board of Directors and the shareholders of each Seller have duly approved this Agreement, all other agreements, certificates and documents executed or to be executed by such 12 Seller in connection herewith, and the transactions contemplated hereby and thereby. Each Seller has full corporate power and authority to execute and deliver this Agreement and all other agreements, certificates and documents executed or to be executed by such Seller in connection herewith, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. This Agreement, and all other agreements, certificates and documents executed or to be executed by each Seller in connection herewith, constitute or, when executed and delivered, will constitute legal, valid and binding agreements of such Seller enforceable against such Seller in accordance with their respective terms. This Agreement, and all other agreements, certificates and documents executed or to be executed by the Stockholder in connection herewith, constitute or, when executed and delivered, will constitute legal, valid and binding agreements of the Stockholder enforceable against the Stockholder in accordance with their respective terms. 7.2 Except as set forth in Schedule 7.2 attached hereto, the consummation of the transactions contemplated by this Agreement and compliance with the provisions hereof will not conflict with or result in a breach of the terms, conditions or provisions of, or constitute a breach or default under, any provision of law, any order of any court or other agency of government, the charter or bylaws of any Seller or any note, debenture, mortgage, loan agreement or other instrument to which any Seller or the Stockholder is a party, or by which any Seller or the Stockholder, or any of their respective properties or assets, are bound, or result in the creation or imposition of any Encumbrance of any kind whatsoever on the Assets. 7.3 There are no actions, suits or proceedings pending or, to the knowledge of the Seller and the Stockholder, threatened against any Seller or the Stockholder which might adversely affect the power or authority of any of them to carry out the transactions to be performed by such party hereunder. There are no actions, suits or proceedings pending, or, to the knowledge of the Sellers and the Stockholder, threatened, against or affecting any Seller, other than those adequately covered by insurance and those disclosed on Schedule 7.3 attached hereto, and none of the actions, suits or proceedings described on Schedule 7.3, if determined adversely to any Seller, would have a material adverse effect on the business, assets or financial condition of such Seller. 7.4 Except as disclosed on Schedule 7.4 attached hereto, the Sellers have good title to the Assets, free and clear of all liens (including tax liens), encumbrances, actions, claims, payments or demands of any kind and character (collectively, "Encumbrances"), except Encumbrances for ad valorem personal property taxes not yet due and payable and Encumbrances which secure only the Liabilities. All of the Assets to be transferred hereunder conform, as to condition and character, to the descriptions of such Assets contained herein and will be transferred at the Closing free and clear of all Encumbrances, except Encumbrances for ad valorem personal property taxes not yet due and payable and Encumbrances which secure only the Liabilities. 7.5 Except as disclosed on Schedule 7.5 attached hereto, there are no permits or approvals used or obtained for use by any of the Sellers which are required under applicable law in connection with the ownership or operation of its Businesses. 13 7.6 Each of the Sellers has filed all federal, state and local governmental tax returns required to be filed by it in accordance with the provisions of law pertaining thereto and has paid all taxes and assessments (including, without limitation of the foregoing, income, excise, unemployment, social security, occupation, franchise, property and import taxes, duties or charges and all penalties and interest in respect thereof) required by it to have been paid to date. 7.7 Except as disclosed on Schedule 7.7, the Sellers have no bonus, deferred compensation, pension, profit-sharing, stock option, employee stock purchase or other employee benefit plan (all of the foregoing being the "Employee Plans"), or any secrecy agreements or covenants not to compete with any employee. 7.8 (a) The Sellers have delivered to the Buyer the following financial statements of the Sellers (the "Financial Statements"): (a) the balance sheets of the respective Sellers as of December 31, 1997, and the related statements of income and stockholder's equity for the years then ended, in each case with an unaudited reviewed opinion by Brent Millikan & Company, P.A., and (b) the unaudited balance sheets of the respective Sellers as of May 31, 1998 and the related unaudited statements of income and stockholder's equity for the five (5) month period then ended. The Financial Statements have been prepared in accordance with generally accepted accounting principles consistently applied. The balance sheet of each Seller included in the Financial Statements fairly presents the financial condition of such Seller as of the date thereof, and the related statement of income of each Seller included in the Financial Statements fairly presents the results of the operations of such Seller and the changes in its financial position for the period indicated, all in accordance with generally accepted accounting principles consistently applied. (b) Each of the Sellers has no outstanding material claims, liabilities, obligations or indebtedness of any nature, fixed or contingent, except as set forth in the Financial Statements or in the Schedules to this Agreement, and except for liabilities incurred in the ordinary course of business and of the kind and type reflected in the Financial Statements. To the knowledge of the Sellers and the Stockholder, the Financial Statements contain adequate reserves for all reasonably anticipated claims relating to matters with respect to which Seller is self-insured. 7.9 None of the Sellers or the Stockholder has engaged any broker or any other person or entity who would be entitled to any brokerage commission or finder's fee in respect of the execution of this Agreement and/or the consummation of the transactions contemplated hereby. 7.10 Except as set forth on Schedule 7.10 attached hereto, the Assets comply with, and the Business has been conducted in all material respects in compliance with, all laws, rules and regulations (including all worker safety and all environmental laws, rules and regulations), applicable zoning and other laws, ordinances, regulations and building codes, and none of the Sellers or the Stockholder has received any notice of any violation thereof which has not been adequately remedied. 7.11 The Fixtures and Equipment are in good condition, ordinary wear and tear excepted, and constitute all of the fixtures, machinery, equipment, furniture, signs and office equipment used 14 or intended for use by the Sellers in the Businesses. All Demonstrators have been operated in the ordinary course of business with dealer tags and have not had certificates of title issued with respect to them. 7.12 Except for the Sellers' cash and accounts receivable and Sellers' rights under their respective dealership agreements with the Manufacturers, the Assets, together with the Real Property and the contracts and leases set forth on Part I of Schedule 2.4 hereto, comprise all of the assets, properties and rights necessary for the Buyer to operate the Businesses substantially in the manner operated by the Sellers prior to the Closing. 7.13 The representations and warranties of the Owners contained in the Real Property Purchase Agreements are true and correct as of the date hereof. ARTICLE VIII CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS The obligations of the Buyer to perform this Agreement at the Closing are subject to the following conditions precedent which shall be fully satisfied at or before the Closing, unless waived in writing by the Buyer. 8.1 All of the representations and warranties of the Sellers herein contained shall be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date (except to the extent that any such representation and warranty, by its terms, relates to a stated date), and the Buyer shall have received a certificate from a duly authorized officer of each of the Sellers, dated the Closing Date, to such effect. 8.2 Each of the agreements or obligations required by this Agreement to be performed or complied with by the Sellers or the Stockholder at or before the Closing shall have been duly performed or complied with, and the Buyer shall have received a certificate from a duly authorized officer of each of the Sellers and the Stockholder, dated the Closing Date, to such effect. 8.3 No action, suit or proceeding shall have been instituted by a governmental agency or any other third party (a) to prohibit or restrain the sale contemplated by this Agreement or otherwise challenge the power and authority of the parties to enter into this Agreement or to carry out their obligations hereunder or the legality or validity of the sale contemplated by this Agreement, or (b) which would have a materially adverse effect on the conduct of an automobile dealership business by the Buyer at any of the Real Property. 8.4 The Inventory shall have been completed. 8.5 The Sellers shall have furnished to the Buyer (a) evidence to the reasonable satisfaction of the Buyer and its counsel with respect to the corporate organization and existence of 15 the Sellers, and (b) UCC-11 search reports or other evidence reasonably satisfactory to the Buyer and its counsel that the Assets are free and clear of all Encumbrances. 8.6 Each of the Sellers shall have furnished to the Buyer a copy of the resolutions duly adopted by such Seller's Board of Directors and the Stockholder authorizing the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, certified by an authorized officer of such Seller as of the Closing Date. 8.7 As of the Closing Date, there shall not have been any fire, accident or other casualty or any labor disturbance, civil commotion, riot, act of God or the public enemy, or any change in the Businesses or the Assets or which would have a material adverse effect on the conduct of an automobile dealership business using the Assets at any of the Real Property or which would interfere with the use by the Buyer of such Assets in connection with the conduct of an automobile dealership business at any of the Real Property. 8.8 The Buyer shall have been licensed as a Motor Vehicle Dealer under applicable Florida motor vehicle dealer registration laws and shall have obtained all other authorizations, consents, licenses and permits from applicable governmental agencies having or asserting jurisdiction, which the Buyer deems necessary or appropriate to conduct business as an automobile dealer at the Real Property; provided, however, this Section 8.8 shall only be a condition to the Buyer's obligations so long as the Buyer is using its reasonable best efforts to obtain such authorizations, consents, licenses and permits. 8.9 The Sellers shall have obtained all other authorizations, consents and approvals from third persons and entities as are required to assign those contracts and leases that are included in the Liabilities at the Closing. 8.10 The Sellers shall have transferred to the Buyer certificates of title or origin for all New Vehicles, Demonstrators and Used Vehicles, and all of their respective registration lists, owner follow-up lists and service files on hand as of the Closing Date with respect to the Businesses. 8.11 The Sellers shall have terminated in writing the Sellers' respective Dealer Agreements with the Manufacturers. 8.12 The Sellers and the Stockholder shall have executed, as appropriate, and delivered to the Buyer the Bills of Sale, other documents of transfer of title contemplated hereby and any and all other documents necessary or desirable in connection with the transfer of the Assets, which documents shall warrant title to the Buyer consistent with this Agreement and shall in all respects be in such form as may be reasonably required by the Buyer and its counsel. 8.13 Each of the Manufacturers shall have approved the Buyer or the Buyer's affiliate as an authorized dealer at each parcel of the Real Property and O. Bruton Smith or O. Bruton Smith's designee, as the authorized Dealer Operator, and the respective Manufacturers shall have executed 16 Dealer Agreements on terms which are not less favorable to the Buyer than the respective Dealer Agreements of the Sellers. 8.14 All conditions to Buyer's obligations under the Real Property Purchase Agreements shall have been satisfied or fulfilled unless waived in writing by the Buyer hereunder. 8.15 The Buyer shall have received an opinion of Cobb Cole & Bell, counsel to the Sellers and the Stockholder, dated the Closing Date, in form and substance reasonably satisfactory to the Buyer and its counsel. 8.16 The Buyer shall have received the Non-Competition Agreement, duly executed by the parties thereto other than the Buyer, and the Employment Agreement, duly executed by Dennis D. Higginbotham. 8.17 The Sellers shall have delivered to the Buyer all documents, including, without limitation, resolutions of the respective Board of Directors and the shareholders of each of the Sellers, necessary to effect a change of names of each of the Sellers after the Closing to names other than the corporate names and the trade names referred to in Section 5.5 hereof or any variation thereof. 8.18 There shall have been no material adverse change or development in the business, prospects, properties, earnings, results of operations or financial condition of any of the Sellers or any of the Assets or the Liabilities. 8.19 The form of all instruments, certificates and documents to be executed and delivered by the Sellers to the Buyers pursuant to this Agreement and all legal matters in respect of the transactions as herein contemplated shall be reasonably satisfactory to the Buyer and its counsel, none of whose approval shall be unreasonably withheld or delayed. 8.20 All applicable waiting periods under the HSR Act (as defined in Section 10.13 hereof) shall have expired without any indication by the Antitrust Division or the FTC (each as defined in Section 10.13 hereof) that either of them intends to challenge the transactions contemplated hereby or, if any such challenge or investigation is made or commenced, the conclusion of such challenge or investigation permits the transactions contemplated hereby in all material respects. 8.21 The Buyer shall have completed preparation of such audited financial statements of the Sellers as may be required by applicable regulations of the Securities and Exchange Commission. 8.22 Subject to payment by the Buyer of the HMC Payable in accordance with Section 2.5 hereof, Dennis D. Higginbotham shall have delivered to the Buyer the promissory note which evidences the HMC Payable. 17 ARTICLE IX CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATIONS The obligations of the Sellers to perform this Agreement at the Closing are subject to the following conditions precedent which shall be fully satisfied on or before the Closing, unless waived in writing by the Sellers' Agent: 9.1 All of the representations and warranties of the Buyer herein contained shall be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date (except to the extent that any such representation and warranty, by its terms, relates to a stated date), and the Sellers shall have received a certificate from a duly authorized officer of the Buyer, dated the Closing Date, to such effect. 9.2 Each of the agreements or obligations required by this Agreement to be performed or complied with by the Buyer at or before the Closing shall have been duly performed or complied with, and the Sellers shall have received a certificate from a duly authorized officer of the Buyer, dated the Closing Date, to such effect. 9.3 No action, suit or proceeding shall have been instituted by a governmental agency or any third party to prohibit or restrain the sale contemplated by this Agreement or otherwise challenge the power and authority of the parties to enter into this Agreement or to carry out their obligations hereunder or the legality or validity of the sale contemplated by this Agreement. 9.4 The Inventory shall have been completed. 9.5 The Buyer shall have furnished the Sellers and the Stockholder with (a) evidence to the reasonable satisfaction of the Sellers' Agent and its counsel with respect to the corporate organization and existence and (b) a copy of the resolutions duly adopted by the Board of Directors of the Buyer authorizing the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, certified by an officer of the Buyer as of the Closing Date. 9.6 The Buyer shall have (a) tendered to the Sellers the cash portion of the Purchase Price and the Preferred Shares, (b) duly executed and delivered to the respective Sellers the Assumption Agreements, and (c) paid in full the HMC Payable, based upon a certificate of Dennis D. Higginbotham as to its amount as of the Closing Date. 9.7 All conditions to the obligations of the Owners under the Real Property Purchase Agreements shall have been satisfied or fulfilled, unless waived in writing by the Sellers' Agent. 9.8 The Sellers shall have received an opinion of Parker, Poe, Adams & Bernstein L.L.P., counsel to the Buyer, dated the Closing Date, in form and substance reasonably satisfactory to the Sellers and their counsel. 18 9.9 The form of all certificates, instruments and documents to be executed and/or delivered by the Buyer to the Sellers pursuant to this Agreement and all legal matters in respect of the transactions as herein contemplated shall be reasonably satisfactory to the Sellers and its counsel, none of whose approval shall be unreasonably withheld or delayed. 9.10 The Sellers' Agent shall have received the Employment Agreement, duly executed by the Buyer. 9.11 All applicable waiting periods under the HSR Act shall have expired without any indication by the Antitrust Division or the FTC that either of them intends to challenge the transactions contemplated hereby, or, if any such challenge or investigation is made or commenced, the conclusion of such challenge or investigation permits the transactions contemplated hereby in all material respects. 9.12 Dennis D. Higginbotham shall have been released from his personal guarantees of those Liabilities specified in Schedule 9.12 hereto, or the Buyer shall have made provision reasonably satisfactory to Dennis D. Higginbotham to protect and indemnify him from and against any liabilities he may have under such guarantees. ARTICLE X COVENANTS AND AGREEMENTS 10.1 Each of the Sellers agrees that it will, at any time and from time to time, after the Closing, upon request of the Buyer, do, execute, acknowledge and deliver all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may be reasonably required to convey and transfer to and vest in the Buyer and protect its rights, title and interest in and enjoyment of all the Assets. 10.2 The parties hereto shall use their reasonable best efforts to obtain, and to cooperate with each other in obtaining, all authorizations, approvals, licenses, permits and other consents contemplated by Articles VIII and IX. 10.3 During the period from the date of this Agreement through the Closing Date, the Sellers will conduct the operation of their respective Businesses in the ordinary course and in accordance with past practices. 10.4 From the date hereof until the Closing, each of the Sellers shall afford to the Buyer, its attorneys, accountants and such other representatives of the Buyer as the Buyer shall designate to such Seller, free and full access at all reasonable times, and upon reasonable prior notice, to the Assets and the properties, books and records of such Seller, and to interview personnel, suppliers and customers of such Seller, in order that the Buyer may have full opportunity to make such due diligence investigation as it shall reasonably desire of the Assets, the Liabilities and the Businesses. 19 10.5 In connection with the Buyer's due diligence investigation, the Sellers shall allow an environmental consulting firm selected by the Buyer (the "Environmental Auditor") to have prompt access to the Real Property in order to conduct an environmental investigation, satisfactory to the Buyer in scope (such scope being sufficient to result in a Phase I environmental audit report and a Phase II environmental audit report, if desired by the Buyer), of, and to prepare a report with respect to, the Real Property (the "Environmental Audit"). Each of the Sellers shall provide to the Environmental Auditor: (i) reasonable access to all of its existing records concerning the matters which are the subject of the Environmental Audit; and (ii) reasonable access to the employees of such Seller and the last known addresses of former employees of such Seller who are most familiar with the matters which are the subject of the Environmental Audit (such Seller agreeing to use reasonable efforts to have such former employees respond to any reasonable requests or inquiries by the Environmental Auditor). The Sellers shall otherwise cooperate with the Environmental Auditor in connection with the Environmental Audit. The Buyer, on the one hand, and the Sellers, on the other hand, shall each bear 50% of the costs, fees and expenses in connection with the Environmental Audit. 10.6 All representations and warranties of the Sellers (which shall include all statements contained in any schedule or certificate furnished or delivered by the Sellers) shall survive the Closing for a period of three (3) years, except for the representations and warranties in Sections 7.4, 7.6, 7.8(b) and 7.10 which shall survive the Closing until the expiration of the applicable statutes of limitation. The Sellers and the Stockholder, jointly and severally, agree to indemnify and hold harmless the Buyer and its officers, directors, employees and agents, and their respective successors and assignees, from and against any and all losses, liabilities, obligations, assessments, suits, actions, proceedings, claims or demands, including costs, expenses and fees (including reasonable attorneys' fees and expert witness fees) incurred in connection therewith, suffered by any of them or asserted against any of them or the Assets (collectively, "Buyer's Damages"), arising out of or based upon: (a) the failure of any representation or warranty of the Sellers contained herein, or in any agreement, certificate, schedule or document executed by the Sellers or the Stockholder in connection herewith, to be true and correct in all material respects as of the Closing Date; provided, however, the Sellers and the Stockholder shall have no obligation to pay Buyer's Damages pursuant to this subsection 10.6(a) unless and until (and only to the extent that) all claims in respect of Buyer's Damages exceed a cumulative aggregate total of Fifty Thousand Dollars ($50,000); (b) the breach of any covenant or agreement of the Sellers or the Stockholder contained in this Agreement; (c) any liability or obligation of the Sellers or the Stockholder not expressly assumed by the Buyer pursuant to this Agreement; or (d) any arrangements or agreements made or alleged to have been made by the Sellers or the Stockholder with any broker, finder or other agent in connection with the transactions contemplated hereby; provided, further, that the aggregate amount of Buyer's Damages required to be paid by the Seller and the Stockholder shall not exceed Twenty-Five Million Dollars ($25,000,000). 10.7 All representations and warranties of the Buyer (which shall include all statements contained in any schedule or certificate furnished or delivered by the Buyer) shall survive the Closing for a period of three (3) years. The Buyer agrees to indemnify and hold harmless each of the Sellers and its Stockholder, officers, directors, employees and agents, and their respective 20 successors and assignees, from and against any and all losses, liabilities, obligations, assessments, suits, actions, proceedings, claims or demands, including costs, expenses and fees (including reasonable attorneys' fees and expert witness fees) incurred in connection therewith, suffered by any of them, or asserted against any of them, arising out of or based upon (a) the failure of any representation or warranty of the Buyer contained herein, or in any agreement, certificate or document executed by the Buyer in connection herewith, to be true and correct in all material respects as of the Closing Date, (b) the breach of any covenant or agreement of the Buyer contained in this Agreement, (c) the Liabilities, or (d) any arrangements or agreements made or alleged to have been made by the Buyer with any broker, finder or other agent in connection with the transactions contemplated hereby. 10.8 Personal property, use and intangible taxes and assessments with respect to the Assets shall be prorated on a per diem basis and apportioned between the Sellers and the Buyer as of the date of the Closing. The Sellers shall be liable for that portion of such taxes and assessments relating to, or arising in respect of, periods on or prior to the Closing Date, and the Buyer shall be liable for that portion of such taxes and assessments relating to, or arising in respect of, any period after the Inventory Date. Any sale or transfer taxes attributable to the sale or transfer of the Assets to the Buyer hereunder shall be paid by the Sellers. 10.9 Except as may be required by law or the rules of the New York Stock Exchange or as necessary in connection with the transactions contemplated hereby, no party hereto shall (i) make any press release or other public announcement relating to this Agreement or the transactions contemplated hereby, without the prior approval of the other parties hereto or (ii) otherwise disclose the existence and nature of negotiations regarding the transactions contemplated hereby to any person or entity other than such party's accountants, attorneys, agents and representatives, all of whom shall be subject to this nondisclosure obligation as agents of such party. The parties shall cooperate with each other in the preparation and dissemination of any public announcements of the transactions contemplated by this Agreement. 10.10 None of the Sellers or the Stockholder shall pursue, initiate, encourage or engage in, any negotiations or discussions with, or provide any information to, any person or entity (other than the Buyer and its representatives and affiliates) regarding the sale or possible sale to any such person or entity of any of the Assets or capital stock of any of the Sellers or any merger or consolidation or similar transaction involving any of the Sellers. 10.11 The Sellers shall promptly notify the Manufacturers regarding the transactions contemplated by this Agreement. The Buyer shall promptly apply to the Manufacturers for, or cause an affiliate of the Buyer to apply to the Manufacturers for, the issuance of franchises to operate the respective automobile dealerships upon the Real Property. Effective as of the Closing, each of the Sellers shall terminate its Dealer Sales and Service Agreements with the Manufacturers. The Sellers shall fully cooperate with the Buyer, and take all reasonable steps to assist the Buyer, in the Buyer's efforts to obtain its own similar Dealer Sales and Service Agreements with the Manufacturers. The parties acknowledge that the Buyer's Dealer Agreements are subject to the approval of the Manufacturers and that the Buyer would be unable to obtain its own, similar Dealer Sales and 21 Service Agreements absent the Sellers' termination of their respective agreements with the Manufacturers. 10.12 The Buyer shall have the right, but not the obligation, to employ any or all of the Sellers' employees. If permitted by law and applicable regulations, each Seller shall, in consideration for the sale of substantially all of such Sellers' assets in bulk, assign and transfer to the Buyer, without additional charge therefor, the amount of reserve in such Seller's State Unemployment Compensation Fund with respect to the Businesses and the corresponding experience rate. 10.13 Subject to the determination by the Buyer that any of the following actions is not required, the Sellers and the Buyer shall promptly prepare and file Notification and Report Forms under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") with the Federal Trade Commission (the "FTC") and the Antitrust Division of the Department of Justice (the "Antitrust Division") and respond as promptly as practicable to all inquiries received from the FTC or the Antitrust Division for additional information or documentation. 10.14 The Sellers shall allow, cooperate with and assist the Buyer's accountants, and shall instruct the Sellers' accountants to cooperate, in the preparation of audited financial statements of the Sellers as necessary for any required filings by the Buyer with the Securities and Exchange Commission or with the Buyer's lenders; provided, however, that the expense of such audit shall be borne by the Buyer. 10.15 Termination. (a) Notwithstanding any other provision herein contained to the contrary, this Agreement may be terminated at any time prior to the Closing Date: (i) By written consent of the Buyer and the Sellers' Agent; (ii) At any time after the Closing Date Deadline (as the same may have been extended pursuant to Article I hereof), by written notice by the Buyer or the Sellers to the other party(ies) hereto if the Closing shall not have been completed on or before the Closing Date Deadline (as the same may have been extended pursuant to Article I hereof); provided, however, no party may terminate this Agreement pursuant to this Section 10.15(a)(ii) if such party is in breach of any material representation, warranty or covenant of such party contained in this Agreement; (iii) By the Buyer if, after any initial HSR Act filing, the FTC makes a "second request" for information, or the FTC or the Antitrust Division challenges the transactions contemplated hereby; provided that the Buyer delivers a written notice to the Sellers of its termination hereunder within 30 days of the Buyer's receipt of such second request or of notice of such challenge; (iv) [intentionally left blank] 22 (v) Subject to the last paragraph of this Section 10.15(a), by the Buyer, by written notice to the Sellers' Agent, in the event that approval by any applicable automobile manufacturer or distributor of the transactions contemplated by this Agreement is not received prior to the Closing Date Deadline; or (vi) Subject to the last paragraph of this Section 10.15(a), by the Buyer, by written notice to the Sellers' Agent, in the event that any Manufacturer shall exercise any right of first refusal, preemptive right or other similar right, with respect to any of the Assets. Notwithstanding the provisions of Subsections 10.15(a)(v) and (vi) above, the Buyer and the Sellers' Agent may elect to terminate this Agreement only as to the Assets and Liabilities with respect to the dealership franchise from the Manufacturer referred to in such Subsection; in such event, the Business and Intangible Assets Purchase Price shall be reduced by the applicable amount opposite the name of the applicable Seller on Schedule 2.2 hereto and the other components of the Purchase Price shall be appropriately reduced. (b) In the event of termination of this Agreement pursuant to Section 10.15(a), this Agreement shall be of no further force or effect; provided, however, that any termination pursuant to Section 10.15(a) shall not relieve (a) the Buyer of any liability under Section 10.15(c) below, (b) the Sellers of any liability under Section 10.15(d) below, or (c) any party hereto of any liability for breach of any representation and warranty, covenant or agreement hereunder occurring prior to such termination. In addition, in the event of any such termination, all filings, applications and other submissions made pursuant to this Agreement or prior to the execution of this Agreement in contemplation thereof shall, to the extent practicable, be withdrawn from the agency or other entity to which made. (c) If this Agreement is terminated by the Sellers pursuant to Section 10.15(a)(ii) above and the failure to complete the Closing on or before the Closing Date Deadline shall have been due to the Buyer's breach of its material representations and warranties or its material covenants or obligations under this Agreement, then the Buyer shall, upon demand of the Sellers, promptly pay to the Sellers in immediately available funds, as liquidated damages for the loss of the transaction, a termination fee of $500,000 (the "Buyer's Termination Fee"). (d) If this Agreement is terminated by the Buyer pursuant to Section 10.15(a)(ii) above and the failure to complete the Closing on or before the Closing Date Deadline shall have been due to the Sellers' breach of any of their material representations and warranties or any of their material covenants or obligations under this Agreement, then the Sellers, jointly and severally, shall, upon demand of the Buyer, promptly pay to the Buyer in immediately available funds, as liquidated damages for the loss of the transaction, a termination fee of $500,000 (the "Sellers' Termination Fee"). (e) The respective rights of the parties to terminate this Agreement under Section 10.15(a)(ii) and to be paid the Sellers' Termination Fee or the Buyer's Termination Fee, as the case may be, shall be the respective parties' sole and exclusive remedies for damages; in the event of 23 such termination by either party, such party shall have no right to equitable relief for any breach or alleged breach of this Agreement, other than for specific performance for the payment of the Sellers' Termination Fee or the Buyer's Termination Fee, as the case may be. Nothing contained in this Agreement shall prevent any party from electing not to exercise any right it may have to terminate this Agreement and, instead, seeking any equitable relief (including specific performance) to which it would otherwise be entitled in the event of breach by any other party hereto. 10.16 The Buyer agrees to provide to Dennis D. Higginbotham and members of his immediate family (for personal use and not for commercial resale) the right to purchase, during each year of the seven years after the termination of his employment with the Buyer, an aggregate total of four vehicles (including trucks), as selected by Dennis D. Higginbotham (or, in the event of his death or disability, by a single person representing his family), from the Buyer or one or more of the Buyer's wholly-owned subsidiaries at the Buyer's or such subsidiaries' actual cost (equal to factory invoice less (i) factory holdback, (ii) dealer rebates, and (iii) any other factory incentive). ARTICLE XI MISCELLANEOUS 11.1 Except as provided in this Section, this Agreement shall not be assignable by any party hereto without the prior written consent of the other parties. The Buyer may assign this Agreement, without the consent of the other parties hereto, to a corporation, partnership or limited liability company controlled by the Buyer, including a corporation, partnership or limited liability company to be formed at any time prior to the Closing Date, and to any person or entity who shall acquire all or substantially all of the assets of the Buyer or of such corporation, partnership or limited liabilities company controlled by the Buyer (including any such acquisition by merger or consolidation); provided said assignment shall be in writing and the assignee shall assume all obligations of the Buyer hereunder, whereupon the assignee shall be substituted in lieu of the Buyer named herein for all purposes, provided, however, that the Buyer originally named herein shall continue to be liable with respect to its obligations hereunder. The Buyer may assign this Agreement, without the consent of the other parties hereto, as collateral security, and the other parties hereto agree to execute and deliver any acknowledgment of such assignment by the Buyer as may be required by any lender to the Buyer. 11.2 The interpretation and construction of this Agreement, and all matters relating hereto, shall be governed by the laws of the State of Florida. 11.3 All accounting matters required or contemplated by this Agreement shall be in accordance with generally accepted accounting principles. 11.4 Except as otherwise specifically provided in this Agreement, each of the parties hereto shall be responsible for the payment of such party's fees, costs and expenses incurred in connection with the negotiation and consummation of the transactions contemplated hereby. 24 11.5 This Agreement, including the schedules and other documents referred to herein which form a part hereof, contains the entire understanding of the parties hereto with respect to the subject matter contained herein and therein. This Agreement may not be amended except by a writing executed by all of the parties hereto. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 11.6 Any party to this Agreement may, by written notice to the other parties hereto, waive any provision of this Agreement from which such party is entitled to receive a benefit. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of such provision or any other provision of this Agreement. 11.7 All notices, claims, certificates, requests, demands and other communications hereunder shall be given in writing and shall be delivered personally or sent by facsimile or by a nationally recognized overnight courier, postage prepaid, and shall be deemed to have been duly given when so delivered personally or by confirmed facsimile or one (1) business day after the date of deposit with such nationally recognized overnight courier. All such notices, claims, certificates, requests, demands and other communications shall be addressed to the respective parties at the addresses set forth below or to such other address as the person to whom notice is to be given may have furnished to the others in writing in accordance herewith. If to the Buyer, to: Sonic Automotive, Inc. 5401 E. Independence Boulevard Charlotte, North Carolina 28212 Telecopy No.: (704) 563-5116 Attention: Chief Financial Officer With a copy to: Parker, Poe, Adams & Bernstein L.L.P. 2500 Charlotte Plaza Charlotte, North Carolina 28244 Telecopy No.: (704) 334-4706 Attention: Edward W. Wellman, Jr. 25 If to the Sellers or the Stockholder, to: Dennis D. Higginbotham Higginbotham Management, Inc. P.O. Box 770 104 Riverside Drive New Smyrna Beach, Florida 32170 Telecopy No.: (904) 426-8111 With a copy to: Cobb, Cole & Bell P.O. Box 2491 150 Magnolia Avenue Daytona Beach, Florida 32114 Telecopy No.: (904) 238-7003 Attention: Larry D. Marsh 11.8 This Agreement may be executed in any number of counterparts. Each such counterpart hereof shall be deemed to be an original instrument, and all such counterparts together shall constitute but one agreement. 11.9 Whenever any representation or warranty of the Sellers contained herein or in any other document executed and delivered in connection herewith is based upon the knowledge of the Sellers, (a) such knowledge shall be deemed to include (i) the best actual knowledge, information and belief of any of the Sellers or the Stockholder, and (ii) any information which any Stockholder would reasonably be expected to be aware of in the prudent discharge of his or her duties in the ordinary course of business (including consultation with legal counsel) on behalf of any Seller, and (ii) the knowledge of any Seller or Stockholder shall be deemed to be the knowledge of all of the Sellers. 11.10 (a) Any dispute, claim or controversy arising out of or relating to this Agreement or the interpretation or breach hereof shall be resolved by binding arbitration under the commercial arbitration rules of the American Arbitration Association (the "AAA Rules") to the extent such AAA Rules are not inconsistent with this Agreement. Judgment upon the award of the arbitrators may be entered in any court having jurisdiction thereof or such court may be asked to judicially confirm the award and order its enforcement, as the case may be. The demand for arbitration shall be made by any party hereto within a reasonable time after the claim, dispute or other matter in question has arisen, and in any event shall not be made after the date when institution of legal proceedings, based on such claim, dispute or other matter in question, would be barred by the applicable statute of limitations. The arbitration panel shall consist of three (3) arbitrators, one of whom shall be appointed by each of the Buyer and the Sellers within thirty (30) days after any request for arbitration hereunder. The two arbitrators thus appointed shall choose the third arbitrator 26 within thirty (30) days after their appointment; provided, however, that if the two arbitrators are unable to agree on the appointment of the third arbitrator within 30 days after their appointment, either arbitrator may petition the American Arbitration Association to make the appointment. The place of arbitration shall be Charlotte, North Carolina. The arbitrators shall be instructed to render their decision within sixty (60) days after their selection and to allocate all costs and expenses of such arbitration (including legal and accounting fees and expenses of the respective parties) to the parties in the proportions that reflect their relative success on the merits (including the successful assertion of any defenses). (b) Nothing contained in this Section 11.10 shall prevent any party hereto from seeking any equitable relief to which it would otherwise be entitled from a court of competent jurisdiction. 11.11 Subject to Section 11.1 hereof, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto. Nothing in this Agreement, expressed or implied, is intended or shall be construed to confer upon or give to any employee of the Sellers, or any other person, firm, corporation or legal entity, other than the parties hereto and their successors and permitted assigns, any rights, remedies or other benefits under or by reason of this Agreement. 11.12 The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 11.13 In the event that any provision, or part thereof, of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions, or parts thereof, shall not in any way be affected or impaired thereby. 11.14 For a period of three (3) years after the Closing Date, the Buyer agrees to provide to the Sellers full cooperation and assistance relative to accounting matters in connection with the Businesses including, but not limited to, assistance in connection with any Florida Department of Revenue sales tax audit, filing of all final payroll and sales tax returns, filing of final W-2's for all employees for the calendar year ended December 31, 1998, assistance in the termination or roll-over of the qualified pension plan, accounting assistance in the paying of accounts payable, accounting assistance relative to the finalization of all factory accounts, accounting assistance relative to the collection of all receivables, accounting assistance relative to the year end accounting necessary to prepare the Sellers' corporate tax returns, and accounting assistance in the event of an Internal Revenue Service audit. 27 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day, month and year first above written. THE BUYER: SONIC AUTOMOTIVE, INC. By: /s/ O. Bruton Smith ------------------------------------ Name: O. Bruton Smith Title: Chief Executive Officer Federal Taxpayer I.D.: 51-0363307 THE SELLERS: HMC FINANCE CORPORATION, INC. By: /s/ Dennis D. Higginbotham ------------------------------------ Name: Title: Federal Taxpayer I.D.: 59-3095116 HALIFAX FORD-MERCURY, INC. By: /s/ Dennis D. Higginbotham ------------------------------------ Name: Title: Federal Taxpayer I.D.: 59-2806650 HIGGINBOTHAM AUTOMOBILES, INC. By: /s/ Dennis D. Higginbotham ------------------------------------ Name: Title: Federal Taxpayer I.D.: 59-3278207 HIGGINBOTHAM CHEVROLET- OLDSMOBILE, INC. By: /s/ Dennis D. Higginbotham ------------------------------------ Name: Title: Federal Taxpayer I.D.: 59-1671876 28 SUNRISE AUTO WORLD, INC. By: /s/ Dennis D. Higginbotham ------------------------------------ Name: Title: Federal Taxpayer I.D.: 59-3297730 THE SHAREHOLDER: /s/ Dennis D. Higginbotham (SEAL) -------------------------------------- DENNIS D. HIGGINBOTHAM 29 INDEX OF SCHEDULES AND EXHIBITS TO ASSET PURCHASE AGREEMENT Schedules Schedule 2.2 Part I - Allocation of Purchase Price Among Sellers(1) Part II - Allocation of Purchase Price and Liabilities to Assets Part III - Payment of Purchase Price(2) Schedule 2.4 Part I - Liabilities Part II - Retained Liabilities Schedule 2.5 Promissory Note from HMC to Dennis D. Higginbotham Schedule 3.1 New Vehicles(2) Schedule 3.2 Demonstrators(2) Schedule 5.4 Fixtures and Equipment (Book Depreciation Schedule)(3) Schedule 5.9 HMC Receivables(4) Schedule 6.2 Compliance re: Buyer Schedule 7.1 Stockholders Schedule 7.2 Compliance re: Seller and Stockholder Schedule 7.3 Pending or Threatened Actions, Suits or Proceedings Schedule 7.4 Encumbrances on the Assets Schedule 7.5 Permits and Approvals Schedule 7.7 Employees Schedule 7.10 Compliance with Laws Schedule 9.12 Personal Guarantees by Dennis D. Higginbotham Exhibits A Form of Bills of Sale B Statement of Rights and Preferences C Form of Non-Competition Agreement D Form of Employment Agreement - Dennis Higginbotham - ----------------------- (1) As to Business and Intangible Assets Purchase Price only; revised Schedule with all Purchase Price Components delivered 3 days prior to Closing (2) 3 days prior to Closing (3) 5 days prior to Closing (4) 1 day prior to Closing -----END PRIVACY-ENHANCED MESSAGE-----