SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement"), dated as of June 30,
1997, by and between SONIC AUTO WORLD, INC., a Delaware corporation (the
"Corporation"), and SONIC FINANCIAL CORPORATION, a North Carolina corporation
("SFC"), sets forth the terms and conditions of SFC's subscription for the
capital stock of the Corporation.
WHEREAS, subject to the filing of a Certificate of Amendment (the
"Certificate") to the Certificate of Incorporation of the Corporation, such
Certificate to be substantially in the form attached hereto as Exhibit A, with
and by the Secretary of State of the State of Delaware in accordance with
applicable law, the authorized capital stock of the Corporation consists of (i)
50,000,000 shares of Class A Common Stock with par value of $.01 per share, (ii)
15,000,000 shares of Class B Common Stock with par value of $.01 per share, (the
"Class B Common Stock"), and (iii) 3,000,000 shares of preferred stock with par
value of $.10 per share;
WHEREAS, SFC is the owner of (i) certain shares of the common stock
(the "SAW Shares") of the Corporation, (ii) certain shares of the common stock
(the "TCF Shares") of Town and Country Ford, Inc., a North Carolina corporation
("TCF"), (iii) certain shares of the common stock (the "Lone Star Shares") of
Lone Star Ford, Inc., a Texas Corporation ("Lone Star"), (iv) certain shares of
the common stock (the "Frontier Shares") of Frontier Oldsmobile-Cadillac, Inc.,
a North Carolina corporation ("Frontier"), and (v) certain shares of the common
stock (the "FMF Management Shares") of FMF Management, Inc., a South Carolina
corporation ("FMF Management") (the SAW Shares, TCF Shares, Lone Star Shares,
Frontier Shares and FMF Management Shares, collectively, the "SFC Shares");
WHEREAS, in connection with a proposed reorganization of the operations
of the Corporation and various automobile dealerships and the entities having
interests therein substantially as outlined on Exhibit B hereto (the
"Reorganization"), the parties hereto propose to effect an exchange of the SFC
Shares for Class B Common Stock as described herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties to this Agreement
hereby agree as follows:
1. SUBSCRIPTION FOR SHARES. SFC hereby subscribes to and agrees to
purchase 7,105 shares of the Class B Common Stock in consideration for the
transfer to the Corporation of all of the SFC Shares (the "SFC Transfer"). SFC
hereby agrees to take all actions necessary to effect the SFC Transfer. The
Corporation hereby accepts the subscription by SFC for 7,105 shares of the Class
B Common Stock and agrees that, upon consummation of the SFC Transfer, the
Corporation will issue SFC a stock certificate representing 7,105 shares of the
Class B Common Stock and that upon issuance such shares will be validly issued,
fully paid and non-assessable.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SFC. SFC hereby
represents, warrants and covenants that:
(a) It has good and valid title to all of the SFC Shares, 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 and that all such SFC Shares, in respect of each of the
Corporation, TCF, Lone Star, Frontier and FMF Management, as
applicable, are validly issued, fully paid and non-assessable;
(b) It is purchasing the Class B Common Stock hereby
subscribed for investment only, for its own account, and not with a
view to the distribution thereof;
(c) It understands that the Class B Common Stock hereby
subscribed will be issued without registration with the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as
amended (the "Act"), and will be issued under one or more exemptions
from registration in the Act and state securities laws that depend upon
the intent hereby represented and that the Corporation will rely on
such representation in issuing such Class B Common Stock without
registration;
(d) It will make no transfer of its securities acquired
hereunder in violation of the Act, any rules of the SEC, any state
securities law or statute or this Agreement, and will not offer, sell,
mortgage, pledge or otherwise dispose of the securities it acquires
hereunder, unless, in the opinion of counsel satisfactory to the
Corporation, registration under applicable federal or state securities
laws is not required; and
(e) It agrees that the stock certificate issued pursuant to
this Agreement, and any replacements thereof, may be marked with a
legend to the effect that such Class B Common Stock cannot be sold or
transferred without either (i) registration under federal and state
securities laws, or (ii) an opinion of counsel satisfactory to the
Corporation that neither the sale nor the proposed transfer constitutes
a violation of any federal or state securities law.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CORPORATION. The
Corporation hereby represents, warrants and covenants that:
(a) It is purchasing the stock of the Corporation, TCF, Lone
Star, Frontier and FMF Management hereby for investment only, for its
own account, and not with a view to the distribution thereof;
(b) It understands that the stock of the Corporation, TCF,
Lone Star, Frontier and FMF Management will be transferred without
registration with the SEC under the Act, and will be transferred under
one or more exemptions from registration in the Act and state
securities laws that depend upon the intent hereby represented and that
SFC will rely on such representation in transferring such stock without
registration;
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(c) It will make no transfer of the securities acquired by it
hereunder in violation of the Act, any rules of the SEC, any state
securities law or statute or this Agreement, and will not offer, sell,
mortgage, pledge or otherwise dispose of the securities it acquired
hereunder, unless, in the opinion of counsel satisfactory to SFC,
registration under applicable federal or state securities laws is not
required;
(d) The execution and delivery of this Agreement and the
issuance of the Class B Common Stock by the Corporation have been duly
and validly authorized by the Corporation and no other action or
proceeding on the part of the Corporation is necessary to authorize
this Agreement or to consummate the transactions contemplated hereby;
and
(e) The stock certificates issued to it pursuant to this
Agreement, and any replacements thereof, may be marked with a legend to
the effect that such securities cannot be sold or transferred without
either (i) registration under federal and state securities laws, or
(ii) an opinion of counsel satisfactory to SFC that neither the sale
nor the proposed transfer constitutes a violation of any federal or
state securities law.
4. DETERMINATION OF THE VALUE OF THE SFC SHARES. The parties
acknowledge that the Board of Directors of the Corporation has determined in the
exercise of its reasonable business judgment as of the date hereof the values of
the consideration provided SFC hereunder in relation to the consideration
provided by other subscribers for the Class B Common Stock as of the date hereof
and giving effect to the Reorganization. Therefore, it is understood and agreed
that, after the SFC Transfer and giving effect to the Reorganization, SFC will
own 71.05% of the Class B Common Stock of the Corporation.
5. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to SFC's subscription for Class B Common
Stock of the Corporation and with respect to the SFC Transfer.
6. MODIFICATION. No modification of or amendment to this Agreement
shall be binding unless executed in writing by both parties.
7. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware.
8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument, and this Agreement
shall be effective when at least one counterpart hereof has been executed by
each of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
SONIC AUTO WORLD, INC.
By: /s/ Xxxxxxxx X. Xxxxxx
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Xxxxxxxx X. Xxxxxx, Vice President
SONIC FINANCIAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx, Vice President
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