<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 3, 1997
REGISTRATION NO. 333-16109
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PEACH AUTO PAINTING AND COLLISION, INC.
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7532 58-2267932
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or organization) Industrial Identification No.)
Classification Code
Number)
</TABLE>
<TABLE>
<S> <C>
506 45TH STREET 506 45TH STREET
SUITE A-2 SUITE A-2
COLUMBUS, GEORGIA 31904 COLUMBUS, GEORGIA 31904
(706) 324-0002 (706) 324-0002
(Address and Telephone Number of Principal Executive Offices) (Address of Principal Place of Business or Intended
Principal Place of Business)
</TABLE>
LENWARD C. WILBANKS, JR.
506 45TH STREET
SUITE A-2
COLUMBUS, GEORGIA 31904
(706) 324-0002
(Name, Address and Telephone Number of Agent for Service)
COPIES TO:
<TABLE>
<S> <C>
BRAD S. MARKOFF, ESQ. FELICE F. MISCHEL, ESQ.
CHARLES R. MONROE, JR., ESQ. THOMAS A. ROSE, ESQ.
SMITH HELMS MULLISS & MOORE, L.L.P. SCHNECK WELTMAN HASHMALL & MISCHEL LLP
2800 TWO HANNOVER SQUARE 1285 AVENUE OF THE AMERICAS
RALEIGH, NORTH CAROLINA 27601 NEW YORK, NEW YORK 10019
(919) 755-8700 (212) 956-1500
</TABLE>
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
(A redherring appears on the left-hand side of this page, rotated 90
degrees. Text is as follows:)
THIS PRELIMINARY OFFICIAL STATEMENT AND THE INFORMATION CONTAINED HEREIN ARE
SUBJECT TO CHANGE, COMPLETION AND AMENDMENT WITHOUT NOTICE. THE BONDS MAY NOT
BE SOLD NOR MAY AN OFFER TO BUY BE ACCEPTED PRIOR TO THE TIME THE OFFICIAL
STATEMENT IS DELIVERED IN FINAL FORM. UNDER NO CIRCUMSTANCES SHALL THIS
PRELIMINARY OFFICIAL STATEMENT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THE BONDS IN ANY
JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF SUCH JURISDICTION.
SUBJECT TO COMPLETION, DATED JANUARY 3, 1997
PEACH AUTO PAINTING AND COLLISION, INC.
1,500,000 SHARES OF COMMON STOCK
This Prospectus relates to an offering (the "Offering") by Peach Auto
Painting and Collision, Inc. (the "Company") of 1,500,000 shares of common
stock, par value $.01 per share (the "Common Stock") through Rickel &
Associates, Inc. (the "Underwriter"). The Common Stock is being offered at $8.00
per share. The Company has applied for quotation of the Common Stock on the
Nasdaq National Market ("Nasdaq") under the trading symbol "PECH."
THE COMMON STOCK OFFERED HEREBY IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF
RISK. ONLY INVESTORS WHO CAN BEAR THE RISK OF LOSS OF THEIR ENTIRE
INVESTMENT SHOULD INVEST. FOR A DESCRIPTION OF CERTAIN RISKS
REGARDING AN INVESTMENT IN THE COMPANY AND IMMEDIATE SUBSTANTIAL
DILUTION, SEE "RISK FACTORS" (PAGE 5) AND
"DILUTION" (PAGE 10).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
[CAPTION]
<TABLE>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSION (1) COMPANY (2)
<S> <C> <C> <C>
Per Share........................................... $8.00 $.71 $7.29
Total (3)........................................... $12,000,000 $1,065,000 $10,935,000
</TABLE>
(1) Does not include additional compensation to the Underwriter consisting of
(i) a non-accountable expense allowance equal to 3% of the gross proceeds of
the Offering, of which $50,000 has been paid by the Company to date, (ii)
warrants (the "Underwriter's Warrants") entitling the Underwriter to
purchase up to 150,000 shares of the Common Stock, and (iii) $50,000 paid to
the Underwriter at the closing of the Offering as compensation under a
two-year financial consulting agreement between the Underwriter and the
Company. The Company has also agreed to indemnify the Underwriter against
certain civil liabilities, including those arising under the Securities Act
of 1933, as amended (the "Securities Act"). See "Underwriting."
(2) After deducting discounts and commissions payable to the Underwriter, but
before payment of the Underwriter's non-accountable expense allowance
($360,000, or $414,000 if the Underwriter's Over-allotment Option (as
defined below) is exercised in full) and the other expenses of the Offering
payable by the Company (estimated at $384,182). See "Underwriting."
(3) The Company has granted the Underwriter an option, exercisable for a period
of 45 days after the closing of the Offering, to purchase up to an
additional 15% of the shares of Common Stock offered hereby, upon the same
terms and conditions solely for the purpose of covering over-allotments, if
any (the "Underwriter's Over-allotment Option"). If the Underwriter's
Over-allotment Option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$13,800,000, $1,224,750 and $12,575,250, respectively. See "Underwriting."
RICKEL & ASSOCIATES, INC.
The date of this Prospectus is , 1997.
<PAGE>
IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ STOCK MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that any such market for the Common Stock
will develop after the closing of the Offering or that, if developed, it will be
sustained. The offering price of the Common Stock was established by negotiation
between the Company and the Underwriter and does not necessarily bear any direct
relationship to the Company's assets, earnings, book value per share or other
generally accepted criteria of value. See "Underwriting."
The Common Stock is being offered by the Underwriter on a firm commitment
basis, subject to prior sale, when, as and if delivered to the Underwriter and
subject to certain conditions. Subject to the provisions of the underwriting
agreement between the Underwriter and the Company, the Underwriter reserves the
right to withdraw, cancel or modify the Offering and to reject any order in
whole or in part. It is expected that delivery of certificates will be made
against payment therefor at the office of the Underwriter, 875 Third Avenue, New
York, New York 10022, on or about , 1997.
As of the date of this Prospectus, the Company will become subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and, in accordance therewith, will file reports, proxy and
information statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy and information statements
and other information can be inspected and copied at the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following regional offices: New York Regional
Office, Suite 1300, 7 World Trade Center, New York, New York 10048, and Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and copies of such material may also be obtained from the Public
Reference Section of the Commission at prescribed rates. The Commission
maintains a World Wide Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file such information electronically. It is anticipated that the Company's
Common Stock will be quoted on Nasdaq and, in such case, such reports and other
information will also be available for inspection at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006. The Company intends to
furnish its stockholders with annual reports containing audited consolidated
financial statements and such other reports as the Company deems appropriate or
as may be required by law.
ii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. EACH PROSPECTIVE INVESTOR IS
URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY. UNLESS OTHERWISE INDICATED, THE
INFORMATION IN THIS PROSPECTUS (I) REFLECTS THE FORMATION OF THE COMPANY AND
CONSUMMATION OF THE FORMATION TRANSACTIONS (AS DEFINED HEREIN) AS IF SUCH
FORMATION AND CONSUMMATION HAD OCCURRED AS OF THE EARLIEST DATE PRESENTED AND
(II) ASSUMES NO EXERCISE OF (A) THE UNDERWRITER'S OVER-ALLOTMENT OPTION, (B) THE
UNDERWRITER'S WARRANTS AND (C) OUTSTANDING OPTIONS TO PURCHASE AN AGGREGATE OF
416,000 SHARES OF COMMON STOCK. UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL
REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" SHALL MEAN PEACH AUTO PAINTING
AND COLLISION, INC., THE PREDECESSOR OF PEACH AUTO PAINTING AND COLLISION, INC.,
AND THE INDIVIDUAL COMPANIES THROUGH WHICH OPERATIONS WERE CONDUCTED PRIOR TO
THE FORMATION TRANSACTIONS (AS DEFINED HEREIN).
THE COMPANY
The Company is a leading regional operator of vehicle paint and collision
centers in the southeastern United States. The Company's operations have rapidly
grown from a single vehicle paint facility in Warner Robins, Georgia in June
1991 to 52 centers in 11 states. The Company's annual revenue has grown from
$9.0 million in 1993 to $22.9 million in 1995, an average net sales growth rate
of 60%.
The Company's paint and collision centers operate under the trade name
"Peach Auto Painting and Collision." The Company paints vehicles on a production
basis, offering its customers a variety of refinishing and painting options at
attractive prices that vary based on the amount of preparation of the vehicle
prior to painting, special paint additives, such as clear coats, hardeners and
sunscreens, optional services and length of warranty. The Company also performs
light and medium body repair services in connection with its refinishing and
painting operations. The goal of the Company's paint and collision centers is to
provide a quality paint job at a reasonable price. Paint-related services
account for approximately 80% of the Company's current revenues, with collision
repair services accounting for the remaining revenues.
The Company has experienced growth by opening new paint and collision
centers and acquiring existing competitors' facilities and converting them into
Company-owned centers, a strategy the Company intends to continue. The Company
believes that its rapid growth rate and success is attributable in large part to
the demographic and financial operating model that it applies when considering
whether to open a new or acquire an existing paint and collision center. In
applying this model, the Company considers (i) the lead time required to open a
new center; (ii) the square footage available in a particular facility; (iii)
the cost of renovating or building a new facility; (iv) the amount of land
required; (v) site demographics; (vi) competition; (vii) the projected break
even point; (viii) projected sales growth; and (ix) the availability of
qualified management. The Company's successful application of this strategy is
evidenced by its ability to generate its substantial growth rate with internal
funding from operating income without incurring any significant amount of debt.
As of September 30, 1996, the Company had long term debt, notes payable to
stockholders, and capital lease obligations of $1.1 million. Although the
Company had advances from stockholders of approximately $1.4 million as of
September 30, 1996, such advances were necessary primarily because the Company
distributed a substantial portion of its available cash to stockholders when its
predecessor entities were operating as S corporations.
GROWTH STRATEGY
The Company intends to pursue an aggressive growth strategy both by
expanding its existing production paint operations and entering the full service
collision market. The Company's expansion strategy with respect to its
production paint operations includes both internal revenue and profit growth
from existing centers as well as external growth through the opening or
acquisition of new centers. The Company's primary strategy for expanding its
operations into the full service collision market is to acquire existing
operations in geographic markets in which the Company conducts production paint
operations. Under the Company's current expansion plans, the Company's goal is
to open or acquire 15 to 20 production paint centers and acquire 12 to 18 full
service collision repair centers in the 12 months following completion of the
Offering. There can be no assurances, however, that the Company will be able to
meet this goal.
The Company believes that certain economic trends are favorably impacting
the production paint industry throughout the United States. The average retail
selling price of a new vehicle sold by a dealership rose from $7,619 in 1980 to
$19,806 in 1994 (Source: U.S. Department of Commerce, Bureau of Economic
Analysis), and the percentage of family income spent on a new car has risen from
36% in 1980 to 51% in 1994 (Source: U.S. Department of Commerce, Bureau of
Economic Analysis). The increase in vehicle prices has led consumers to drive
their vehicles longer: the average age of cars and trucks
1
<PAGE>
in the United States in 1994 was 8.4 years, the highest since 1948 (Source:
American Automobile Manufacturers Association). The Company believes that the
trend of higher prices and longer life spans for vehicles is leading consumers
to seek quality vehicle paint services at reasonable prices. The Company
believes these trends present the Company with a strong opportunity to expand
its presence in existing markets as well as in other markets in the United
States that satisfy the Company's demographic and financial operating model.
The vehicle paint and collision repair industry in the United States is
estimated to exceed $21 billion annually (Source: COLLISION REPAIR INDUSTRY
INSIGHT, December 1995), of which the Company estimates the production paint
industry comprises approximately 5%. A substantial portion of the remaining
industry is comprised of the heavy collision repair market. The production paint
and heavy collision repair markets complement one another because of their
similarities. The Company's current production paint centers have the capability
of performing full service vehicle collision repairs. Likewise, full service
collision repair centers generally offer vehicle painting as an incidental but
necessary service to their primary business of collision repair. The primary
operational differences in the production paint and full service collision
repair markets are their customer and marketing focus and the mix of body repair
services relative to painting services. The production paint market targets
primarily retail customers, while the collision repair market is directed
primarily at commercial customers, such as insurance companies, fleet operators,
leasing agencies and rental companies. Approximately 20% of revenues of the
Company's production paint centers are generated by collision repair services.
The Company believes that entrance into the full service collision repair
market is a logical extension of its existing business. The Company has
established a successful track record of operating a chain of production paint
centers that provide collision repair services. The Company believes that the
experience it has acquired in the production paint market and application of a
strict demographic and financial operating model will enable the Company to
pursue an aggressive strategy of acquiring established profitable full service
collision repair centers and operating them on a large-scale basis. The Company
anticipates operating its full service collision repair centers under the trade
name "Collins Collision" in a division separate from the Company's production
paint centers.
The Company believes the following factors affecting the collision repair
market present the Company with an ideal opportunity to enter the market:
(Bullet) INDUSTRY CONSOLIDATION PRESSURES. The collision repair industry is
highly fragmented, comprised of approximately 48,000 individual
paint and body repair facilities (Source: COLLISION REPAIR
INDUSTRY INSIGHT, December 1995), and currently is experiencing
increased pressures, generated largely by the automobile insurance
industry, to control prices. The insurance industry's efforts to
control claim costs, insure quality repairs, increase services and
standardize claims processing with advanced electronic
communications have created consolidation pressures in the
industry. Moreover, many insurance companies encourage their
customer base to utilize only the services of collision repair
centers that are "accredited" by the insurance industry. Small
independent operators generally do not have the ability or
financial resources to respond successfully to these pressures.
The Company believes that it has the operational experience and
will have the resources to capitalize on the existing
consolidation pressures.
(Bullet) EXISTING ACQUISITION VALUES. The consolidation pressures in the
collision repair industry have led many independent operators to
search for a means of either exiting the industry or becoming part
of a larger, better capitalized operation. The Company believes
that the lack of any dominant multi-location operators in the
collision industry has significantly limited the opportunities of
independent operators to sell their businesses or to associate
with other companies. The Company believes that these factors will
provide opportunities to acquire profitable collision repair
centers generating high revenue at low multiples of the centers'
profits.
There can be no assurances that the Company will be successful in
implementing its growth strategy with respect to either its existing production
paint operations or its intended expansion into the full service collision
market.
The Company, which was organized as a Delaware corporation in connection
with this Offering, is the successor to a series of corporations through which
all of the Company's existing paint and collision operations were conducted
prior to the consummation of the Formation Transactions. The Company's principal
executive offices are located at 506 45th Street, Suite A-2, Columbus, Georgia
31904, and the telephone number is (706) 324-0002.
2
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered.................................... 1,500,000 shares of Common Stock. See "Description of Securities" and
"Underwriting."
Offering Price........................................ $8.00 per share of Common Stock.
Common Stock outstanding:
Prior to the Offering................................. 6,818,812 shares of Common Stock
After the Offering (1)................................ 8,318,812 shares of Common Stock
Use of Proceeds....................................... The net proceeds to the Company, aggregating approximately
$10,140,818, will be used by the Company to repay approximately $1.9
million of debt, to pursue its business strategy of opening new and
acquiring existing production paint operations and entering the full
service collision repair market, and for working capital and general
corporate purposes. See "Use of Proceeds."
Risk Factors.......................................... The Common Stock offered hereby involves a high degree of risk and
substantial immediate dilution to new investors. Only investors who
can bear the risk of their entire investment should invest. See "Risk
Factors" and "Dilution."
Proposed Nasdaq Symbol................................ PECH
</TABLE>
(1) Includes 1,500,000 shares of Common Stock offered hereby. Excludes (i)
225,000 shares of Common Stock issuable upon exercise of the Underwriter's
Over-allotment Option; (ii) 150,000 shares of Common Stock reserved for
issuance upon exercise of the Underwriter's Warrants; and (iii) 700,000
shares of Common Stock issuable upon the exercise of stock options that may
be granted pursuant to the Company's 1996 Stock Option Plan (the "Plan"),
416,000 of which will be granted as of the closing of the Offering. See
"Management -- 1996 Stock Option Plan," "Certain Relationships and Related
Transactions," "Description of Securities" and "Underwriting."
3
<PAGE>
SUMMARY COMBINED FINANCIAL INFORMATION
The selected combined operating financial data for each of the three years
in the period ended December 31, 1995 and the selected combined balance sheet
financial data as of December 31, 1995 and 1994 presented below have been
derived from financial statements of the Company, which have been audited by
Ernst & Young LLP, independent auditors. The other operating data was derived
from unaudited information maintained by the Company. The selected combined
operating financial data for the nine months ended September 30, 1995 and 1996
and the selected combined balance sheet financial data as of September 30, 1996
have been derived from unaudited interim combined financial statements of the
Company, and reflect, in management's opinion, all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of the financial
position and results of operations for these periods. Results of operations for
interim periods are not necessarily indicative of results to be expected for the
full year. The following data is qualified in its entirety by, and should be
read in conjunction with, the other information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus.
(IN THOUSANDS, EXCEPT PER SHARE AND OTHER OPERATING DATA AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
COMBINED OPERATING FINANCIAL DATA:
Net sales........................................................... $8,975 $15,555 $22,926 $17,122 $19,493
Cost of sales....................................................... 5,564 9,610 14,510 10,783 12,369
Gross profit........................................................ 3,411 5,945 8,416 6,339 7,124
Selling, general and administrative expenses........................ 2,887 5,337 6,864 4,982 6,438
Operating income.................................................... 524 608 1,552 1,357 686
Other income (expense).............................................. (42) (31) 5 (1) 27
Income before income taxes.......................................... 482 577 1,557 1,356 713
Income tax expense.................................................. -- 39 121 117 76
Net income.......................................................... $ 482 $ 538 $ 1,436 $ 1,239 $ 637
Supplemental pro forma net income per share (1)..................... $ 0.04 $ .05 $ 0.14 $ 0.12 $ 0.06
OTHER OPERATING DATA (UNAUDITED):
Number of shops at period end....................................... 21 34 44 40 52
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1996
1994 1995 (UNAUDITED)
ACTUAL ACTUAL ACTUAL AS ADJUSTED(2)
<S> <C> <C> <C> <C>
COMBINED BALANCE SHEET DATA:
Working capital (deficit)................................................. $(1,530) $(1,716) $(1,722) $ 8,419
Total assets.............................................................. 2,437 3,105 3,663 11,482
Current liabilities....................................................... 2,259 2,722 3,162 840
Long-term debt and capital lease obligations, less current portion........ 495 420 410 410
Shareholders' (deficit) equity............................................ (316) (36) 91 10,232
</TABLE>
(1) The supplemental pro forma net income per share has been computed as pro
forma net income divided by the weighted average number of shares
outstanding for each period presented. Pro forma net income has been
computed as if the Company had been a C corporation, subject to federal and
state income taxes at an estimated effective rate of 40%, for all periods
presented. For the nine months ended September 30, 1996 and year ended
December 31, 1995, the effect of repayment of debt from the initial public
offering proceeds as if the retirement had occurred at the beginning of the
respective periods does not substantially change the supplemental pro forma
net income per share calculation.
(2) Adjusted to give effect to the sale of the 1,500,000 shares of Common Stock
offered hereby, and the application of the estimated net proceeds therefrom.
See "Use of Proceeds" and "Capitalization."
4
<PAGE>
RISK FACTORS
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK, INCLUDING,
BUT NOT NECESSARILY LIMITED TO, THE RISK FACTORS DESCRIBED BELOW. PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, AS WELL AS THE
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE MAKING AN INVESTMENT
DECISION.
1. ACQUISITION STRATEGY; RISKS RELATED TO RAPID GROWTH; ABILITY TO SUSTAIN
GROWTH. A principal component of the Company's business strategy is to continue
its growth by expanding its vehicle production paint operations in geographic
markets in which the Company currently operates and to new geographic markets
and expanding into the full service collision repair industry by acquiring
existing collision repair centers. With respect to the Company's production
paint operations, the Company has opened or acquired 52 paint and collision
centers since the Company's inception in June 1991. The Company's ability to
maintain or exceed its historical rapid growth rate with respect to its
production paint operations and successfully expand into the full service
collision repair industry will depend in large part upon the Company's ability
to successfully execute its existing market growth and new market expansion
strategy. The successful execution of these strategies and the Company's
financial success will depend upon the Company's ability to (i) identify
acceptable acquisition candidates and locations to open new facilities; (ii)
consummate the acquisition and opening of such facilities on terms favorable to
the Company; (iii) retain and expand the sales and profitability of acquired
facilities and successfully initiate and expand the sales and profitability of
newly-opened facilities; and (iv) integrate acquired and newly-opened facilities
into the Company's financial reporting, data processing and control systems and
management structure. The Company's successful expansion into the full service
collision repair industry is also heavily dependent upon the Company's ability
to successfully apply to such industry the demographic and financial operating
model that the Company has successfully applied to the Company's production
paint operations. There can be no assurance that the Company will successfully
execute its growth and expansion strategy, realize anticipated growth in its
production paint operations, or successfully enter the full service vehicle
collision repair industry. See "Business -- Growth Strategy."
The Company believes that the financial success of individual production
paint centers and full service collision repair centers is heavily dependent
upon the management of each particular facility. The success of the Company's
growth strategy with respect to its existing production paint operations and its
intended expansion into the full service collision market is, therefore,
dependent upon the Company's ability to identify, hire, train and retain
management personnel for its individual facilities. Historically the production
paint and full service collision repair industries have experienced high
employee turnover. The Company intends to address this challenge by compensating
the management of its individual facilities at competitive rates, offering
attractive benefit packages, hiring management personnel with experience in the
Company's industry, and conducting effective and regular training of management
personnel. The Company is also exploring the possibility of hiring a specialist
to conduct training for the Company on a full-time basis and currently is
implementing an electronic management information system to connect individual
facilities to the Company's corporate offices. There can be no assurances,
however, that the Company will be successful in hiring and retaining qualified
management personnel. See "Business -- Growth Strategy" and " -- Management."
2. COMPETITION. The vehicle production paint industry in the United States
is highly fragmented and the cost of entry is relatively low. Although the
industry is characterized by a substantial number of independent operators of
vehicle repair and paint facilities, the Company's primary competitors in the
vehicle production paint industry are Fact-O-Bake, Inc., Econo Auto Painting,
Inc., Maaco Enterprises, Inc. and Earl Scheib, Inc. Existing or new competitors
may be significantly larger and have greater financial and marketing resources
than the Company and may compete with the Company in rendering production
painting services in the markets in which the Company currently operates and
also in seeking existing facilities to acquire and locations to open new
facilities in markets to which the Company desires to expand.
The full service collision repair industry is also highly fragmented and
comprised primarily of independent operators of full service collision repair
centers, against which the Company expects to compete and among which the
Company anticipates identifying attractive acquisition candidates. The Company
also expects its competitors in the full service collision industry to include
Caliber Collision Center, Inc., ABRA Automotive Systems, Inc., and CARSTAR
Automotive, Inc., all of which are franchised operators of full service
collision centers. Although the Company is not aware of any competitor that has
undertaken an effort to consolidate this highly fragmented industry by operating
company-owned full service collision centers on a large-scale basis, some of the
Company's existing competitors in the production paint industry or new
competitors, some of whom may be significantly larger and have greater financial
resources than the Company, may seek to compete with the Company in acquiring,
opening and operating full service collision repair centers on a regional or
national basis. See "Business -- Competition."
5
<PAGE>
3. DEPENDENCE UPON KEY PERSONNEL. The success of the Company will be
largely dependent upon the services of Lenward C. Wilbanks, Jr., the President
and Chief Executive Officer of the Company. The loss of the services of Mr.
Wilbanks would materially and adversely affect the Company's operations. The
Company has entered into an employment agreement with Mr. Wilbanks, which
includes non-competition provisions. The success of the Company also is
dependent upon its ability to hire and retain additional qualified executive and
marketing personnel. There can be no assurance that the Company will be able to
retain the members of its current management or that it will successfully
attract and retain other qualified personnel in the future. See "Management."
4. DEPENDENCE UPON KEY SUPPLIERS. The Company is dependent upon a small
number of key suppliers of its automotive paint and related materials. In the
United States, the five primary suppliers of automotive paint are: E. I. Dupont
de Nemours & Co., PPG Industries, Inc., BASF, Sherwin-Williams and Sikkens. The
Company purchases substantially all of its automotive paint from
Sherwin-Williams. As is common in the Company's industry, the Company does not
maintain long-term supply contracts with Sherwin-Williams. The Company believes
that the suppliers of automotive paint generally compete with each other along
product lines and that the products generally are interchangeable. Accordingly,
the Company believes that it could establish a relationship with and acquire its
automotive paint from another supplier in the event that its relationship with
Sherwin-Williams changed. Although the Company considers its relationship with
Sherwin-Williams to be excellent, the loss of, or a significant change in, the
relationship between the Company and Sherwin-Williams could cause delays or
interruptions in delivery of necessary products to the Company's facilities and
could have a materially adverse impact on the Company's business and financial
results on a short-term basis. In addition, failure or delay by the Company's
other suppliers in fulfilling anticipated needs would adversely affect the
Company's ability to deliver its services. The Company purchases substantially
all of its automotive refinishing materials and supplies from Sherwin-Williams,
3M and American Tape. As such, the loss of these suppliers could have a material
adverse effect on the Company. See "Business -- Suppliers."
5. SEASONALITY AND VARIABILITY OF QUARTERLY RESULTS. The Company's revenues
and operating results have historically varied substantially from quarter to
quarter due to certain factors, and the Company expects certain of these
fluctuations to continue. These factors include the timing and integration of
newly-opened or newly-acquired facilities and the seasonal nature of the
Company's business. Historically, the Company's sales have slowed in the late
fall and winter of each year due largely to inclement weather and the reduced
number of business days during the holiday season. Accordingly, the Company's
financial performance is generally weaker during the third and fourth quarters
relative to the first two quarters of the fiscal year. The Company's revenues
and operating results also may vary due to the general economic conditions that
affect consumer spending and the timing of supplier price changes. The Company
expects its aggressive growth and expansion strategy to contribute to variations
in quarterly revenues and operating results. The time when newly-opened or
acquired facilities become operational may cause substantial fluctuations of
operating results from quarter to quarter and may also have an adverse financial
impact on the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Seasonality."
6. COMPLIANCE WITH GOVERNMENT REGULATIONS; ENVIRONMENTAL HAZARDS. The
Company is subject to various federal, state and local laws and regulations.
Various state and federal regulatory agencies, such as the Occupational Safety
and Health Administration and the United States Environmental Protection Agency
(the "EPA"), have jurisdiction over the operations of the Company with respect
to matters including worker safety, community and employee "right-to-know" laws,
and laws regarding clean air and water. Under various federal, state and local
laws, ordinances and regulations, an owner or lessee of real estate may be
liable for the costs of removal or remediation of certain hazardous or toxic
substances located on or in, or emanating from, such property, as well as
related costs of investigation and property damage. Such laws often impose such
liability without regard to whether the owner or lessee knew of, or was
responsible for, the presence of such hazardous or toxic substances.
The Company has had Phase I environmental assessments conducted at only
three of the Company's 52 facilities. These Phase I assessments disclosed one
environmental condition that will cost approximately $10,000 to remediate. The
costs of this remediation are, however, the responsibility of the lessor of the
property. The Company is not aware and has not been notified of any
environmental conditions at its other facilities that would subject the Company
to environmental remediation liability. The lease agreements between the Company
and the lessors of all of the Company's facilities require the Company to pay
remediation costs only for those environmental conditions created at such
facilities by the Company. The lessors are responsible for remediation of all
environmental conditions existing prior to the time that the Company leased such
facilities. There can be no assurances, however, that such lessors would have
the ability to fully fund any required remediation, in which case the Company
could be subject to liability, or that the Company could prove that an
environmental condition existing at any Company-leased facility was in existance
prior to the time the Company first took possession of such facility.
6
<PAGE>
The Company intends to conduct Phase I environmental assessments in connection
with all future acquisitions of production paint centers and full service
collision repair centers.
The Company believes that it currently is in substantial compliance with
all applicable environmental laws and regulations, and is not aware of any
material environmental problems at any of its current or former facilities. No
assurance can be given, however, that the Company's prior activities, or the
activities of a prior owner or lessee, have not created a material environmental
problem or that future uses or conditions (including, without limitation,
changes in applicable laws and regulations) will not result in the imposition of
material environmental liability upon the Company. Furthermore, compliance with
legislative or regulatory changes may cause future increases in the Company's
operating costs or otherwise adversely affect operations. Imposition of material
environmental liability upon the Company would have a materially adverse impact
on the Company's business and financial results. Certain of the Company's
products, such as paints and solvents, are highly flammable. Accordingly, the
storage and transportation of these materials expose the Company to the inherent
risk of fire. See "Business -- Government Regulation."
7. NEED FOR ADDITIONAL FINANCING. To implement its growth and expansion
strategy, the Company expects to incur additional indebtedness or issue
additional equity securities in the future. There can be no assurance that such
additional capital, if and when required, will be available on terms acceptable
to the Company, or available at all. In addition, future issuances of Common
Stock, if any, may dilute the present ownership of all stockholders in the
Company, including investors purchasing Common Stock in this Offering.
Historically, stockholders of the Company have made loans and advances to the
Company from time to time to provide it with working capital. The stockholders
do not expect to continue to make such loans and advances. See "Use of
Proceeds," "Capitalization," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Growth Strategy."
8. CONTROL BY EXISTING STOCKHOLDERS. Immediately following the Offering,
Lenward C. Wilbanks, Jr. and eight members of his family will own 6,387,006
shares of Common Stock, or approximately 76.8% of the Company's Common Stock
outstanding after the Offering (without giving effect to the possible exercise
of the Underwriter's Over-allotment Option, the Underwriter's Warrants, or
options granted under the Plan), which, among other things, will allow Mr.
Wilbanks and his family to elect the entire class of directors to be elected
from time to time. Such concentration of ownership also could limit the price
that certain investors might be willing to pay in the future for shares of the
Company's Common Stock, and could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from attempting
to acquire, control of the Company. The ownership of Common Stock of Mr.
Wilbanks and four members of his family is set forth under "Principal
Stockholders."
9. NO DIVIDENDS. Payment of dividends on the Common Stock is within the
discretion of the Board of Directors and will depend upon the Company's
earnings, its capital requirements and financial condition, and other relevant
factors. The Company does not currently intend to declare any dividends on its
Common Stock in the foreseeable future. Currently, the Company plans to retain
any earnings it receives for development of its business operations. See
"Description of Securities -- Dividends."
10. DILUTION. The offering price per share of the Common Stock offered
hereby is $8.00. The net tangible book value per share of Common Stock after
completion of the Offering is estimated to be $1.23. Investors purchasing shares
of Common Stock in the Offering will therefore incur immediate and substantial
dilution in the net tangible book value per share of Common Stock. Such dilution
is estimated to be $6.77 per share (or approximately 85% of the public offering
price). See "Dilution."
11. ABSENCE OF PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. Prior to
this Offering, there has been no public market for the Company's Common Stock.
The initial public offering price of the Common Stock was determined by
negotiations between the Company and the Underwriter. There can be no assurance
that an active trading market for the Common Stock will develop or be sustained
after completion of this Offering, or that the market price of the Common Stock
will not decline below the initial public offering price. The market price of
the Common Stock offered hereby could be subject to significant fluctuations in
response to the Company's operating results, the degree of success the Company
achieves in implementing its growth and expansion strategy and numerous other
factors. In addition, the market for many individual stocks has experienced
extreme price and volume fluctuations in recent periods, often as a result of
factors unrelated to a company's operations. These fluctuations, as well as
general economic, political and market conditions, may adversely affect the
market price of the Common Stock.
12. SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of this Offering, the
Company will have 8,318,812 shares of Common Stock outstanding, without giving
effect to shares of Common Stock issuable upon exercise of (i) the Underwriter's
7
<PAGE>
Warrants, (ii) the Underwriter's Over-allotment Option, or (iii) options granted
under the Plan. Of these 8,318,812 shares, the 1,500,000 shares of Common Stock
offered hereby (1,725,000 shares in the event the Underwriter exercises the
Over-allotment Option) will be freely tradeable without restriction or further
registration under the Securities Act. The remaining 6,818,812 shares are deemed
to be "restricted securities," as that term is defined under Rule 144
promulgated under the Securities Act ("Rule 144") and may be publicly sold only
if registered under the Securities Act or sold pursuant to an exemption
therefrom. In addition, the beneficial owners of all shares of Common Stock
outstanding immediately prior to the Offering have agreed with the Underwriter
not to offer, sell, contract to sell or otherwise dispose of any of their shares
for a period of 18 months after the date of this Prospectus, without the prior
written consent of the Underwriter. See "Shares Eligible for Future Sale" and
"Underwriting."
13. BROAD DISCRETION IN APPLICATION OF PROCEEDS BY MANAGEMENT; REPAYMENT OF
DEBT. The Company anticipates using approximately $8.2 million (81.0%) of the
estimated net proceeds of this Offering to open and acquire production paint
centers and acquire full service collision repair centers and for working
capital and general corporate purposes. The Company's business plan is subject
to change, however, and the Company may find it necessary or advisable to
reallocate some of the proceeds or use portions thereof for other purposes.
Accordingly, the Company will have broad discretion as to the application of
such proceeds. In addition, approximately $1.9 million (19.0%) of the estimated
net proceeds of this Offering will be used to repay debt, including the Bridge
Financing (as defined herein) and Stockholder Advances (as defined herein), and,
accordingly, such funds will not be available to fund future growth. See "Use of
Proceeds."
14. ANTI-TAKEOVER STATUTES. Delaware has enacted legislation that prohibits
a publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an "interested stockholder," unless
the business combination is approved in a prescribed manner. Subject to certain
exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns (or in the prior three years did own) 15% or
more of a corporation's voting stock. A "business combination" includes mergers,
asset sales and other transactions that result in a financial benefit to the
"interested stockholder." See "Description of Securities -- Anti-Takeover
Provisions of Delaware Law."
15. LIMITATION ON LIABILITY OF DIRECTORS AND OFFICERS. The Certificate of
Incorporation of the Company provides that (i) the Company will indemnify any
director, officer, employee or agent of the Company with respect to actions,
suits or proceedings relating to the Company and (ii) subject to certain
limitations, a director shall not be personally liable for monetary damages for
breach of his fiduciary duty. In addition, the Company's Bylaws provide for
mandatory indemnification of directors and officers to the fullest extent
permitted by Delaware Law. These provisions may discourage stockholders from
bringing suit against a director for breach of fiduciary duty and may reduce the
likelihood of derivative litigation brought by stockholders on behalf of the
Company against a director. The Company also has entered into an indemnification
agreement with each of the directors of the Company, which provides that the
director is entitled to indemnification to the fullest extent permitted by law.
Such indemnification will cover all expenses, liabilities, judgments, penalties,
fines and amounts paid in settlement which are incurred or imposed upon the
director if the director is a party, threatened to be made a party to any
action, suit or proceeding of any kind by reason of the fact that such person
served or serves as a director of the Company or served as a director, officer,
employee or agent with any other enterprise at the request of the Company. See
"Description of Securities -- Limited Liability and Indemnification."
THE FORMATION TRANSACTIONS
Historically, the Company's production paint operations were conducted
through separate affiliated corporations and partnerships. As part of the
Offering, these separate operations are being consolidated into the Company (the
"Formation Transactions") in two stages. In the first stage, the corporations
through which all existing production paint operations have been conducted
merged into a single corporation. In those transactions (the "Merger
Transactions"), 23 corporations (collectively, the "Merging Corporations")
merged into Peach Warehouse & Distribution, Inc. ("Peach Warehouse &
Distribution"), a Georgia corporation. The Merging Corporations and Peach
Warehouse & Distribution collectively were organized in seven different states.
In connection with the Merger Transactions, the shares of common stock of each
of the Merging Corporations were converted into shares of common stock of Peach
Warehouse & Distribution in various ratios depending upon the value assigned to
each of the Merging Corporations by management. Following the Merger
Transactions, Peach Warehouse & Distribution had 6,818,812 shares of common
stock outstanding. The effective date of all of the Merger Transactions was
January 1, 1997. The Merger Transactions were effected for the business purpose
of consolidating all existing production paint operations into one entity.
8
<PAGE>
The second step of the Formation Transactions will occur concurrently with
the closing of this Offering. In this stage, Peach Warehouse & Distribution will
merge (the "Second Merger Transaction") into the Company, which was organized as
a Delaware corporation on November 13, 1996. In connection with the Second
Merger Transaction, the shares of common stock of Peach Warehouse & Distribution
will be converted into shares of Common Stock of the Company on a one-for-one
basis and the shares of Peach Warehouse & Distribution will be canceled. The
Second Merger Transaction is being effected to enable the Company to operate
under favorable corporation and business laws in the state of Delaware.
Following the Second Merger Transaction and this Offering, the Company will have
a total of 8,318,812 shares of Common Stock outstanding (8,543,812 if the
Underwriter exercises the Over-allotment Option). All beneficial owners of
shares of Common Stock not issued in this Offering have agreed with the
Underwriter not to sell or dispose of their shares for a period of 18 months
after the closing of this Offering. Following that period, such owners will
generally be able to sell their shares, subject to certain volume limitations
and holding period restrictions, in accordance with Rule 144 under the
Securities Act. See "Shares Available for Future Sale."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby are estimated to be $10,140,818 ($11,781,068 if the Underwriter's
Over-allotment Option is exercised in full), after deducting the underwriting
discount, expense allowance and compensation under the financial consulting
agreement, all of which are payable to the Underwriter, and the estimated
offering expenses payable by the Company. The Company expects to use the net
proceeds (assuming no exercise of the Underwriter's Over-allotment Option)
during the next 12 months as follows:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
DOLLAR PERCENTAGE OF
APPLICATION OF PROCEEDS AMOUNT NET PROCEEDS
<S> <C> <C>
Repayment of Stockholder Advances (1)........................................................... $ 1,400,000 13.8%
Repayment of Bridge Financing (2)............................................................... 525,000 5.2
Expansion of existing production paint operations (3)........................................... 1,000,000 9.8
Expansion into full service collision repair market (4)......................................... 6,000,000 59.2
Working capital and general corporate purposes.................................................. 1,216,000 12.0
Total......................................................................................... $10,141,000 100.0%
</TABLE>
(1) Lenward C. Wilbanks, Jr., Lisa W. Griffin, Laura W. Rodier, Jeffrey W.
Hudson, Dallas R. Barbee and Jan Barbee, all of whom are current
stockholders of the Company, made advances to the Company (the "Stockholder
Advances"), the aggregate principal amount of which is outstanding as of the
date of this Offering is approximately $1.4 million. The Stockholder
Advances are payable on demand and do not accrue interest.
(2) Mr. Wilbanks, Sheila Wilbanks Kaylor and F. Yvonne Wilbanks made loans to
the Company (the "Bridge Financing"), the aggregate principal amount of
which is outstanding as of the date of the Offering is $525,144. The Bridge
Financing accrues interest at a per annum rate of 9.5%, which is payable
monthly, and is due and payable on the earlier of (i) two years from the
date of the Bridge Financing or (ii) completion of an initial public
offering yielding net proceeds to the Company of at least $10 million. See
"Certain Relationships and Related Transactions."
(3) Amounts will be used primarily to open new and acquire existing production
paint centers.
(4) Amounts will be used primarily to acquire existing full service collision
repair centers.
If the Underwriter exercises its Over-allotment Option in full, the Company
will realize additional net proceeds of approximately $1,640,250, which amount
will be added to the Company's working capital.
The Company anticipates, based on current proposed plans and assumptions
related to its operations, that the proceeds of this Offering will be sufficient
to satisfy the Company's contemplated cash requirements for at least 12 months
following the consummation of the Offering. In the event the Company's plans
change or its assumptions change or prove to be inaccurate or the proceeds of
the Offering prove to be insufficient to fund operations (due to unanticipated
expenses, delays, problems or otherwise), the Company may find it necessary or
advisable to reallocate some of the proceeds within the above-described
categories or to use portions thereof for other purposes and could be required
to seek additional financing sooner than currently anticipated. Depending on the
Company's progress in executing its business plan and the state of the capital
markets, the Company may also determine that it is necessary to borrow
additional funds or to raise additional equity capital, possibly within the next
12 months, to fund the Company's growth. The Company has no current arrangements
with respect
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<PAGE>
to, or sources of, additional financing and there can be no assurance that
additional financing will be available to the Company when needed on
commercially reasonable terms, or at all. Any inability to obtain additional
financing when needed would have a material adverse effect on the Company,
including possibly requiring the Company to significantly curtail its
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Proceeds not immediately required for the purposes described above will be
invested principally in U.S. government securities or short-term certificates of
deposit.
DILUTION
As of September 30, 1996, the Company had a net tangible book value of
$91,003, or $.01 per share. After giving effect to the sale of the 1,500,000
shares of Common Stock offered by the Company pursuant to this Prospectus at an
initial public offering price of $8.00 per share and the application of the
estimated net proceeds as set forth under "Use of Proceeds," the pro forma net
tangible book value at such date would have been $10.2 million, or $1.23 per
share. This represents an immediate increase in net tangible book value of $1.22
per share to the existing stockholders and an immediate dilution of $6.77 per
share (or 85% of the public offering price) to purchasers of the Common Stock
offered hereby ("New Investors"). If the initial public offering price is higher
or lower, the dilution to New Investors will be, respectively, greater or less.
The following table illustrates the dilution per share:
<TABLE>
<S> <C> <C>
Public Offering price (1)............................................................ $8.00
Net tangible book value per share at September 30, 1996 (2)........................ $ .01
Increase per share attributable to New Investors................................... $1.22
Pro forma net tangible book value per share after Offering........................... $1.23
Dilution per share to New Investors (3).............................................. $6.77
</TABLE>
(1) Before deduction of underwriting discounts and commissions and estimated
offering expenses payable by the Company.
(2) Net tangible book value per share represents the Company's total tangible
assets less its total liabilities divided by the number of shares of Common
Stock outstanding.
(3) Does not include the effect of (i) the Underwriter's Over-allotment
exercise, (ii) the Underwriter's Warrants, or (iii) the Consultant Warrants.
The dilution of net tangible book value per share to New Investors assuming
the Underwriter's Over-allotment Option is exercised in full would be $6.47
(or 81%).
The table above assumes no exercise of stock options outstanding as of
September 30, 1996. As of such date, there were options outstanding to purchase
416,000 shares of Common Stock, each at an exercise price of $8.00. If all of
such options were exercised, as adjusted net tangible book value per share after
the Offering would be $1.55 per share and, therefore, would not result in
immediate dilution to New Investors. See "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Certain Relationships and Related Transactions," "Description of Securities"
and "Underwriting."
The following table sets forth, with respect to existing stockholders and
New Investors, a comparison of the number of shares of Common Stock acquired
from the Company, the percentage of ownership of such shares, the total
consideration paid and the average price paid per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION PAID AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing Stockholders...................................... 6,818,812 82% $ -- (1) -- (1) -$- (1)
New Investors.............................................. 1,500,000 18% $12,000,000 100% $8.00
Total............................................... 8,318,812 100% $12,000,000 100%
</TABLE>
(1) nominal amount
The table above assumes no exercise of the Underwriter's Over-allotment
Option. If such option is exercised in full, the New Investors will have paid
$13,800,000 for 1,725,000 shares of Common Stock, representing approximately
100% of the total consideration for 18% of the total number of shares of Common
Stock outstanding. The table above also gives no effect
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<PAGE>
to the exercise of the Underwriter's Warrants and stock options to be
outstanding upon consummation of the Offering. Exercise of the Underwriter's
Warrants and stock options would not result in further dilution to New Investors
in this Offering.
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1996, as adjusted to give effect to the receipt and anticipated
use of the estimated net proceeds of this Offering. This table should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
PRO FORMA,
HISTORICAL AS ADJUSTED
<S> <C> <C>
Debt:
Advances from and notes payable to stockholders.................................................. $1,879,202 -- (1)
Current portion of long-term debt and capital lease obligations.................................. 221,096 221,096
Long-term debt and capital lease obligations..................................................... 410,203 410,203
Total debt................................................................................ 2,510,501 631,299
Stockholders' Equity:
Common Stock, $.01 par value;
20,000,000 authorized;
8,250,000 issued and
outstanding on a pro forma basis............................................................... -- 83,188
Additional paid-in capital....................................................................... -- 10,057,630
Retained earnings................................................................................ 91,003 91,003
Total shareholders' equity................................................................ 91,003 10,231,821
Total capitalization...................................................................... $2,601,504 $10,863,120
</TABLE>
(1) All advances from and notes payable to stockholders are expected to be
retired with a portion of the proceeds of the Offering (see "Use of
Proceeds").
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
Net sales for the nine months ended September 30, 1996 increased $2.4
million, or 13.9%, to $19.5 million from $17.1 million for the same period in
1995. Approximately $1.7 million of this increase was attributable to net sales
of eight new operating locations opened during the first nine months of fiscal
1996 with the remainder attributable to increased sales in existing operations.
The Company believes that its net sales growth was adversely affected in the
1996 period due to several factors. The Company believes that the harsh winter
in the first quarter of 1996 depressed revenues by approximately $1 million. In
addition, it is the Company's experience that locations in large metropolitan
areas experience revenue growth at a much slower rate than locations in smaller
areas. Of the ten locations opened by the Company in fiscal 1995, seven were in
large metropolitan areas, while only one of the 14 locations opened in fiscal
1994 was in a large metropolitan area. Consequently, revenue growth in fiscal
1996 from locations opened in 1995 has been much slower than revenue growth in
fiscal 1995 from locations opened in fiscal 1994. The Company also experienced
lower than normal traffic in most of its locations in the summer of 1996 due to
overall industry conditions. The Company has experienced similar events in the
past and believes that this was a periodic industry anomaly. The Company
experienced normal traffic patterns in most of its locations in the third
quarter of 1996.
Cost of sales for the nine months ended September 30, 1996 increased to
$12.4 million (63% of net sales) from $10.8 million (63% of net sales) for the
nine months ended September 30, 1995. The increase in cost of sales was the
direct result of the increase in net sales for the 1996 period.
Gross profit for the nine months ended September 30, 1996 increased to $7.1
million, or 37% of net sales, as compared to $6.3 million, or 37% of net sales,
for the same period in 1995. The increase in gross profit was the direct result
of the higher net sales for the 1995 period. The Company has historically been
successful in maintaining gross profit as a percentage of net sales of
approximately 37%.
Selling, general and administrative expenses increased by $1.5 million
during the nine months ended September 30, 1996 to $6.4 million (33% of net
sales) from $5.0 million (29% of net sales) during the nine months ended
September 30, 1995. The increase in selling, general and administrative expenses
for the 1996 period reflects increases in selling, general and administrative
expenses that the Company normally experiences in connection with new start-up
shops opened for less than 12 months. This situation results from the fact that
it takes a number of months for sales to ramp-up to expected levels at new
locations, while the related expenses of the shops, including rent and
advertising, are incurred at full budgeted amounts from the first month. Thus,
in most cases, the Company has found it takes an average of 12 months for
selling, general and administrative expenses to reach expected levels as a
percentage of sales for new shops. Management estimates that this factor
accounted for approximately $300,000 or 38% of the 4% increase in selling,
general and administrative expenses as a percentage of sales as the Company had
13 new locations that had been in operation for less than 12 months for the nine
month period ended September 30, 1996, as compared with seven new start-up
locations open for less than 12 months for the nine month period ended September
30, 1995. In addition, the Company incurred expenses of approximately $60,000
related to the new management information system ("MIS") infrastructure
necessary for the Company to begin its expansion efforts in both its current
production paint division and its newly formed full service collision repair
division; and also incurred certain incremental charges in the approximate
amount of $175,000 related primarily to this Offering.
Due to the Company's growth strategy in its production paint division of
expanding primarily by opening new locations, the Company experiences an
increase in the amount of its selling, general and administrative expenses for
each new start-up location during each such location's first 12 months of
operation. During this start-up period, the Company estimates that each new
location adds an average of approximately $50,000 of additional selling, general
and administrative expenses. For the period ended September 30, 1996, the
Company had 13 new start-up locations that had been in operation for less than
12 months, as compared with only seven new start-up locations open for less than
12 months for the same period in 1995.
The Company incurred expenses related to adding new MIS infrastructure in
the nine months ended September 30, 1996, which expenses the Company did not
incur in the same period in 1995. These expenses included adding seven new
administrative personnel at a cost of approximately $50,000 for the period and
incurring certain temporary administrative services expenses at a cost of
approximately $10,000 for the period. The Company began implementing the new MIS
infrastructure to enhance its ability to effectively integrate the new locations
that the Company intends to open and acquire after the Offering.
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<PAGE>
In the nine months ended September 30, 1996, the Company incurred
approximately $175,000 of incremental professional and other expenses related to
the Offering. Selling, general and administrative expenses are expected to
increase from period to period as a result of continued growth of the Company,
including MIS infrastructure and the planned acquisition strategy that the
Company intends to pursue in its newly-formed full service collision repair
division after the closing of the Offering.
Depreciation and amortization expenses increased to $301,162 in the nine
months ended September 30, 1996 from $293,969 in the nine months ended September
30, 1995. The increase in depreciation and amortization expenses are
attributable to an increase in fixed assets related to the expanded operations
of the Company during 1996. Depreciation and amortization expenses are expected
to increase from period to period as a result of the Company's continued growth
activity, including the planned acquisition strategy that the Company intends to
pursue in its newly-formed full service collision repair division after the
closing of the Offering.
Interest expense for the nine months ended September 30, 1996 decreased to
$9,970 from $15,670 in the nine months ended September 30, 1995. The decrease
was attributable to repayment of outstanding principal debt by the Company
during the nine months ended September 30, 1995. Interest expense in future
periods will depend upon fluctuations in outstanding debt balances and
prevailing interest rates. The Company anticipates that interest expense will
increase in future periods as a result of debt that may be incurred in
connection with the Company's growth strategy, including its acquisition
strategy in its newly-formed full service collision repair division.
During the nine months ended September 30, 1996, the Company operated
through 24 corporations, of which 20 were S corporations and four were C
corporations. The Company operated through the same number of S and C
corporations in the nine months ended September 30, 1995. With respect to the S
corporations, income tax liabilities were the responsibility of the Company's
shareholders during both 1996 and 1995. With respect to the C corporations, the
Company's effective tax rate was 38% in the nine months ended September 30, 1996
and the nine months ended September 30, 1995.
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1994
Net sales for the fiscal year ended December 31, 1995 increased $7.4
million, or 47.7%, to $22.9 million from $15.6 million for the same period in
1994. Approximately $2 million of this increase was attributable to net sales of
10 new operating locations opened during fiscal 1995 with the remainder
attributable to increased sales in existing operations.
Cost of sales for the fiscal year ended December 31, 1995 increased to
$14.5 million (63% of net sales) from $9.6 million (62% of net sales) for the
fiscal year ended December 31, 1994. The increase in cost of sales was the
direct result of the increase in net sales for fiscal 1995.
Gross profit for the fiscal year ended December 31, 1995 increased to $8.4
million, or 37% of net sales, as compared to $5.9 million, or 38% of net sales,
for the same period in fiscal 1994. The increase in gross profit was the direct
result of the increase in net sales for fiscal 1995.
Selling, general and administrative expenses increased by $1.5 million
during the fiscal year ended December 31, 1995 to $6.9 million (30% of net
sales) from $5.3 million (34% of net sales) during the fiscal year ended
December 31, 1994. The increase in selling, general and administrative expenses
reflects the increase in the costs necessary to support the Company's rapid
growth during the period and was primarily the result of the addition of 10 new
operating locations during fiscal 1995. The Company did, however, decrease
selling, general and administrative expenses as a percentage of net sales, from
34% in fiscal 1994 to 30% in fiscal 1995 even though the Company experienced
more than a 47% increase in net sales and a 29% increase in the number of
operating locations from fiscal 1994 to fiscal 1995. Selling, general and
administrative expenses are expected to increase from period to period as a
result of continued growth activity of the Company, including the planned
acquisition strategy the Company intends to implement in its newly-formed full
service collision repair division after the closing of the Offering.
Depreciation and amortization expenses increased to $391,959 in the fiscal
year ended December 31, 1995 from $306,398 in the fiscal year ended December 31,
1994. The increase in depreciation and amortization expenses are attributable to
an increase in fixed assets related to the expanded operations of the Company
during fiscal 1995. Depreciation and amortization expenses are expected to
increase from period to period as a result of continued growth activity of the
Company, including the planned acquisition strategy the Company intends to
implement in its newly-formed full service collision repair division after the
closing of the Offering.
Interest expense for the fiscal year ended December 31, 1995 decreased to
$29,218 from $40,759 in the fiscal year ended December 31, 1994. The decrease
was attributable to repayment of outstanding principal debt by the Company
during
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fiscal 1995. Interest expense in future periods will be dependent upon
fluctuations in outstanding debt balances and prevailing interest rates. The
Company anticipates that interest expense will increase in future periods as a
result of debt that may be incurred in connection with the Company's growth
strategy, including its acquisition strategy in its newly-formed full service
collision repair division.
During the fiscal year ended December 31, 1995, the Company operated
through 24 corporations, of which 20 were S corporations and four were C
corporations, as compared to the fiscal year ended December 31, 1994, in which
the Company operated through two partnerships and 21 corporations, of which 16
were S corporations and five were C corporations. With respect to the S
corporations, income tax liabilities were the responsibility of the Company's
shareholders during fiscal 1995 and fiscal 1994. With respect to the
partnerships, income tax liabilities were the responsibility of the partners
during fiscal 1994. With respect to the C corporations, the Company's effective
tax rate was 38% in fiscal 1995 and 30% in fiscal 1994. The Company utilized
$273,000 in tax loss carryforwards for the fiscal year ended December 31, 1995
as compared to $137,594 in tax loss carryforwards utilized for the fiscal year
ended December 31, 1994. At December 31, 1995 the Company had net operating loss
carryforwards of $40,000 for income tax purposes, which expire at various times
through 2008. The Company's S corporation status will terminate on consummation
of the Formation Transactions.
FISCAL YEAR ENDED DECEMBER 31, 1994 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1993
Net sales for the fiscal year ended December 31, 1994 increased $6.6
million, or 74%, to $15.6 million from $9.0 million for the same period in 1993.
Approximately $3.8 million of this increase was attributable to net sales of 14
new operating locations opened during fiscal 1994 with the remainder
attributable to increased sales in existing operations.
Cost of sales for the fiscal year ended December 31, 1994 increased to $9.6
million (62% of net sales) from $5.6 million (62% of net sales) for the fiscal
year ended December 31, 1993. The increase in cost of sales was the direct
result of the increase in net sales for fiscal 1994.
Gross profit for the fiscal year ended December 31, 1994 increased to $5.9
million, or 38% of net sales, as compared to $3.4 million, or 38% of net sales,
for the same period in fiscal 1993. The increase in gross profit was the direct
result of the increase in net sales for fiscal 1994.
Selling, general and administrative expenses increased by $2.4 million
during the fiscal year ended December 31, 1994 to $5.3 million (34% of net
sales) from $2.9 million (32% of net sales) during the fiscal year ended
December 31, 1993. The increase in selling, general and administrative expenses
reflects the increase in costs necessary to support the Company's rapid growth
during the period and was primarily the result of the addition of 14 new
operating locations during fiscal 1994. Selling, general and administrative
expenses are expected to increase from period to period as a result of continued
growth activity of the Company, including the planned acquisition strategy the
Company intends to implement in its newly-formed full service collision repair
division after the closing of the Offering.
Depreciation and amortization expenses increased to $306,398 in the fiscal
year ended December 31, 1994 from $119,902 in the fiscal year ended December 31,
1993. The increase in depreciation and amortization expenses are attributable to
an increase in fixed assets related to the expanded operations of the Company
during fiscal 1994. Depreciation and amortization expenses are expected to
increase from period to period as a result of continued growth activity of the
Company, including the planned acquisition strategy the Company intends to
implement in its newly-formed full service collision repair division after the
closing of the Offering.
Interest expense for the fiscal year ended December 31, 1994 decreased to
$40,759 from $41,873 in the fiscal year ended December 31, 1993. The decrease
was attributable to repayment of outstanding principal debt by the Company
during fiscal 1994. Interest expense in future periods will be dependent upon
fluctuations in outstanding debt balances and prevailing interest rates. The
Company anticipates that interest expense will increase in future periods as a
result of debt that may be incurred in connection with the Company's continued
growth strategy, including its acquisition strategy in its newly-formed full
service collision repair division.
During the fiscal year ended December 31, 1994, the Company operated
through two partnerships and 21 corporations, of which 16 were S corporations
and five were C corporations, as compared to the fiscal year ended December 31,
1993, in which the Company operated through 17 corporations, of which 13 were S
corporations and four were C corporations. With respect to the S corporations,
income tax liabilities were the responsibility of the Company's stockholders
during fiscal 1994 and fiscal 1993. With respect to the partnerships, income tax
liabilities were the responsibility of the partners during fiscal 1994. With
respect to the C corporations, the Company's effective tax rate increased to 30%
in fiscal 1994 from 0% in fiscal 1993 primarily due to the C corporations
yielding income for the first time. The Company utilized $137,594 in tax loss
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carryforwards for the fiscal year ended December 31, 1994 as compared to $0 in
tax loss carryforwards utilized for the fiscal year ended December 31, 1993. At
December 31, 1994 the Company had net operating loss carryforwards of $313,000
for income tax purposes, which expire at various times through 2008. The
Company's S corporation status will terminate upon consummation of the Formation
Transactions.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its activities to date through cash flows from
operations, borrowings from its majority shareholders, operating equipment
leases and seller provided financing related to certain of its acquisitions. The
Company's primary long-term capital needs are for opening and acquiring new
production paint and full service collision centers. The Company expects to fund
such needs through cash flows from operations, operating equipment leases,
seller provided financing related to its future acquisitions, the net proceeds
from this Offering and possibly borrowings under credit facilities that have not
yet been established.
Net cash provided by operating activities was $2.0 million during fiscal
1995 as compared to $1.0 million for fiscal 1994. Net cash used in investing
activities was $631,908 in fiscal 1995 compared to $810,015 for fiscal 1994,
comprised primarily of purchases of capital equipment, furniture and fixtures
required by the Company to open 10 new facilities in fiscal 1995 and 14 new
facilities in fiscal 1994.
Net cash provided by operating activities was $766,094 during the nine
months ended September 30, 1996 as compared to $1.8 million for the same period
in 1995. Net cash used in investing activities was $424,465 in the nine month
period ended September 30, 1996 as compared to $452,895 for the same period in
1995, comprised primarily of purchases of capital equipment, furniture and
fixtures required by the Company to open eight new facilities in the nine months
ended September 30, 1996 and seven new facilities in the same period in 1995.
The Company's capital expenditures in 1996 will continue to focus on
opening new facilities, acquiring existing operations and implementing the
Company's new electronic management information system. The Company estimates
that the total cash required to open a new production paint facility, including
fixtures and equipment, leasehold improvements and inventory ranges between
$75,000 and $100,000 per location. The Company estimates that the total purchase
price for each full service collision center to be acquired pursuant to the
Company's acquisition strategy for its new full service collision repair
division will be between $400,000 and $600,000. The Company currently intends to
fund each purchase with a combination of cash and seller provided financing with
total cash required for each acquisition to equal 25% to 50% of the total
purchase price. The Company may, however, utilize a greater or lesser percentage
of cash for each acquisition on a case-by-case basis. The Company's MIS will be
implemented in each of the Company's current locations at an estimated aggregate
cost of approximately $250,000.
The Company receives payment for its services from its retail customers
upon delivery of their vehicles and does not extend credit to its retail
customers, which represent approximately 90% of the Company's net sales. The
Company bills its commercial customers upon delivery of their vehicles and
receives payment within 30 days, which represents approximately 15% to 25% of
the Company's net sales. The average commercial customer days' sales outstanding
for accounts receivable at September 30, 1996 of approximately 30 days did not
vary significantly from the average days' sales outstanding for commercial
customers of approximately 30 days at September 30, 1995.
The Company maintains a small amount of inventories, comprised primarily of
supplies and materials at each of its facilities. At September 30, 1996,
inventories for 52 facilities were $147,672 compared to inventories for the
fiscal year ended December 31, 1995 for 44 facilities of $129,972.
The Company's policy has historically been to pay its suppliers upon
delivery. Accordingly, the Company maintains low levels of trade accounts
payable, with such amount being $221,178 for the fiscal year ended December 31,
1995 and $291,511 for the nine months ended September 30, 1996.
The Company intends to use part of the net proceeds of this Offering to
repay approximately $1.4 million of Shareholder Advances and $525,144 of Bridge
Financing. See "Use of Proceeds" and "Certain Relationships and Related
Transactions."
Management of the Company presently believes that cash flow from
operations, the net proceeds from this Offering and its anticipated borrowing
capacity after completion of the Offering will be sufficient to support its
operations and general business and capital liquidity requirements for the next
12 months. To finance future acquisitions, the Company expects to utilize its
net proceeds from this Offering, its cash flow from operations and its borrowing
capacity. Depending upon market
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conditions, the Company may also incur additional indebtedness or issue
additional equity securities. There can be no assurance that such additional
capital, if and when required, will be available on terms acceptable to the
Company, or at all. See "Risk Factors -- Need for Additional Financing."
SEASONALITY
The Company's business is somewhat subject to seasonal influences, with a
larger portion of sales realized during the spring and summer (second and third
quarters) of each fiscal year due primarily to weather conditions being
generally more favorable in these periods. Adverse weather conditions, however,
such as snow, ice and hail, during the winter (late fourth and first quarters)
of each fiscal year can positively affect the Company's sales due to the
increased incidences of vehicular damage that occur during such adverse weather
conditions.
INFLATION
The Company believes that, to date, inflation has not had a material
adverse effect on its business. In recent years, however, automotive paint
prices have generally risen at rates in excess of the overall inflation rate
due, in part, to the changing paint formulations and related costs incurred by
the Company's paint supplier to comply with environmental regulations.
Historically, the Company has been successful in passing most, if not all, of
such increases on to the customer.
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BUSINESS
GENERAL
The Company is a leading regional operator of vehicle paint and collision
centers in the southeastern United States. The Company's operations have rapidly
grown from a single vehicle paint facility in Warner Robins, Georgia in June
1991 to 52 centers in 11 states. The Company's annual revenue has grown from
$9.0 million in 1993 to $22.9 million in 1995, an average net sales growth rate
of 60%.
The Company's paint and collision centers operate under the trade name
"Peach Auto Painting and Collision." The Company paints vehicles on a production
basis, offering its customers a variety of refinishing and painting options at
attractive prices that vary based on the amount of preparation of the vehicle
prior to painting, special paint additives, such as clear coats, hardeners and
sunscreens, optional services and length of warranty. The Company also performs
light and medium body repair services in connection with its refinishing and
painting operations. The goal of the Company's paint and collision centers is to
provide a quality paint job at a reasonable price. Paint-related services
account for approximately 80% of the Company's current revenues, with collision
repair services accounting for the remaining revenues.
The Company has experienced growth by opening new paint and collision
centers and acquiring existing competitors' facilities and converting them into
Company-owned centers, a strategy the Company intends to continue. The Company
believes that its rapid growth rate and success is attributable in large part to
the demographic and financial operating model that it applies when considering
whether to open a new or acquire an existing paint and collision center. In
applying this model, the Company considers (i) the lead time required to open a
new center; (ii) the square footage available in a particular facility; (iii)
the cost of renovating or building a new facility; (iv) the amount of land
required; (v) site demographics; (vi) competition; (vii) the projected break
even point; (viii) projected sales growth; and (ix) the availability of
qualified management. The Company's successful application of this strategy is
evidenced by its ability to generate its substantial growth rate with internal
funding from operating income without incurring any significant amount of debt.
As of September 30, 1996, the Company had long term debt, notes payable to
stockholders, and capital lease obligations of $1.1 million. Although the
Company had advances from stockholders of approximately $1.4 million as of
September 30, 1996, such advances were necessary primarily because the Company
distributed a substantial portion of its available cash to stockholders when its
predecessor entities were operating as S corporations.
The Company, which was organized as a Delaware corporation in connection
with this Offering, is the successor to a series of corporations through which
all of the Company's existing paint and collision operations were conducted
prior to the consummation of the Formation Transactions.
GROWTH STRATEGY
The Company intends to pursue an aggressive growth strategy both by
expanding its existing production paint operations and entering the full service
collision market. The Company's expansion strategy with respect to its
production paint operations includes both internal revenue and profit growth
from existing centers as well as external growth through the opening or
acquisition of new centers. The Company's primary strategy for expanding its
operations into the full service collision market is to acquire existing
operations in geographic markets in which the Company conducts production paint
operations. Under the Company's current expansion plans, the Company's goal is
to open or acquire 15 to 20 production paint centers and acquire 12 to 18 full
service collision repair centers in the 12 months following completion of the
Offering. There can be no assurances, however, that the Company will be able to
meet this goal.
EXISTING PAINT AND COLLISION OPERATIONS
The Company intends to expand its existing paint and collision operations
by pursuing both an internal and external growth strategy.
Internal Growth. The Company's internal growth strategy with respect to its
production paint operations includes:
(Bullet) INCREASING REVENUES. Revenues at the Company's paint and collision
centers tend to increase rapidly as such centers mature. Based on
the Company's historical experience, its centers typically reach
maturity in terms of sales three years after opening, at which
time revenues generally stabilize. The average annual revenues of
centers that have been in operation for more than three years are
$625,000, while the average annual revenues of centers in their
first, second and third years of operations are $500,000, $550,000
and $600,000, respectively. As of the date of this Offering, only
16 of the Company's paint and collision centers have been in
operation for more than three years. While only four of the
centers are expected to reach maturity in the next 12 months, 18
centers are expected to reach maturity in the next
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24 months and 28 in the next 36 months. There can be no
assurances, however, that the Company will achieve anticipated
results.
(Bullet) INCREASING PROFIT MARGINS. In addition to increasing revenues,
management expects the Company's paint and collision centers to
experience improved profit margins as the centers reach maturity.
This increase is a result of improved operating performance and
efficiencies as a center matures, as well as the recognition of
economies of scale from fixed operating costs. The Company also
anticipates that its profit margins will improve as the
concentration of centers in certain geographic markets increases,
since certain costs, particularly advertising expenses, will be
shared by an increasing number of centers, providing the
opportunity to better leverage these expenses. The average profit
margin of centers that have been in operation for more than three
years is 14%, while the average profit margins of centers in their
first, second and third years of operations are 7%, 9% and 12%,
respectively. There can be no assurances, however, that the
Company will achieve anticipated results.
External Growth. The Company believes that certain economic trends are
favorably impacting the production paint industry throughout the United States.
The average retail selling price of a new vehicle sold by a dealership rose from
$7,619 in 1980 to $19,806 in 1994 (Source: U.S. Department of Commerce, Bureau
of Economic Analysis), and the percentage of family income spent on a new car
has risen from 36% in 1980 to 51% in 1994 (Source: U.S. Department of Commerce,
Bureau of Economic Analysis). The increase in vehicle prices has led consumers
to drive their vehicles longer: the average age of cars and trucks in the United
States in 1994 was 8.4 years, the highest since 1948 (Source: American
Automobile Manufacturers Association). The Company believes that the trend of
higher prices and longer life spans for vehicles is leading consumers to seek
quality vehicle paint services at reasonable prices. The Company believes these
trends present the Company with a strong opportunity to expand its presence in
existing markets as well as in other markets in the United States that satisfy
the Company's demographic and financial operating model. The Company's strategy
for external growth includes:
(Bullet) CONCENTRATING FACILITIES WITHIN LIMITED GEOGRAPHIC MARKETS.
Although the Company currently operates 52 paint and collision
centers located primarily in the southeastern United States, the
Company has not yet achieved the optimum scale of operations in
certain metropolitan areas to fully realize the economies of scale
generated by operating more centers in a single geographic market.
The Company, therefore, intends to increase the concentration of
its paint and collision centers in certain of the geographic
markets in which the Company now operates. As the Company
increases its concentration of facilities in these markets,
management expects the Company's profit margins in these markets
to improve as a greater number of facilities are in place to
better leverage local marketing and advertising expenses.
(Bullet) EXPANDING THROUGHOUT THE SOUTHEAST. Primarily all of the Company's
existing paint and collision centers are located in the
southeastern United States, and the Company believes that this
region continues to present attractive opportunities to expand the
Company's production paint operations. In addition to increasing
the concentration of facilities in certain markets in the
Southeast, the Company also intends to expand to certain other
markets in that region with strong economic trends, such as
Florida and Texas. The Company currently operates only five paint
and collision centers in Florida and seven centers in Texas. The
proceeds from this Offering will provide the Company with the
capital resources to expand its paint and collision operations to
attractive markets in the Southeast.
(Bullet) EXPANDING TO NEW GEOGRAPHIC REGIONS. While the Company has
historically operated primarily in the southeastern United States,
management believes that certain other geographic regions offer
attractive growth opportunities. The Company's present intention
is to establish a stronger presence in the Mid-Atlantic region and
expand into the Midwest, including Cincinnati, Indianapolis and
St. Louis, the Southwest, including New Mexico and Arizona, and
the Inner Mountain West, including Denver. Management believes
that these markets have demographic and economic characteristics
similar to those of the Company's current markets.
Competitive Advantages. The Company believes that certain competitive
factors will enhance its ability to successfully implement its growth
strategies.
(Bullet) COMPANY-OWNED CENTERS. The Company has direct ownership of its
centers. As such, the interests of the Company are directly
aligned with the local operators of the centers. Direct ownership
also enables the Company to exercise a high level of control over
the management and operation of the centers, including the hiring
of employees, the enforcement of cost controls, operational
procedures and quality assurance. Direct ownership also enables
the Company to offer competitive prices and recognize higher
margins since no licensing, franchise, administrative, purchasing
or other fees are being paid to third parties.
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(Bullet) EXPERIENCED MANAGEMENT. The Company's senior management has more
than 55 years of combined experience in the production paint
industry and the acquisition and operation of multiple locations.
(Bullet) OPERATING EFFICIENCIES. The proceeds of the Offering will enhance
the Company's ability to increase the number of its centers in
multiple locations, thereby enabling the Company to take advantage
of (i) economies of scale in the purchasing of supplies and (ii)
increasing profit margins resulting from increasing revenues
without a proportional increase in expenses due to certain fixed
costs associated with operating the centers.
(Bullet) RETENTION OF EMPLOYEES. The operation of a production paint center
requires skilled labor. Historically, production paint businesses
have had difficulty retaining qualified employees. As a public
company, the Company will be able to offer employee benefits not
traditionally found in the industry, including stock option and
ownership programs. The Company believes these competitive benefit
plans will enable it to retain a higher percentage of its
employees, thereby reducing costs associated with hiring and
training new employees.
BUSINESS LINE EXPANSION
The vehicle paint and collision repair industry in the United States is
estimated to exceed $21 billion annually (Source: COLLISION REPAIR INDUSTRY
INSIGHT, December 1995), of which the Company estimates the production paint
industry comprises approximately 5%. A substantial portion of the remaining
industry is comprised of the heavy collision repair market. The production paint
and heavy collision repair markets complement one another because of their
similarities. The Company's current production paint centers have the capability
of performing full service vehicle collision repairs. Likewise, full service
collision repair centers generally offer vehicle painting as an incidental but
necessary service to their primary business of collision repair. The primary
operational differences in the production paint and full service collision
repair markets are their customer and marketing focus and the mix of body repair
services relative to painting services. The production paint market targets
primarily retail customers, while the collision repair market is directed
primarily at commercial customers, such as insurance companies, fleet operators,
leasing agencies and rental companies. Approximately 20% of revenues of the
Company's production paint centers are generated by collision repair services.
The Company believes that entrance into the full service collision repair
market is a logical extension of its existing business. The Company has
established a successful track record of operating a chain of production paint
centers that provide collision repair services. The Company believes that the
experience it has acquired in the production paint market and application of a
strict demographic and financial operating model will enable the Company to
pursue an aggressive strategy of acquiring established profitable full service
collision repair centers and operating them on a large-scale basis. The Company
anticipates operating its full service collision repair centers under the trade
name "Collins Collision" in a division separate from the Company's production
paint centers.
The Company believes the following factors affecting the collision repair
market present the Company with an ideal opportunity to enter the market:
(Bullet) Industry consolidation pressures. The collision repair industry is
highly fragmented, comprised of approximately 48,000 individual
paint and body repair facilities (Source: COLLISION REPAIR
INDUSTRY INSIGHT, December 1995), and currently is experiencing
increased pressures, generated largely by the automobile insurance
industry, to control prices. The insurance industry's efforts to
control claim costs, insure quality repairs, increase services and
standardize claims processing with advanced electronic
communications have created consolidation pressures in the
industry. Moreover, many insurance companies encourage their
customer base to utilize only the services of collision repair
centers that are "accredited" by the insurance industry. Small
independent operators generally do not have the ability or
financial resources to respond successfully to these pressures.
The Company believes that it has the operational experience and
will have the resources to capitalize on the existing
consolidation pressures.
(Bullet) Existing acquisition values. The consolidation pressures in the
collision repair industry have led many independent operators to
search for a means of either exiting the industry or becoming part
of a larger, better capitalized operation. The Company believes
that the lack of any dominant multi-location operators in the
collision industry has significantly limited the opportunities of
independent operators to sell their businesses or to associate
with other companies. The Company believes that these factors will
provide opportunities to acquire profitable collision repair
centers generating high revenue at low multiples of the centers'
profits.
Competitive Advantages. The Company believes certain factors will give the
Company a competitive advantage over other operators in the collision repair
industry.
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(Bullet) INDUSTRY EXPERIENCE. The Company has established a successful
track record of operating a chain of production paint centers that
already provide collision repair services. The Company believes
that this experience greatly enhances the Company's ability to
successfully operate a chain of full service collision repair
centers, which are operationally similar to production paint
centers.
(Bullet) ECONOMIES OF SCALE. The Company's ability to purchase parts and
supplies for multiple locations will enable the Company to take
advantage of economies of scale, volume discounts and rebates that
generally are unavailable to independent operators. Management
believes that it will be able to purchase supplies at prices less
than those paid by independent operators.
(Bullet) INSURANCE INDUSTRY RELATIONSHIP. Many independent operators are
currently resisting the cost control pressures of the insurance
industry. The Company intends to establish a close working
relationship with the insurance industry by having all of its
collision repair facilities certified for participation in the
industry's designated repair programs, and among other things,
installing electronic estimating and insurance claim processing
systems in each of its collision repair facilities. The Company's
goal is to establish a relationship with individual insurers
whereby such insurers will choose to refer their insureds, on a
large-scale basis, to the Company's collision centers.
(Bullet) MARKETING STRATEGIES. The Company believes that it can target
insurance companies, fleet operators, leasing agencies and rental
companies more effectively than smaller operators as a result of
the Company's ability to render higher quality services at more
competitive rates than smaller operators. The Company also intends
to utilize its contacts with fleet operators, leasing agencies,
and rental companies that it has developed through its production
paint operations.
(Bullet) AUTOMOBILE DEALERSHIP RELATIONSHIPS. Automobile dealerships
typically maintain body shops for the convenience of their
customers. Management believes that these shops frequently operate
at a loss or with small profit margins and, as a result, many
dealerships may consider out-sourcing their body repair work to an
established and reputable chain of collision repair centers, such
as the Company intends to develop. The Company, therefore, intends
to pursue working relationships with selected automobile
dealerships.
Market Entry Strategy. To implement its strategy to expand into the
collision repair market, the Company intends to undertake the following steps:
(Bullet) DEVELOP OPERATING MODEL. The Company intends to apply to the
collision repair market the demographic and financial modeling
techniques that it has successfully applied to the production
paint industry. The Company will, however, incorporate into its
model several elements that are specific to the collision repair
industry, including electronic estimating and insurance claim
processing, compliance with established insurance claim payment
criteria, and member participation in automobile insurance company
preferred provider and designated repair programs.
(Bullet) ESTABLISH TEST MARKET. The Company will initially test its model
for operating full service collision centers in twelve to eighteen
facilities, which the Company anticipates will be located in
markets in which the Company has existing production paint
centers. This limited operation will enable the Company to refine
its operating model.
(Bullet) EXPAND OPERATIONS. If the Company is successful in operating full
service collision centers on a limited basis, the Company intends
to first expand its collision centers regionally in the
southeastern United States. After establishing a strong presence
in the southeastern United States, the Company intends to expand
to other geographic markets that satisfy the Company's demographic
and financial operating model. Initially, the Company intends to
establish collision centers through the acquisition of existing
operations, which will be converted to the Company's full service
collision operating model and trade name. To the extent that the
Company is unable to identify suitable acquisition candidates in
attractive markets, the Company will open new full service
collision centers.
There can be no assurances that the Company will be successful in
implementing its growth strategy with respect to either its existing production
paint operations or its intended expansion into the full service collision
market.
PRODUCTS AND SERVICES
The Company's existing centers paint vehicles on a production basis. When a
vehicle enters the paint and collision center, any required body work, including
removal of dents and rust and replacement of parts, is performed first. The
vehicle then enters the sanding area, where certain accessories are removed, and
the vehicle is sanded to remove most chips, scratches, surface rust and oxidized
paint, the extent of which depends upon the paint package selected. The sander
scuffs the entire vehicle and spot primes it if such service is necessary and
included in the package selected. Each vehicle is then air-
20
<PAGE>
blown using a high pressure air hose to remove excess dust and particles, after
which the exposed chrome and glass areas are masked. Each vehicle is inspected
by a manager or assistant manager before it is turned over to a painter. The
painter moves the vehicle into an environmentally controlled paint booth,
air-blows it again, hand wipes the entire surface with a tack rag to remove all
excess dust and then applies a sealer, which serves as a bonding agent, with a
high volume low pressure paint gun. The painter then applies generally two or
three coats of paint to the vehicle, the last of which can be either a full
clear coat or a clear coat integrated with automotive paint, depending upon the
paint package selected.
The Company's paint booths are comprised primarily of the side downdraft
variety. Side downdraft booths are pressurized, thereby limiting the amount of
dust and particles that can enter the booth and compromise the quality of the
paint finish on the vehicle. Side downdraft booths use an air make-up unit that
draws air from outside the chamber into the top of the booth before an exhaust
unit expels the air. The side downdraft booth also serves as a drying chamber.
After a vehicle is painted, the heating unit is activated, which raises the
temperature in the booth by approximately 70(degree) to a temperature ranging
from 110(degree) to 140(degree) . This curing process takes approximately 20 to
30 minutes per vehicle. The vehicle is then detailed, which involves removing
over spray, reinstalling accessories removed during the painting process and
dressing the tires.
The Company offers five separate paint packages, which generally range in
price from approximately $170 to approximately $700, excluding any body repair
work or additional preparation. The average ticket price per vehicle serviced by
the Company ranges from $400 to $450. The Company provides a limited warranty of
the workmanship and materials on all paint jobs performed by the Company for
periods ranging from three months to three years, depending upon the service
package selected by the customer. Historically, fewer than 5% of all cars
serviced by the Company require warranty reservicing. Most of the Company's
sales take place in either cash or credit cards, although the Company does
accept personal checks on a case-by-case basis. The Company does not offer
credit terms for its retail sales, but offers limited credit terms for certain
of its commercial accounts. Each of the Company's paint and collision centers
offers free estimates for paint and body repair services.
The Company constantly reviews new products and techniques developed by its
suppliers and others in the Company's and related industries for their
applicability to the Company's operations.
OPERATIONS
The Company's prototypical production paint and collision center is a
single building with paint and repair facilities and office space plus exterior
parking and vehicle storage space. Each center has approximately nine to twelve
employees, which include a manager, an assistant manager, one painter, two
collision repair employees, one employee rendering vehicle detail services and
two or three employees to prepare vehicles for painting. Each paint and
collision center operates from 8:00 a.m. to 6:00 p.m. Monday through Friday and
9:00 a.m. to 12:00 p.m. on Saturday. On average, each of the Company's paint and
collision centers perform painting or collision repair services on 25 to 30 cars
per week. Commercial customers (for example, used car dealers) account for
approximately 15% to 25% of the Company's business, and approximately 15% to 25%
of the Company's business is provided by repeat customers. The average turn
around time for the Company to service a car is four days.
The lead time to open a new paint and collision center is typically three
to four months if the Company renovates an existing building and nine months to
two years if the Company enters into a build-to-suit lease arrangement. A new
center requires approximately three-quarters of an acre of land, and the
physical facility consists of approximately 6,000 square feet with 400 to 600
square feet of office space and the remainder comprised of work and storage
areas. In accordance with the Company's financial operating model, the Company
strives to limit renovation expenses to approximately $10,000 when the Company
leases an existing building. Renovation expenses can, however, range as high as
$25,000 to $35,000, depending upon whether or not the Company negotiates
favorable lease terms. In connection with opening new paint and collision
centers, the Company generally makes expenditures of less than $100,000, which
include paint and supply inventories, renovation expenses, fixtures, equipment,
advertising, employee training, signs and pre-opening expenses. When the Company
enters into a build-to-suit lease agreement, the Company typically guarantees
the real estate developer a certain rate of return on the costs incurred to
develop the property. Although the developer incurs the development costs, the
Company controls the amount of such costs, which vary by location. The
development costs of the Company's three most recent built-to-suit facilities
have averaged approximately $165,000 plus land cost and applicable commissions.
Land costs can range from $100,000 to $250,000 per location.
In choosing the location of a new paint and collision center, the Company
conducts a detailed demographic study. The ideal location has high traffic, good
visibility and favorable demographics located in high density commercial areas
with easy accessibility. The existence of competitors in a prospective market is
an insignificant factor in the Company's site selection
21
<PAGE>
process unless the site is located near three or more competitors. Although, new
paint and collision centers opened by the Company in accordance with the
Company's financial operating model usually reach a break even point in terms of
profitability within six to nine months, variables beyond the Company's control,
such as the costs to market a new location in a certain geographic area,
sometimes extend the time required for a new center to reach the break even
point. The Company's new paint and collision centers usually experience sales
growth for three to four years before same store sales stabilize.
The Company currently operates 52 production paint centers in eleven states
as follows:
<TABLE>
<S> <C>
Alabama..................................................... 5
Florida..................................................... 5
Georgia..................................................... 10
Louisiana................................................... 1
Mississippi................................................. 1
North Carolina.............................................. 9
Oklahoma.................................................... 4
South Carolina.............................................. 4
Tennesee.................................................... 4
Texas....................................................... 7
Virginia.................................................... 2
</TABLE>
MANAGEMENT
Each of the Company's collision and repair centers has one manager and one
assistant manager, who are responsible for day-to-day operating activities of
their particular facility. Each individual facility manager reports to one of
five district managers assigned to the manager's geographic location. Each
district manager has supervisory responsibility for all of the Company's paint
and collision centers in a designated geographic area. Each district manager
reports to one of three Vice Presidents of Operations, who report to the
President of the Company. Currently, three of the district managers also serve
as Vice Presidents of Operations. The Company is in the process of conducting a
search for a person who will be responsible for day-to-day management of the
Company's production paint operations. The Company is taking this action to
permit Mr. Wilbanks to devote a substantial portion of his time and effort to
the Company's planned expansion into the full service collision repair market.
The Company has established an extensive management training program, which
is comprised of initial and continuing education. The Company conducts intensive
three to four day training sessions for each new manager. All aspects of paint
and collision center operations, including customer contact, sales and service,
are covered in the Company's training program. All Company managers also
participate in regional and Company-wide continuing training sessions two to
three times each year. The Company is currently exploring the possibility of
hiring a specialist to conduct in-house training for the Company on a full-time
basis.
The Company is in the process of implementing a centralized electronic
management information system that will electronically connect all of the
Company's paint and collision centers to the Company's corporate offices in
Georgia. This system is expected to further improve the Company's operating
performance by providing management with faster and more accurate information
concerning inventories, sales and other localized information.
SUPPLIERS
The Company purchases all of its paint products from The Sherwin-Williams
Company and is one of the largest independent customers of Sherwin-Williams'
automotive paint division. Most of the products and supplies used by the
Company's paint and collision centers are centrally purchased by the corporate
offices in Columbus, Georgia. The Company purchases supplies in bulk, and those
supplies, except for paint products, are shipped to the Company's central
warehouse in Georgia. The Company then ships products and supplies to each paint
and collision center on an as-needed basis. Paint products are drop-shipped from
the supplier to the paint and collision centers. Individual centers are
responsible for purchasing parts and a minimum amount of supplies locally from
established vendors. The Company has not encountered any major difficulty in
obtaining adequate supplies of products used in rendering its paint and repair
services and does not expect to encounter any such difficulty in the foreseeable
future. Although fluctuations and shortages in energy markets may require an
allocation method of distribution to purchasers, the Company believes that it
will be able to maintain adequate inventories of paint and related products for
use by its paint and collision centers. See "Risk Factors -- Dependence Upon Key
Suppliers."
22
<PAGE>
COMPETITION
The vehicle painting industry in which the Company is engaged is highly
competitive due primarily to the relative ease of entry into the industry. The
Company competes not only with nationally and regionally-based companies engaged
in production vehicle painting, but also with thousands of individual vehicle
paint and body shops. The Company's competitors in the production vehicle paint
industry include Fact-O-Bake, Inc., Econo Auto Painting, Inc., Maaco
Enterprises, Inc. and Earl Sheib, Inc. The Company believes that the strict cost
controls that the Company applies in opening and managing its centers allow the
Company to offer comparable quality at lower prices than the Company's
competitors that operate on a franchised basis. With respect to certain other of
the Company's competitors that operate on a regional or national basis, the
Company believes that it offers higher quality paint services at comparable
prices. Although some independent paint and body shops may offer vehicle
painting of a higher quality than that offered by the Company, the prices
charged by such shops are generally substantially higher than those charged by
the Company. The Company believes that it competes effectively in all of the
markets in which it operates as a result of the state-of-the-art equipment
utilized by the Company, the products and services offered by the Company, the
Company's advertising and promotional programs, which the Company believes
generate relatively high name recognition for the Company's paint and repair
centers.
The full service collision repair industry is highly fragmented and
comprised primarily of independent operators of collision repair centers and a
few franchised operators of collision repair centers, including Caliber
Collision Center, Inc., ABRA Automotive Systems, Inc. and CARSTAR Automotive,
Inc. The Company believes that it will be able to compete effectively with both
franchised and independent operators of full service collision centers for the
reasons that the Company competes effectively in the production paint industry.
In particular, the Company believes that it will be able to offer comparable
quality at lower prices by realizing economies of scale generated by operating
on a volume basis and applying strict cost controls in acquiring and operating
its centers. See "Business -- Competition."
MARKETING
PRODUCTION PAINT OPERATIONS. The Company conducts all of its marketing
activities internally from the Company's corporate offices in Columbus, Georgia.
The Company believes that effective marketing and advertising has and will
continue to determine the degree of success the Company experiences in its
production paint operations. The Company focuses its promotional efforts on
highlighting the prices offered by the Company for its paint services, as well
as the quality of the services offered by the Company. The Company believes that
the most effective advertising medium for marketing the Company's production
paint services is television, which the Company supplements with a minimal
amount of newspaper and direct mail advertising. The Company spends an average
of 8% of gross revenues annually on its marketing efforts. The Company does not
intend to use proceeds from the Offering to increase marketing expenditures for
its production paint operations.
The Company markets its production paint services primarily through a
pattern of high frequency television advertising on network channels. The
Company utilizes an advertising cycle that includes ten and thirty second
television spots, which are run simultaneously for a four to six-week period in
all of the markets in which the Company operates. The Company's television
advertising spots highlight a series of specially-priced vehicle paint packages.
During the periods between the Company's television promotional cycles, the
Company utilizes a small amount of newspaper advertising to pre-market the next
television advertising cycle. The Company also advertises its production paint
services with a minimal amount of direct mail. The production vehicle painting
industry is price driven and seasonal in nature. Accordingly, the Company's
advertising highlights rolling season-based price offers for the Company's
services.
COLLISION REPAIR OPERATIONS. The full service collision repair market is
directed primarily at a commercial market, such as insurance companies and
automobile fleet and rental companies, unlike the production paint industry,
which is directed primarily at retail customers. Accordingly, the Company will
conduct only limited retail marketing of its full service collision division,
utilizing primarily direct marketing aimed at that division's potential
commercial customers. A portion of the net proceeds of the Offering will be used
to fund the Company's marketing efforts with respect to its entrance into the
full service collision repair market, particularly its efforts to establish
relationships with certain commercial customers.
EMPLOYEES
The Company employs approximately 500 persons, of which approximately 125
are sales, administrative, management or executive personnel and 375 are
production personnel. The Company's managers and assistant managers are paid on
a salary basis and participate in the Company's management incentive bonus
program. Collision repair employees are paid on a commission basis, and all
other employees are paid on an hourly basis ranging generally from $7.00 to
$15.00 per hour
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<PAGE>
depending upon skill level and job duties. The Company recruits management
personnel for individual paint and collision centers from all of its major
competitors, retired military personnel and promotion from within the Company.
None of the Company's employees are represented by a labor union, and management
believes that its employee relations are excellent.
PROPERTIES
All of the Company's paint and collision centers are operated in leased
facilities. The Company secures sites for new paint and collision centers by
leasing either existing facilities or new facilities developed pursuant to
build-to-suit agreements. The Company leases all of its facilities on a
long-term basis. The average lease payment per facility is $3,000 per month, and
the Company generally does not pay more than $4,500 per month to lease any of
its facilities. Leases for the Company's facilities vary with respect to their
terms, rental provisions, expiration dates and the existence of renewal options.
The number of years remaining on leases for the Company's facilities (excluding
unexercised options) range from less than a year to 24 years. All of the
Company's leases have fixed rental payments with no additional rents based upon
a facility's sales, and, except those with Mr. Wilbanks (see "Certain
Relationships and Related Transactions"), do not include escalation clauses. The
leases generally require the Company to pay all or a portion of the real estate
taxes and insurance and maintenance expenses, except for major repairs, relating
to the leased premises. Most of the Company's facilities are in stand alone
sites and have adjacent parking facilities.
Nine of the Company's facilities are leased from the Company's President,
Mr. Wilbanks, at rates that the Company believes are at or below market based on
rates for comparable facilities in the vicinity of the Company's facilities and
rates paid by the Company to unrelated third parties for leasing the Company's
other facilities. See "Certain Relationships and Related Transactions."
The Company devotes a substantial amount of effort in its expansion review
process to obtaining lease terms that satisfy the Company's financial operating
model. The Company investigates many potential facilities for each new paint and
collision center that the Company opens. Locating physical facilities that
satisfy the Company's financial operating model historically has been one of the
primary obstacles to the Company's effort to enter new geographic markets with
its paint and repair centers. The Company is exploring various alternatives to
enhance its ability to obtain favorable lease sites. One such alternative would
involve an arrangement with a real estate investment trust to finance all of the
Company's future facility needs on terms that satisfy the Company's financial
operating model. Under this arrangement, the real estate investment trust would
finance and construct build-to-suit facilities for the Company to lease in
locations that satisfy the Company's financial operating model, enhancing the
Company's ability to enter new geographic markets. The Company would retain the
right to design and build its future facilities. No formal arrangement has been
reached with the real estate investment trust at this time and no assurance can
be given that the Company will be able to agree upon terms with the real estate
investment trust.
The Company leases its corporate offices, located at 506 45th Street, Suite
A-2, Columbus, Georgia 31904. The facility has approximately 6,000 square feet
of office and warehouse space. The Company warehouses paint products and other
supplies at this location, which the Company supplies to its individual paint
and collision centers on a regular basis.
The Company believes that its facilities are in good operating condition.
GOVERNMENT REGULATIONS
The Company is subject to increasing environmental regulations that affect
the Company's operations and the demand for its services. The Company generates
certain hazardous waste and substances in connection with conducting its paint
and collision repair operations and, therefore, is subject to federal, state and
local environmental regulations in many of the areas in which it operates. Of
the 52 paint and collision centers currently operated by the Company, the
Company has had Phase I environmental assessments conducted at only three of the
facilities. The assessments at two of the facilities did not disclose any
material environmental conditions that could subject the Company to liability.
With respect to the third facility, in Irving, Texas, Phase I and Phase II
assessments conducted at the Company's request disclosed an environmental
condition that the Company believes will cost approximately $10,000 to
remediate. Pursuant to the applicable lease agreement, however, the costs of
such remediation are the responsibility of Mr. Wilbanks, who owns the property
and leases it to the Company. Mr. Wilbanks intends to pay the environmental
remediation costs associated with the Irving, Texas property.
Except for the Phase I and Phase II assessments described above, the
Company has not had environmental assessments conducted on the properties on
which its facilities are situated. The Company is not, however, aware and has
not been notified of any environmental conditions at its other facilities that
would subject the Company to environmental remediation liability. In addition,
the lease agreements between the Company and the lessors of all of the Company's
facilities require the Company to pay remediation costs only for those
environmental conditions created at such facilities by the Company. The lessors
are responsible for remediation of all environmental conditions existing prior
to the time that the Company leased
24
<PAGE>
such facilities. There can be no assurances, however, that such lessors would
have the ability to fully fund any required remediation, in which case the
Company could be subject to liability, or that the Company could prove that an
environmental condition existing at a leased site was in existence prior to the
time that the Company leased such site.
The Company intends to conduct Phase I environmental assessments in
connection with all future acquisitions of paint and collision and full service
collision repair centers. Each of the Company's vehicle painting centers
provides fresh air breathers in the center's paint areas, and each center
contracts with certified hazardous disposal companies for the proper disposal of
all hazardous waste materials produced by the center. Although the Company
believes that it has been and is currently in substantial compliance with the
applicable standards imposed pursuant to environmental and worker safety laws,
there can be no assurance that in the future the Company will not be adversely
affected by such requirements or incur materially increased operating costs in
complying therewith. The Company believes that, on balance, these regulations
favorably affect the Company, as it believes it is better able than its smaller
competitors to comply with such regulations.
The principal environmental legislation presently affecting the Company in
a significant manner is described below. Also see "Risk Factors -- Compliance
with Government Regulations; Environmental Hazards."
RESOURCE CONSERVATION AND RECOVERY ACT OF 1976 ("RCRA"). RCRA regulates the
treatment, storage and disposal of hazardous and solid wastes. Under RCRA,
liability and stringent management standards are imposed on a person who is a
generator or transporter of a hazardous waste or an owner or operator of a waste
treatment, storage or disposal facility. At some of its locations, the Company
is subject to RCRA requirements as a small quantity generator, requiring the
Company to comply with the storage and disposal requirements of RCRA.
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF
1980 ("CERCLA"). CERCLA addresses cleanup of sites at which there has been or
may be a release of hazardous substances into the environment. CERCLA assigns
liability for costs of cleanup and for damage to natural resources (i) to any
person who, currently or at the time of disposal of a hazardous substance, owned
or operated any facility at which hazardous substances were deposited; (ii) to
any person who by agreement or otherwise arranged for the disposal or treatment,
or arranged with a transporter for transport for disposal or treatment of
hazardous substances owned or possessed by such person; and (iii) to any person
who accepted hazardous substances for transport to disposal or treatment
facilities or sites selected by such person from which there is a release or
threatened release of hazardous substances. The Company is not aware of any
circumstances that could subject the Company to liability under CERCLA.
CLEAN AIR ACT AND 1990 AMENDMENTS. The Clean Air Act requires compliance
with national ambient air quality standards ("NAAQS") and empowers the EPA to
establish and enforce limits on the emission of various pollutants from specific
types of facilities. The Clean Air Act Amendments of 1990 (the "Amendments")
modify the Clean Air Act in a number of significant areas. The Amendments, among
other things, establish new programs and deadlines for achieving compliance with
the NAAQS, establish controls for hazardous air pollutants, establish a new
national permit program for all major sources of pollutants and create
significant new penalties, both civil and criminal, for violations of the Clean
Air Act. The Amendments specifically require a review of VOC emissions from
commercial products (which includes emissions relating to the application of
paint to vehicles). Pursuant to this review, the EPA has decided to develop a
regulation controlling automotive refinishing coatings; a proposed rule is
presently scheduled for 1996. The Company is subject to the Clean Air Act
because it uses paint spraying equipment at its paint and collision centers.
OTHER FEDERAL AND STATE ENVIRONMENTAL LAWS. The Company's operations are
subject to regulation under, among others, the following federal laws: the Clean
Water Act, the Safe Drinking Water Act, the Occupational Safety and Health Act
and the Hazardous Materials Transportation Act. In addition, many states have
other regulations and policies to cover more detailed aspects of hazardous
materials management. To date, the impact of these regulations on the Company
has not been material.
TRADE NAMES
The Company has trademarked and currently does business under the name
"Peach Auto Painting and Collision" and will continue to conduct its production
paint operations under that name. The Company is not aware of any rights of or
claims by third parties to its trademarked name. The Company intends to conduct
its proposed full service collision repair operations under the name "Collins
Collision."
LEGAL PROCEEDINGS
In the ordinary course of its business, the Company is involved in legal
proceedings from time to time. As of the date of this Prospectus, there are no
material legal proceedings pending against the Company.
25
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their respective
ages and positions with the Company are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Lenward C. Wilbanks, Jr. 51 Chief Executive Officer, President
and Director
Joseph W. Walters, Jr. 48 Chief Financial Officer, Treasurer
and Secretary
Lisa W. Griffin 32 Vice President of Purchasing,
Director
Laura W. Rodier 27 Vice President of Marketing,
Director
Dallas R. Barbee 43 Vice President of Operations
Jeffrey W. Hudson 38 Vice President of Operations
Scott A. Alexander 40 Vice President of Operations
</TABLE>
LENWARD C. WILBANKS, JR. has acted as Chief Executive Officer and Chairman
of the Company and the predecessor companies through which the Company's
operations were conducted prior to the Formation Transactions. Prior to that,
Mr. Wilbanks operated multiple production paint centers as a franchisee of Maaco
Enterprises, Inc. He began operating Maaco franchises in 1977 and expanded to
become the largest single operator of Maaco franchises. Mr. Wilbanks is employed
by the Company pursuant to an employment agreement that expires December 31,
1999. Mr. Wilbanks is the father of Lisa W. Griffin and Laura W. Rodier.
JOSEPH W. WALTERS, JR. has been Chief Financial Officer, Treasurer and
Secretary of the Company since June 1996. Prior to that time, Mr. Walters served
as Controller for Tom's Foods, Inc. from 1994 to 1996. From 1991 to 1994, he
served as the Director of the Financial Services Division of Burnham Service
Corporation. From 1985 to 1991, Mr. Walters was self-employed in a family owned
retail building materials business. From 1981 to 1985, he served as Chief
Financial Officer of The Jordan Company. From 1980 to 1981, Mr. Walters served
as Director of Corporate Taxes for Pizza Hut, Inc. and, from 1974 to 1980, as
Director of Corporate Taxes for Hardee's Food Systems, Inc. Mr. Walters is a
certified public accountant. He is employed by the Company pursuant to an
employment agreement that expires December 31, 1999.
LISA W. GRIFFIN has served since December 1991 as Vice President of
Purchasing and a Director of the Company and the predecessor companies through
which the Company's operations were conducted prior to the Formation
Transactions. Ms. Griffin has also served as President of several of the
Company's predecessor companies. She is the daughter of Mr. Wilbanks and the
sister of Laura W. Rodier.
LAURA W. RODIER has served since September 1991 as Vice President of
Marketing and a Director of the Company and the predecessor companies through
which the Company's operations were conducted prior to the Formation
Transactions. Ms. Rodier has also served as Secretary of several of the
Company's predecessor companies. She is the daughter of Mr. Wilbanks and the
sister of Lisa W. Griffin.
DALLAS R. BARBEE has served since 1989 as a Regional Manager of the Company
and the predecessor companies through which the Company's operations were
conducted in the past. He was appointed Vice President of Operations in October
1996. Prior to joining the Company, Mr. Barbee served as a Regional Manager for
Earl Sheib, Inc. from 1984 to 1989.
JEFFREY W. HUDSON has served since 1991 as a Regional Manager of the
Company and the predecessor companies through which the Company's operations
were conducted in the past. He was appointed Vice President of Operations in
October 1996. Prior to joining the Company, Mr. Hudson served as a District
Manager for Econo Auto Painting from 1989 to 1991.
SCOTT A. ALEXANDER has served since 1993 in various management capacities
with the Company and the predecessor companies through which the Company's
operations were conducted in the past. He was appointed a Regional Manager of
the Company in April 1994 and was appointed Vice President of Operations in
October 1996. From 1992 to 1993, Mr. Alexander owned and operated Southeast Auto
Wholesale. From 1991 to 1992, he served as a buyer for World Rental Car Sales,
and from 1987 to 1991, as Inventory Control Manager for Budget Car Sales.
26
<PAGE>
In 1981, Mr. Wilbanks was convicted of arson in connection with a business
owned by him that was unrelated to the Company. Mr. Wilbanks was sentenced to
six years of incarceration on the arson charge, for which he served
approximately 11 months.
Prior to completion of the Offering, the Company intends to name two
additional persons, who will be unaffiliated with the Company, to the Board of
Directors. One of those persons will be Donald B. Cameron. Mr. Cameron is 69
years old. He has extensive background in the automotive collision industry,
having served in various capacities with Allstate Insurance Company and its
affiliates from 1952 to 1991. During his term with Allstate, Mr. Cameron served
as national Director of Auto Physical Damage Claims and President of Tech-Cor,
Inc., a wholly owned subsidiary of Allstate that engaged in automotive collision
research, trained Allstate's claims personnel and operated a large collision
repair facility and five salvage disposal pools. In 1991 Mr. Cameron retired
from Allstate and began serving as an automotive industry consultant. From 1993
to present, he has served as president of Dawson Truck Parts, a
collision-related truck parts distributor. Mr. Cameron is a member of several
collision industry related associations, including the American Insurance
Association, the National Association of Independent Insurers and the Certified
Automotive Parts Association.
All Directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board. The
Company has agreed that it will engage a designee of the Underwriter as an
advisor to the Board of Directors for a two-year period following consummation
of the Offering. Such advisor has the right to attend meetings of the Board,
receive all communications sent by the Company to Board members and receive
compensation and expense reimbursement equal to the entitlement of other
non-officer Directors. In lieu of the Underwriter's right to designate an
advisor, the Underwriter may, in its sole discretion, designate a person for
election as a Director during such two-year period. The Company has agreed that
it will use its best efforts to cause the election of such designee as a
Director of the Company. The Underwriter has not designated any person to serve
as an advisor or stand for election as a Director.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid during the Company's
last fiscal year to the Company's Chief Executive Officer and to executive
officers whose total compensation exceeded $100,000 in any of the last three
completed fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1)
<S> <C> <C> <C> <C>
LENWARD C. WILBANKS, JR. 1995 $ 39,000 $ -- $448,872
(CHIEF EXECUTIVE OFFICER
AND PRESIDENT)
LISA W. GRIFFIN 1995 32,938 -- 243,102
(VICE PRESIDENT OF
PURCHASING)
LAURA W. RODIER 1995 32,938 -- 243,102
(VICE PRESIDENT OF
MARKETING)
</TABLE>
(1) Represents amounts distributed to such executives as stockholders of S
corporations that were predecessors to the Company.
The amounts received by the listed executive officers in 1995 and prior
years is not indicative of the salaries expected to be paid in the future, since
many of the predecessor entities operated as S corporations, which distributed a
substantial portion of their available cash to the stockholders of such
corporations.
COMPENSATION OF DIRECTORS
The Company intends to pay its directors who are not officers of the
Company fees for their services as directors. Each such director will receive a
fee of $1,000 plus expenses for attendance in person at each meeting of the
Board of Directors, and $500 for each telephonic meeting of the Board of
Directors. Officers of the Company who are directors will not be paid any
director fees.
27
<PAGE>
EMPLOYMENT AGREEMENTS
Prior to the closing of this Offering, Messrs. Wilbanks and Walters will
enter into employment contracts with the Company, the terms of which will be
three years. The contracts provide for base annual compensation and incentive
compensation to be determined by the Board of Directors. The contracts include
provisions restricting Messrs. Wilbanks and Walters from competing with the
Company during employment and, except in certain circumstances, for a limited
period of time after termination of employment. The employment contracts provide
for certain severance payments in the event of disability or termination by the
Company without cause.
1996 STOCK OPTION PLAN
Prior to the Offering, the Board of Directors will adopt, and the
stockholders will approve, the 1996 Stock Option Plan (the "Plan"). The Plan
will be administered by the Board of Directors. Officers and certain other
employees of the Company generally will be eligible to participate in the Plan.
Non-employee directors of the Company are eligible to receive stock options
under the Plan on a limited basis. See " -- Directors' Compensation" and
" -- Executive Compensation."
The Plan authorizes the issuance of up to 700,000 shares of Common Stock
pursuant to the grant of (i) stock options that qualify as incentive stock
options ("ISO") under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) stock options that do not so qualify as ISOs
("NQSO"), (iii) phantom stock awards, (iv) stock appreciation rights and (v)
restricted Common Stock (the "Restricted Stock") contingent upon the attainment
of performance goals or subject to other restrictions.
In connection with the grant of options under the Plan, the Board of
Directors will determine the option exercise period and any vesting
requirements. It is expected that the initial options granted under the Plan
will have 10-year terms and will vest in four equal annual installments
beginning on the second anniversary of the date of grant, subject to
acceleration of vesting upon a change in control of the Company. Generally,
options will terminate three months after the optionee's termination of
employment with the Company. The Board of Directors may, however, provide that
an option may be exercised over a longer period following termination of
employment, but in no event beyond the expiration date of the option. Any shares
of Common Stock subject to options that are forfeited pursuant to the vesting
requirement established at the time of grant will again be available for grant
under the Plan. The exercise price of options granted under the Plan may not be
less than the fair market value of the Common Stock on the date of grant.
Payment for shares of Common Stock granted under the Plan may be made either in
cash, or, if permitted by the option agreement, by exchanging Common Stock
having a fair market value equal to the option exercise price.
An optionee will not be deemed to have received taxable income upon the
grant or exercise of any ISO (except that the alternative minimum tax may apply
upon exercise). Any gain realized upon a disposition of shares of Common Stock
received pursuant to the exercise of an ISO will be taxed as a long-term capital
gain, assuming the optionee holds the shares for at least two years after the
date of grant and for at least one year after the date of exercise. Upon
exercise of an NQSO, an optionee will be deemed to receive ordinary income in an
amount equal to the difference between the exercise price and the fair market
value of the underlying shares of Common Stock on the date of the exercise.
Generally, neither a gain nor a loss will be recognized by the Company upon
the grant or exercise of an ISO. Upon the exercise of an NQSO, the Company will
be entitled to a deduction for the amount recognized as ordinary income by the
optionee. If Common Stock acquired upon the exercise of an ISO is disposed of
prior to satisfaction of the holding periods described above, generally the
optionee will be deemed to have realized ordinary income, and the Company will
be allowed to deduct the excess of the market value at the date of exercise over
the option price. If an optionee pays the exercise price of any option by
delivering shares of Common Stock, the exchange of shares generally will be
treated as a non-taxable transaction (provided, in the case of an ISO, that the
shares delivered in payment are not shares acquired upon exercise of an ISO that
has not satisfied the holding period requirements discussed above).
The Board of Directors will determine the service requirements and
performance goals to which awards of restricted Common Stock will be subject. It
is expected that the initial grant of Restricted Stock will vest in three equal
annual installments beginning on the first anniversary of the date of grant if
performance goals established at the time the Restricted Stock is awarded are
satisfied and subject to acceleration of vesting upon a change of control of the
Company. Restricted Stock that has not vested at the time of an employee's
termination of employment with the Company will be forfeited, except where such
termination occurs by reason of death or disability. Any Restricted Stock
forfeited pursuant to the vesting provisions of the Plan will again be available
for award under the Plan. Restricted Stock will be awarded at no cost to the
employee, other
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<PAGE>
than such minimal consideration as may be required, but the employee will have
all other rights of a shareholder, including the right to vote and receive
distributions with respect to the shares.
An award of Restricted Stock will create no immediate tax consequences for
the employee or the Company (unless the employee makes an election pursuant to
Section 83(b) of the Code). The employee will, however, realize ordinary income
when Restricted Stock becomes vested, in an amount equal to the fair market
value of the Restricted Stock on the date of vesting less any consideration paid
by the employee for such stock. If the employee makes an election pursuant to
Section 83(b) of the Code, the employee will recognize income at the time the
shares of Restricted Stock are awarded (based upon the value of such shares at
the time of award), rather than when the shares of Restricted Stock become
vested. The Company will be allowed a business expense deduction for the amount
of any taxable income recognized by the employee at the time such income is
recognized (assuming the Company complies with applicable with-holding
requirements).
Options for 416,000 shares of Common Stock will be granted to key employees
and officers in the amounts listed below as of the closing of the Offering, at
an exercise price equal to the initial public offering price.
OPTION GRANTS IN FISCAL YEAR 1996 (1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF STOCK
OPTIONS GRANTED PRICE APPRECIATION
OPTIONS TO EMPLOYEES EXERCISE PRICE EXPIRATION FOR OPTION TERM (4)
NAME GRANTED (1) IN FISCAL YEAR PER SHARE (2) DATE (3) 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Lenward C. Wilbanks, Jr. 60,000 15.3% $ 8.00 December 2006 $781,869 $1,244,996
Joseph W. Walters, Jr. 80,000 15.3 8.00 December 2006 781,869 1,244,996
Lisa W. Griffin 20,000 5.1 8.00 December 2006 260,623 414,999
Laura W. Rodier 20,000 5.1 8.00 December 2006 260,623 414,999
Wayne Lovering 10,000 1.3 8.00 December 2006 65,156 103,750
Scott A. Alexander 50,000 12.8 8.00 December 2006 651,558 1,037,497
Dallas R. Barbee 20,000 5.1 8.00 December 2006 260,623 414,999
Jeffrey W. Hudson 20,000 5.1 8.00 December 2006 260,623 414,999
Edward D. Griffin, Jr. 20,000 5.1 8.00 December 2006 260,623 414,999
Jim Godsted 20,000 5.1 8.00 December 2006 260,623 414,999
Wayne Bishop 10,000 2.6 8.00 December 2006 130,312 207,499
</TABLE>
(1) These options generally will vest in four equal installments on the second,
third, fourth and fifth anniversaries of the date of grant.
(2) Based on the initial public offering price of $8.00 per share.
(3) The expiration date of the options will be ten years after the date of
grant.
(4) These amounts have not been reduced by the $8.00 per share exercise price
that each optionee will be required to pay to the Company in order to
exercise the options.
Options to purchase an additional 86,000 shares of Common Stock at the initial
public offering price will be granted to other employees of the Company on the
closing of the Offering.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The table below sets forth information as of November 13, 1996 and, as
adjusted, assumes the sale of all of the Common Stock offered pursuant to this
Prospectus. The table also assumes, with respect to each individual stockholder,
the exercise of all warrants or options held by any other stockholder. The table
is based on information obtained from the persons named below with respect to
the beneficial ownership of shares of Common Stock by (i) each person known by
the Company to be the owner of more than 5% of the aggregate outstanding shares
of Common Stock, (ii) each director, (iii) each executive officer, and (iv) all
executive officers and directors as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
COMMON STOCK
NUMBER OF SHARES BENEFICIALLY OWNED
OF COMMON STOCK PRIOR TO AFTER
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) OFFERING OFFERING
<S> <C> <C> <C>
FIVE PERCENT STOCKHOLDERS
Lenward C. Wilbanks, Jr. (2) 2,881,983 42.3% 34.6%
5033 Donna Sue Drive
Columbus, Georgia 31907
F. Yvonne Wilbanks (2) 457,411 6.7 5.5
5033 Donna Sue Drive
Columbus, Georgia 31907
Lisa W. Griffin (2) 1,158,751 17.0 13.9
766 River Oaks Court
Columbus, Georgia 31904
Laura W. Rodier (2) 1,158,751 17.0 13.9
675 Cedar Drive West
Hamilton, Georgia 31811
Sheila W. Kaylor (2) 344,375 5.1 4.1
3133 Genito Road
Powhaton, Virginia 23139
<CAPTION>
OTHER OFFICERS AND DIRECTORS
<S> <C> <C> <C>
Dallas R. Barbee 105,398 1.6 1.3
886 Smith Road
Lexington, North Carolina 27292
Jeffrey W. Hudson 66,897 1.0 .8
140 Wooford Road
Taylors, South Carolina 29687
All Executive Officers and Directors 5,371,780 78.8 64.6
as a group
</TABLE>
(1) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within 60
days from the date of this Prospectus upon the exercise of options, warrants
or convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that convertible securities, options or warrants that
are held by such person (but not those held by any other person) and which
are exercisable within 60 days of the date of this Prospectus have been
exercised.
(2) F. Yvonne Wilbanks is the wife of Lenward C. Wilbanks, Jr., Ms. Griffin and
Ms. Rodier are the daughters of Mr. and Mrs. Wilbanks, and Sheila W. Kaylor
is the sister of Mr. Wilbanks. These five individuals will own a combined
72.1% of the outstanding Common Stock after the Offering and, together with
four other members of Mr. Wilbanks' family, a combined 76.8% of the
outstanding Common Stock after the Offering. See "Risk Factors--Control By
Existing Stockholders."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1996, the Company obtained loans from Lenward C. Wilbanks, Jr., the
President and Chief Executive Officer of the Company, his wife, F. Yvonne
Wilbanks, and his sister, Sheila Wilbanks Kaylor, in the aggregate principal
amount of $525,144 (the "Bridge Financing"). The Bridge Financing is evidenced
by promissory notes, the principal balances of which accrue interest at the rate
of 9.5% per annum. Interest is repayable monthly, and principal is due and
payable on the earlier of (i) two years from the date of execution of the
promissory notes, or (ii) the first day of the first month following the
successful completion of an initial public offering of the Company's Common
Stock yielding aggregate net proceeds to the Company of at least $10 million. A
portion of the net proceeds of this Offering will be used to repay the Bridge
Financing. The net cash proceeds from the Bridge Financing were used primarily
for working capital purposes.
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<PAGE>
Six of the Company's current stockholders made advances to the Company (the
"Stockholder Advances") from time to time primarily to provide the Company with
working capital. The aggregate principal amount of the Stockholder Advances
outstanding as of the date of this Offering is approximately $1.4 million, and
the stockholders who made such advances are Lenward C. Wilbanks, Jr., Lisa W.
Wilbanks, Laura W. Wilbanks, Jeffrey W. Hudson, Dallas R. Barbee and Jan Barbee.
The Stockholder Advances are payable on demand and do not accrue interest.
Nine of the Company's paint and collision facilities are leased from
Lenward C. Wilbanks, Jr. and his wife, Frances Yvonne Wilbanks. The terms of the
leases range from 23 to 26 years, and each lease has a five-year renewal option.
The current lease rates range from $2,250 per month to $4,000 per month, with
average monthly rental of approximately $3,000. The leases contain escalation
clauses, generally resulting in rental increases of approximately 7.5% after
each three-year period. The leased facilities range in size from approximately
5,800 square feet to approximately 15,500 square feet. Each lease requires the
Company to pay the real estate taxes and any other special assessments on the
properties, to maintain insurance on the properties, and to incur the costs of
routine repair and maintenance on the facilities. All facilities leased from Mr.
and Mrs. Wilbanks are in good operating condition. The Company believes that the
lease rates for the nine properties leased by the Company from Mr. and Mrs.
Wilbanks are at market based upon lease rates for comparable facilities in the
vicinity of the Company's facilities and rates paid by the Company to unrelated
third parties for leasing the Company's other facilities.
The Company believes that all related party transactions were on terms no
less favorable than those that could be obtained with unaffiliated third
parties. All future transactions will be on terms no less favorable than the
Company could obtain upon negotiations with unaffiliated third parties in
arms-length transactions.
DESCRIPTION OF SECURITIES
GENERAL
Upon completion of the Offering, the Company will be authorized to issue
20,000,000 shares of Common Stock, par value $.01 per share, and 1,000,000
shares of preferred stock, par value $.01 per share. As of November 13, 1996,
there were 6,818,812 shares of Common Stock outstanding and no preferred stock
outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors then up for election. The holders of Common Stock are
entitled to receive ratably such dividends when, as and if declared by the Board
of Directors out of funds legally available therefor. In the event of
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining that are available
for distribution to them after payment of liabilities and after provision has
been made for each class of stock, if any, having preference over the Common
Stock. Holders of shares of Common Stock, as such, have no conversion,
preemptive or other subscription rights, and there are no redemption provisions
applicable to the Common Stock. All of the outstanding shares of Common Stock
are (and the shares of Common Stock offered hereby, when issued in exchange for
the consideration set forth in this Prospectus, will be) fully paid and
nonassessable.
PREFERRED STOCK
The Company may issue preferred stock from time to time, in one or more
series, as authorized by the Board of Directors. Prior to issuance of shares of
each series, the Board of Directors is required by the General Corporation Law
of Delaware and the Company's Articles of Incorporation to fix for each series
the terms, preferences, conversion or other rights, voting powers, restrictions,
limitations as to distributions, qualifications and terms or conditions of
redemption, as are permitted by Delaware law. Such rights, powers, restrictions
and limitations could include the right to receive specified distribution
payments and payments on liquidation prior to any such payments being made to
the holders of Common Stock. The Board of Directors could authorize the issuance
of preferred stock with terms and conditions that could have the effect of
discouraging a takeover or other transaction that holders of shares of Common
Stock might believe to be in their best interests. As of the date hereof, no
shares of preferred stock are outstanding, and the Company has no present plans
to issue any shares of preferred stock.
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<PAGE>
WARRANTS
The Company has agreed to sell to the Underwriter, for nominal
consideration, the Underwriter's Warrants to purchase 150,000 shares of Common
Stock. The Underwriter's Warrants will be nonexercisable for one year after the
date of this Prospectus. Thereafter, for a period of four years, the
Underwriter's Warrants will be exercisable at an amount equal to 120% of the per
share offering price of the Common Stock sold in this Offering. The
Underwriter's Warrants are not transferable for a period of one year after the
date of this Prospectus, except to officers and directors of the Underwriter.
The Company has also granted certain demand and "piggyback" registration rights
to the holders of the Underwriter's Warrants. See "Underwriting."
DIVIDENDS
Although the Company has never declared or paid any dividends on its Common
Stock, the Company's predecessor entities, many of which operated as S
corporations, distributed a substantial portion of their available cash to
stockholders to enable such stockholders to pay tax on their porportionate
interests in the earnings of such entities. The future payment by the Company of
dividends, if any, is within the discretion of the Board of Directors and will
depend upon the Company's earnings, if any, its capital requirements and
financial condition, as well as other relevant factors. The Board of Directors
does not intend to declare any dividends in the foreseeable future, but instead
intends to retain earnings for use in the Company's business operations.
TRANSFER AGENT
The transfer agent for the Common Stock is Continental Stock Transfer and
Trust Company in New York, New York.
REPORTS TO STOCKHOLDERS
The Company intends to file an application with the Securities and Exchange
Commission to register its Common Stock under the provisions of Section 12(g) of
the Exchange Act prior to the date of this Prospectus and has agreed with the
Underwriter that it will use its best efforts to continue to maintain such
registration. Such registration will require the Company to comply with periodic
reporting, proxy solicitation and certain other requirements of the Exchange
Act.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW
The Company is subject to the provisions of Section 203 of the General
Corporation Law of Delaware. Section 203 prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder" unless the business
combination is approved in a prescribed manner. Subject to certain exceptions,
an "interested stockholder" is a person who, together with affiliates and
associates, owns (or within the prior three years did own) 15% or more of a
corporation's voting stock. A "business combination" includes mergers, asset
sales and other transactions resulting in a financial benefit to the "interested
stockholders."
LIMITED LIABILITY AND INDEMNIFICATION
The Certificate of Incorporation of the Company provides that, to the
fullest extent permitted by applicable law, as amended from time to time, the
Company will indemnify any person who was or is a party or is threatened to be
made a party to an action, suit or proceeding (whether civil, criminal,
administrative or investigative) by reason of the fact that such person is or
was a director or officer of the Company or serves or served in such capacity
with any other enterprise at the request of the Company. This indemnification
includes the right to advancement of expenses when allowed pursuant to
applicable law.
In addition, the Certificate of Incorporation provides that a director of
the Company shall not be personally liable to the Company or its stockholders
for monetary damages for breach of the director's fiduciary duty. By operation
of law, however, the Certificate of Incorporation does not eliminate or limit
the liability of a director for any of the following reasons: (i) a breach of
the director's duty of loyalty to the Company or its stockholders; (ii) acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law; (iii) a transaction from which the director derived an
improper personal benefit, or (iv) an act or omission occurring before the
effective date of the Certificate of Incorporation.
The Company has entered into indemnification agreements with its directors
(collectively, the "Indemnification Agreements"), which provide that the
director is entitled to indemnification to the fullest extent permitted by
applicable law. Such indemnification will cover all expenses, liabilities,
judgments (including punitive and exemplary damages), penalties, fines
(including excise taxes relating to employee benefit plans and civil penalties)
and amounts paid in settlement that are incurred
32
<PAGE>
by or imposed upon the director if the director is a party or threatened to be
made a party to any threatened, pending or completed action, suit or proceeding
of any kind, whether civil, criminal, administrative or investigative (including
actions by or in the right of the Company and any preliminary inquiry or claim
by any person or authority), by reason of the fact that the director is or was a
director, officer, employee or agent of the Company or is or was serving at the
Company's request as a director, officer, employee or agent of another
corporation (including a subsidiary), partnership, joint venture, trust or other
enterprise against liability incurred in connection with such proceeding,
including any appeal thereof (collectively, the "Covered Matters").The Company's
obligations under the Indemnification Agreements will continue as long as a
director is subject to any actual or possible Covered Matter, notwithstanding
termination of the director.
Pursuant to the Indemnification Agreements, the directors are presumed to
be entitled to indemnification and will receive such indemnification
irrespective of whether the Covered Matter involves allegations of intentional
misconduct, alleged violations of Section 16(b) of the Exchange Act, alleged
violations of Section 10(b) of the Exchange Act (including Rule l0b-5
thereunder), breach of the director's fiduciary duties (including duties of
loyalty or care) or any other claim.
In addition, upon the director's request, the Company will promptly either
advance expenses directly or reimburse the director for all expenses (including
attorneys' fees, expert fees, other professional fees and court costs) incurred
by the director in connection with a Covered Matter other than judgments,
penalties, fines and settlement amounts.
The Company will purchase and maintain directors and officers insurance as
soon as the Board of Directors determines it is practicable, in amounts which
they consider appropriate, insuring the directors against any liability arising
out of a director's status as a director of the Company regardless of whether
the Company has the power to indemnify the director against such liability under
applicable law.
In addition, the Indemnification Agreements provide that no action may be
brought by or on behalf of the Company against the director or the director's
heirs or personal representatives relating to the director's service as a
director, after the expiration of one year from the date the director ceases
(for any reason) to serve as a director of the Company, and any claim or cause
of action of the Company will be extinguished and deemed released unless
asserted by the filing of a legal action before the expiration of such period.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 8,318,812 shares of
Common Stock outstanding, without giving effect to shares of Common Stock
issuable upon exercise of (i) the Underwriter's Warrants, (ii) the Underwriter's
Over-allotment Option, or (iii) options granted under the Plan. Subject to the
contractual restrictions described below, of these 8,318,812 shares, the
1,500,000 shares of Common Stock offered hereby (1,725,000 shares if the
Underwriter exercises the Over-allotment Option) will be freely tradeable
without restriction or further registration under the Securities Act. The
remaining 6,818,812 shares (the "Founders' Shares") are deemed to be "restricted
securities," as that term is defined under Rule 144, because such shares were
issued and sold by the Company in private transactions not involving a public
offering and, as such, may only be sold pursuant to an effective registration
under the Securities Act, in compliance with the exemption provisions of Rule
144, or pursuant to another exemption under the Securities Act. The Founders'
Shares will not be eligible for resale under Rule 144 until November 1998, at
which time such shares will still be subject to the resale limitations of Rule
144.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or persons whose shares are aggregated with an affiliate), who has
owned restricted shares of Common Stock beneficially for at least two years is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class or, if the common stock is quoted on Nasdaq, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least three months immediately
preceding the sale and who has beneficially owned shares of Common Stock for at
least three years is entitled to sell such shares under Rule 144 without regard
to any of the limitations described above.
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<PAGE>
The beneficial owners of all shares of Common Stock outstanding immediately
prior to the Offering have agreed with the Underwriter not to offer, sell,
contract to sell or otherwise dispose of any of their shares for a period of 18
months after the date of this Prospectus, without the prior written consent of
the Underwriter.
Prior to this Offering, there has been no market for the Common Stock and
no prediction can be made as to the effect, if any, that public sales of shares
of Common Stock or the availability of such shares for sale will have on the
market prices of the Common Stock prevailing from time to time. Nevertheless,
the possibility that substantial amounts of Common Stock may be sold in the
public market may adversely affect prevailing market prices for the Common Stock
and could impair the Company's ability in the future to raise additional capital
through the sale of its equity securities.
UNDERWRITING
The Company has agreed to sell, and the Underwriter has agreed to purchase
from the Company, 1,500,000 shares of Common Stock. The underwriting agreement
between the Company and the Underwriter (the "Underwriting Agreement") provides
that the obligations of the Underwriter are subject to certain conditions
precedent. The Underwriter is committed to purchase all of the securities
offered hereby if any are purchased.
The Underwriter has advised the Company that it proposes initially to offer
the 1,500,000 shares of Common Stock to the public at the initial public
offering price set forth on the cover page of this Prospectus and that it may
allow to selected dealers who are members of the NASD concessions not in excess
of $ per share of Common Stock, of which not more than $ per
share of Common Stock may be re-allowed to certain other dealers.
The Underwriting Agreement provides further that the Underwriter will
receive a non-accountable expense allowance of 3% of the gross proceeds of the
Offering, of which $50,000 has been paid by the Company to date. The Company has
also agreed to pay all expenses in connection with qualifying the shares of
Common Stock offered hereby for sale under the laws of such states as the
Underwriter may designate, including expenses of counsel retained for such
purpose by the Underwriter.
Pursuant to the Underwriter's Over-allotment Option, which is exercisable
for a period of 45 days after the closing of the Offering, the Underwriter may
purchase up to an additional 15% of the total number of shares of Common Stock
offered hereby, solely to cover over-allotments.
The Company has agreed to sell to the Underwriter, for nominal
consideration, the Underwriter's Warrants to purchase 150,000 shares of Common
Stock. The Underwriter's Warrants will be nonexercisable for one year after the
date of this Prospectus. Thereafter, for a period of four years, the
Underwriter's Warrants will be exercisable at an amount 120% above the offering
price of the Common Stock sold in this Offering. The Underwriter's Warrants are
not transferable for a period of one year after the date of this Prospectus,
except to officers of the Underwriter, members of the selling group and their
officers and partners. The Company has also granted certain demand and
"piggyback" registration rights to the holders of the Underwriter's Warrants.
For the life of the Underwriter's Warrants, the holders thereof are given,
at nominal cost, the opportunity to profit from a rise in the market price of
the Common Stock with a resulting dilution in the interest of other
stockholders. Further, such holders may be expected to exercise the
Underwriter's Warrants at a time when the Company would in all likelihood be
able to obtain equity capital on terms more favorable than those provided in the
Underwriter's Warrants.
The Company has agreed, for a period of 18 months after the date of this
Prospectus, not to issue any shares of Common Stock or preferred stock, or any
warrants, options or other rights to purchase Common Stock or preferred stock,
without the prior written consent of the Underwriter, except for the issuance of
Common Stock under the Company's 1996 Stock Option Plan. Notwithstanding the
foregoing, the Company may issue shares of Common Stock upon exercise of any
warrants outstanding on the date hereof or to be outstanding upon closing of the
Offering as described herein. Subject to certain exceptions, all of the
Company's existing stockholders have agreed not to sell or otherwise dispose of
any shares of Common Stock for a period of up to 18 months following the date of
this Prospectus, without the prior written consent of the Underwriter.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against liabilities in connection with the
Offering, including liabilities under the Securities Act.
All Directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board. The
Company has agreed that it will engage a designee of the Underwriter as an
advisor to the Board of Directors for a two-year period
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<PAGE>
following consummation of the Offering. Such advisor has the right to attend
meetings of the Board, receive all communications sent by the Company to Board
members and receive compensation and expense reimbursement equal to the
entitlement of other non-officer Directors. In lieu of the Underwriter's right
to designate an advisor, the Underwriter may, in its sole discretion, designate
a person for election as a Director during such two-year period. The Company has
agreed that it will use its best efforts to cause the election of such designee
as a Director of the Company. The Underwriter has not designated any person to
serve as an advisor or stand for election as a Director.
The Underwriter intends to act as a market maker for the Common Stock after
the closing of the Offering.
The Company has agreed to retain the Underwriter as a consultant at an
annual fee of $25,000 for two years commencing on the closing of the Offering.
The entire fee is payable at the closing of the Offering. Pursuant to this
agreement, the Underwriter will be obligated to provide general financial
advisory services to the Company on an as-needed basis with respect to possible
future financing or acquisitions by the Company and related matters. The
agreement does not require the Underwriter to provide any minimum number of
hours of consulting services to the Company.
The initial public offering price of the shares of Common Stock has been
determined by negotiation between the Company and the Underwriter and does not
necessarily bear any direct relationship to the Company's assets, earnings, book
value per share or other generally accepted criteria of value. Factors
considered in determining the offering price of the shares of Common Stock
included the business in which the Company is engaged, the Company's financial
condition, an assessment of the Company's management, the general condition of
the securities markets and the demand for similar securities of comparable
companies.
The Underwriter or members of the selling group may, at their option,
charge a customary "ticket charge" to purchasers in the Offering. Any such
charge will be disclosed on the customer's confirmation slip.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon for the
Company by Smith Helms Mulliss & Moore, L.L.P., 2800 Two Hannover Square,
Raleigh, North Carolina 27601. Schneck Weltman Hashmall & Mischel LLP, 1285
Avenue of the Americas, New York, New York 10019, has acted as counsel for the
Underwriter in connection with this Offering.
EXPERTS
The combined financial statements of Peach Auto Painting & Collision at
December 31, 1995 and 1994, and for each of the three years in the period ended
December 31, 1995, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (the "Registration
Statement") under the Securities Act with respect to the Common Stock offered by
this Prospectus. This Prospectus, filed as a part of such Registration
Statement, does not contain all of the information set forth in, or annexed as
exhibits to, the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and this Offering, reference is made to
the Registration Statement, including the exhibits filed therewith, which may be
inspected without charge at the offices of the Commission, 450 Fifth Street,
N.W., Washington D.C. 20549; 1400 Citicorp Center, 500 West Madison, Chicago,
Illinois 60661; and 7 World Trade Center, New York, New York 10048. Copies of
the Registration Statement may be obtained from the Commission at its principal
office upon payment of prescribed fees. Electronic registration statements made
through the Electronic Data Gathering, Analysis, and Retrieval system are
publicly available through the Commission's Web site at http://www.sec.gov.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, and where the contract or other
document has been filed as an exhibit to the Registration Statement, each
statement is qualified in all respects by reference to the applicable document
filed with the Commission.
35
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PEACH AUTO PAINTING & COLLISION
COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Auditors......................................................................................... F-2
Audited Combined Financial Statements
Combined Balance Sheets................................................................................................ F-3
Combined Statements of Income.......................................................................................... F-5
Combined Statements of Shareholders' (Deficit) Equity.................................................................. F-6
Combined Statements of Cash Flows...................................................................................... F-7
Notes to Combined Financial Statements................................................................................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE SHAREHOLDERS
PEACH AUTO PAINTING & COLLISION
We have audited the accompanying combined balance sheets of Peach Auto
Painting & Collision as of December 31, 1995 and 1994, and the related combined
statements of income, shareholders' (deficit) equity and cash flows for each of
the three years in the period ended December 31, 1995. 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, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Peach Auto Painting
& Collision as of December 31, 1995 and 1994, and the combined results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Raleigh, North Carolina
June 4, 1996
F-2
<PAGE>
PEACH AUTO PAINTING & COLLISION
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................................... $ 229,691 $ 333,319 $ 618,564
Accounts receivable............................................................ 333,792 497,018 639,275
Inventories.................................................................... 60,722 129,972 147,672
Advances to employees.......................................................... 104,223 45,367 34,472
TOTAL CURRENT ASSETS...................................................... 728,428 1,005,676 1,439,983
PROPERTY AND EQUIPMENT:
Buildings...................................................................... 233,565 233,565 233,565
Leasehold improvements......................................................... 135,585 248,683 254,090
Furniture, machinery and equipment............................................. 2,181,027 2,843,221 3,204,816
2,550,177 3,325,469 3,692,471
Less accumulated depreciation and amortization................................. (867,362) (1,252,882) (1,554,044)
1,682,815 2,072,587 2,138,427
OTHER ASSETS..................................................................... 25,814 26,954 84,417
TOTAL ASSETS.............................................................. $ 2,437,057 $ 3,105,217 $ 3,662,827
</TABLE>
F-3
<PAGE>
PEACH AUTO PAINTING & COLLISION
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
<S> <C> <C> <C>
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Cash overdraft................................................................... $ 364,534 $ 397,278 $ 442,119
Trade accounts payable........................................................... 93,020 221,178 291,511
Advances from shareholders....................................................... 1,381,261 1,411,358 1,404,058
Accrued warranty expense......................................................... 50,000 70,000 80,000
Accrued payroll and taxes........................................................ 124,068 176,142 193,103
Taxes payable.................................................................... 39,483 167,306 54,590
Notes payable to shareholders.................................................... -- -- 475,144
Current portion of long-term debt................................................ 93,564 100,776 111,324
Current portion of capital lease obligations..................................... 112,639 177,735 109,772
TOTAL CURRENT LIABILITIES................................................... 2,258,569 2,721,773 3,161,621
LONG-TERM DEBT, less current portion............................................... 312,106 291,330 259,757
CAPITAL LEASE OBLIGATIONS, less current portion.................................... 182,562 128,444 150,446
COMMITMENTS (Note 7)
SHAREHOLDERS' (DEFICIT) EQUITY..................................................... (316,180) (36,330) 91,003
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY........................ $2,437,057 $3,105,217 $ 3,662,827
</TABLE>
See accompanying notes.
F-4
<PAGE>
PEACH AUTO PAINTING & COLLISION
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTH
YEAR ENDED DECEMBER 31, PERIOD ENDED SEPTEMBER 30,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Net sales......................................... $8,974,938 $15,555,156 $22,926,132 $17,121,946 $19,493,442
Cost of sales..................................... 5,564,299 9,610,302 14,510,079 10,783,123 12,368,943
Gross profit...................................... 3,410,639 5,944,854 8,416,053 6,338,823 7,124,499
Selling, general and administrative expenses...... 2,887,129 5,336,804 6,863,632 4,981,730 6,438,647
Operating income.................................. 523,510 608,050 1,552,421 1,357,093 685,852
Other income (expense):
Interest expense................................ (41,873) (40,759) (29,218) (15,670) (9,970)
Other income.................................... 263 9,632 34,707 15,028 37,354
(41,610) (31,127) 5,489 (642) 27,384
Income before income taxes........................ 481,900 576,923 1,557,910 1,356,451 713,236
Income tax expense................................ -- 39,428 121,186 116,516 76,520
Net income........................................ $ 481,900 $ 537,495 $ 1,436,724 $ 1,239,935 $ 636,716
Pro forma -- unaudited
Net income (Note 6)............................. $ 289,140 $ 346,154 $ 934,746 $ 813,871 $ 427,942
Net income per share............................ $ 0.04 $ 0.05 $ 0.14 $ 0.12 $ 0.06
Weighted average shares outstanding............. 6,818,812 6,818,812 6,818,812 6,818,812 6,818,812
</TABLE>
See accompanying notes.
F-5
<PAGE>
PEACH AUTO PAINTING & COLLISION
COMBINED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY
<TABLE>
<CAPTION>
SHAREHOLDERS'
(DEFICIT)
EQUITY
<S> <C>
BALANCE AT DECEMBER 31, 1992................................................................................... $ (282,053)
Shareholders' distributions.................................................................................... (183,838)
Shareholders' contributions.................................................................................... 1,500
Net income for 1993............................................................................................ 481,900
BALANCE AT DECEMBER 31, 1993................................................................................... 17,509
Shareholders' distributions.................................................................................... (892,984)
Shareholders' contributions.................................................................................... 21,800
Net income for 1994............................................................................................ 537,495
BALANCE AT DECEMBER 31, 1994................................................................................... (316,180)
Shareholders' distributions.................................................................................... (1,158,874)
Shareholders' contributions.................................................................................... 2,000
Net income for 1995............................................................................................ 1,436,724
BALANCE AT DECEMBER 31, 1995................................................................................... (36,330)
Shareholders' distributions (unaudited)........................................................................ (509,383)
Net income for the period ended September 30, 1996 (unaudited)................................................. 636,716
BALANCE AT SEPTEMBER 30, 1996 (unaudited)...................................................................... $ 91,003
</TABLE>
See accompanying notes.
F-6
<PAGE>
PEACH AUTO PAINTING & COLLISION
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTH
PERIOD ENDED SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
OPERATING ACTIVITIES
Net income............................................. $ 481,900 $ 537,495 $ 1,436,724 $ 1,239,935 $ 636,716
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................ 119,902 306,398 391,959 293,969 301,162
Changes in operating assets and liabilities:
Accounts receivable............................... 32,107 (100,135) (163,226) (72,492) (142,257)
Inventories....................................... 5,708 (41,293) (25,749) (44,045) (17,700)
Advances to employees............................. (4,118) (35,983) 15,355 24,348 10,895
Advances from shareholders........................ 718,211 399,938 30,097 14,350 (7,300)
Cash overdraft.................................... (4,758) 302,008 32,744 (153,536) 44,841
Accounts payable.................................. (125,387) (104,385) 128,158 254,684 70,333
Accrued expenses.................................. 95,277 78,791 72,074 17,528 26,961
Taxes payable..................................... (29,048) 39,483 127,823 109,283 (112,716)
Net cash provided by operating activities......... 1,289,794 1,382,317 2,045,959 1,684,024 810,935
INVESTING ACTIVITIES
Purchases of property and equipment.................... (614,647) (801,723) (630,768) (452,823) (367,002)
Net change in other assets............................. 116,134 (8,292) (1,140) (72) (57,463)
Net cash used in investing activities............. (498,513) (810,015) (631,908) (452,895) (424,465)
FINANCING ACTIVITIES
Proceeds from issuance of notes to
shareholders...................................... -- -- -- -- 475,144
Proceeds from issuance of long-term debt............. 75,000 141,500 80,000 80,000 --
Principal payments on long-term debt................. (65,803) (90,059) (93,564) (87,218) (21,025)
Principal payments on capital lease obligations...... (74,412) (103,341) (139,985) (104,989) (45,961)
Contributions from shareholders...................... 1,500 21,800 2,000 2,000 --
Distributions to shareholders........................ (183,838) (892,984) (1,158,874) (1,102,868) (509,383)
Net cash used in financing activities............. (247,553) (923,084) (1,310,423) (1,213,075) (101,225)
Increase (decrease) in cash and cash
equivalents....................................... 543,728 (350,782) 103,628 18,054 285,245
Cash and cash equivalents at beginning of year....... 36,745 580,473 229,691 229,691 333,319
Cash and cash equivalents at end of year............. $ 580,473 $ 229,691 $ 333,319 $ 247,745 $ 618,564
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest............. $ 15,670 $ 40,759 $ 29,218 $ 15,670 $ 9,970
Cash paid during the period for income taxes......... $ -- $ 32,648 $ 52,832 $ 7,233 $ 217,670
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Certain capital lease obligations have been incurred by the Company in relation to agreements for equipment,
furniture and fixtures. (See Note 4)
</TABLE>
See accompanying notes.
F-7
<PAGE>
PEACH AUTO PAINTING & COLLISION
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. DESCRIPTION OF BUSINESS
The combined financial statements consist of four C-corporations and twenty
S-corporations. The operations of these corporations are comprised of
forty-seven Peach Auto Painting and Collision shops and a single Peach Warehouse
(collectively referred to as the "Company"). These entities are related through
common ownership and management.
The Company operates a chain of Company-operated auto paint centers
throughout the southeastern United States which offer auto painting and light
body and fender repair services primarily to the general consuming public and
secondarily to commercial accounts.
In 1996, the individual corporations entered into agreements to transfer
all of their assets and liabilities to a single corporate entity, Peach Auto
Painting and Collision, Inc., in connection with Peach Auto Painting and
Collision, Inc.'s planned initial public offering of common stock. Peach Auto
Painting and Collision, Inc. plans to authorize 20,000,000 shares of common
stock, $.01 par value, in which 6,818,812 shares will be issued and outstanding
upon completion of the merger of the existing corporations ("the merger") and
prior to the planned initial public offering of common stock.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of the entities
described in Note 1, all of which are 96% beneficially owned by the same
shareholder. All significant intercompany accounts and transactions have been
eliminated in combination.
CASH AND CASH EQUIVALENTS
The Company considers highly liquid, short-term investments with a maturity
of three months or less when purchased to be cash equivalents.
INVENTORIES
Inventories consist primarily of paint, auto parts and supplies and are
stated at the lower of cost or market, using the specific identification method.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets (7-31.5 years).
OTHER ASSETS
Other assets consist primarily of rent and utility deposits.
INCOME TAXES
Twenty of the existing corporations are subchapter S corporations for
income tax purposes and, accordingly, any income tax liabilities are the
responsibility of the individual shareholders of those corporations. The
subchapter S corporation status of these corporations will terminate on
consummation of the merger as described in Note 1. Four of the existing
corporations are subchapter C corporations. Taxes for these corporations were
provided in accordance with Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes" (See Note 7).
ADVERTISING COSTS
Statement of Position 93-7 "Reporting on Advertising Costs" was implemented
by the Company during the year ended December 31, 1995. The adoption of this
statement did not have a material impact on the financial statements. The
Company
F-8
<PAGE>
PEACH AUTO PAINTING & COLLISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
2. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
expenses advertising costs as incurred. Total advertising expense was
approximately $1,896,500, $1,220,700 and $631,100 for 1995, 1994 and 1993,
respectively.
STOCK BASED COMPENSATION
Prior to the planned initial public offering, the Board of Directors of
Peach Auto Painting and Collision, Inc. plans to adopt the 1996 Stock Option
Plan whereby up to 700,000 shares of Common Stock will be authorized for
issuance under the plan. In the case of initial grants of non-qualified options,
the exercise price will be fixed by the Board of Directors. The exercise price
per share for all other grants will not be less than the fair market value of
one share of Common Stock on the date of grant.
The Company will account for stock options in accordance with APB Option
No. 25, "Accounting for Stock Issued to Employees." Under APB No. 25, no
compensation expense is recognized for stock or stock options issued at fair
market value. For stock options granted at exercise prices below the deemed fair
market value, APB No. 25 provides for recording deferred compensation expense
for the difference between the exercise price of the shares and the deemed fair
market value. The resulting deferred compensation expense is amortized ratably
over the vesting period of the individual options.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS 123"), which
provides an alternative to APB No. 25 in accounting for stock based compensation
issued to employees. SFAS 123 provides for a fair value based method of
accounting for employee stock options and similar equity instruments. However,
for companies that account for stock based compensation arrangements under APB
No. 25, SFAS 123 requires disclosure of the pro forma effect on net income and
earnings per share as if the fair value based method prescribed by SFAS 123 had
been applied. The disclosure requirements are effective for fiscal years
beginning after December 31, 1995, or upon initial adoption of the statement, if
earlier. The Company plans to continue to account for stock based compensation
arrangements under APB No. 25 and plans to adopt the pro forma disclosure
requirements of SFAS 123 for the year ending December 31, 1996.
ADVANCES FROM SHAREHOLDERS
Advances from shareholders represent amounts advanced to the Company for
working capital purposes. These advances are non-interest bearing; however, had
interest been accrued at 9.5% (interest rate on shareholder bridge loan),
interest expense on these advances would have been approximately $133,000,
$112,000 and $70,000 for the years ended December 31, 1995, 1994 and 1993,
respectively and $134,000 and $132,000 for the nine month periods ended
September 30, 1996 and 1995, respectively.
ACCRUED WARRANTY
The Company provides an accrual for estimated future warranty costs. The
estimate is derived based upon the relationship of actual historical warranty
costs to historical sales.
SALES AND ACCOUNTS RECEIVABLE
The Company's primary source of revenue is the provision of auto painting
and collision services for the consuming general public. The Company receives
payment for these services in cash or by credit card. A secondary source of
resources is provision of these same services to certain commercial accounts
such as auto fleets and insurance companies. These sales are often made on
account. Based on historical collection experience, the Company does not provide
an allowance for doubtful accounts since bad debt expense has historically been
immaterial.
Due to its geographic diversity and lack of large credit customers, the
Company had no significant concentrations of credit risk with individual
customers at December 31, 1995.
F-9
<PAGE>
PEACH AUTO PAINTING & COLLISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
2. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
EARNINGS PER SHARE
Historical net income per share has not been presented as it is not deemed
a meaningful presentation as a result of the capital structures of the various
individual corporations prior to the merger. Pro forma unaudited earnings per
share data and weighted average shares outstanding set forth in the statement of
operations is presented as if the capital structure that will exist upon
completion of the merger described in Note 1 (i.e. 6,818,812 shares of common
stock issued and outstanding) had existed for all periods presented.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the FASB issued Statement No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amounts. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt Statement 121
during the fiscal year ending December 31, 1996, and based on current
circumstances, does not believe the effect of adoption will be material.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The unaudited interim financial statements include all adjustments
(consisting of normal recurring adjustments) that are, in the opinion of
management, necessary for a fair presentation of the financial position of the
Peach Auto Painting and Collision as of September 30, 1996 and the results of
operations and cash flows for the nine month periods ended September 30, 1995
and 1996. Operating results for the nine months ended September 30, 1996 are not
necessarily indicative of the results to be expected for the entire year ending
December 31, 1996. All interim financial data presented is unaudited.
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
<S> <C> <C>
Note payable to bank, collateralized by deed of trust on real property with interest at 9%, due in
monthly installments of $2,252 through September 2007............................................. $ 195,536 $204,514
Unsecured note payable to a corporation bearing interest at 8%, due in monthly installments of
$1,622 through April 2000......................................................................... 68,780 --
Note payable to a corporation collateralized by equipment and a personal guarantee by a shareholder
of the Company with interest at 8%, due in monthly installments of $1,315 through October 1999.... 51,947 63,083
Note payable to a corporation collateralized by equipment and a personal guarantee by a shareholder
of the Company with interest at 7%, due in monthly installments of $3,088 through March 1997...... 41,394 74,288
Other notes payable................................................................................. 34,449 63,785
392,106 405,670
Less current portion................................................................................ 100,776 93,564
$ 291,330 $312,106
</TABLE>
The approximate carrying value of assets pledged as collateral for notes
payable was $395,000 and $537,000 at December 31, 1995 and 1994, respectively.
F-10
<PAGE>
PEACH AUTO PAINTING & COLLISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
3. LONG-TERM DEBT -- CONTINUED
The following represents maturities of long-term debt by year:
<TABLE>
<S> <C>
1996................................................................................................ $ 100,776
1997................................................................................................ 49,569
1998................................................................................................ 42,772
1999................................................................................................ 43,814
2000................................................................................................ 18,859
Thereafter.......................................................................................... 136,316
$ 392,106
</TABLE>
The Company estimates that the fair value of notes payable approximates the
carrying value based upon its effective current borrowing rate for debt for
similar terms and remaining maturities. Disclosure about fair value of financial
instruments is based upon information available to management as of December 31,
1995. Although management is not aware of any factors that would significantly
affect the fair value of amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date.
4. LEASES
The Company primarily leases its shop facilities under cancelable and
noncancelable operating leases expiring at various times through August 2020.
Rent expense charged to operations during the years ended December 31, 1995,
1994 and 1993 was $1,340,426, $969,319 and $576,181, respectively. Nine of the
Company's paint and collision facilities are leased from the majority
shareholder. The terms of the leases range from 23 to 26 years, and each lease
has a five year renewal option. The leases contain escalation clauses and
require the Company to pay the real estate taxes, insurance and any other
special assessments on the properties. The Company believes that the lease rates
for these nine properties are at market rates based upon lease rates for
comparable facilities in the vicinity of the Company's facilities and rates paid
by the Company to unrelated third parties for leasing the Company's other
facilities. The Company paid $150,449, $71,579 and $9,235 to the majority
shareholder for rent expense for the years ended December 31, 1995, 1994 and
1993, respectively.
The Company leases certain machinery and equipment under capitalized lease
agreements that expire at various times through November 1998. Furniture,
machinery and equipment includes the following amounts for capital leases:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
<S> <C> <C>
Furniture, machinery and equipment......................................... $ 807,995 $604,731
Less accumulated amortization.............................................. (268,092) (172,023)
$ 539,903 $432,708
</TABLE>
Capital lease obligations of $150,963, $289,211 and $69,064 were incurred
when the Company entered into leases for new machinery and equipment in 1995,
1994 and 1993, respectively.
Amortization of capital leases is included in depreciation and amortization
expense.
F-11
<PAGE>
PEACH AUTO PAINTING & COLLISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
4. LEASES -- CONTINUED
Future minimum lease payments, by year and in the aggregate, under capital
leases and operating leases with remaining terms of one year or more consisted
of the following at December 31, 1995:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
<S> <C> <C>
1996....................................................................... $185,881 $ 1,426,344
1997....................................................................... 131,998 1,351,859
1998....................................................................... 15,031 1,274,240
1999....................................................................... -- 1,301,121
2000....................................................................... -- 1,274,969
Thereafter................................................................. -- 10,370,992
332,910 $16,999,525
Less amounts representing interest (26,731)
Present value of future minimum lease payments $306,179
</TABLE>
5. RELATED PARTY TRANSACTIONS
As of December 31, 1995 advances from shareholders was $1,411,358, of which
$786,747 was due to the majority shareholder of the Company. These advances
represent verbal agreements with the Company and are payable on demand.
The Company obtained bridge loan financing from shareholders totaling
$475,144 in August 1996. Interest is payable monthly at 9.5%. The outstanding
principle balance plus accrued unpaid interest is due the earlier of twenty-four
months from the date of the note or one month following the successful
completion of the Company's initial public offering. As of September 30, 1996,
the unpaid balance on these notes was $475,144.
6. INCOME TAXES
The components of income tax expense consist of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1993 1994 1995 1996
<S> <C> <C> <C> <C>
(UNAUDITED)
Federal........................................ $ -- $ 30,630 $ 93,623 $59,303
State.......................................... -- 8,798 27,563 17,217
Income tax expense............................. $ -- $ 39,428 $121,186 $76,520
</TABLE>
At December 31, 1995, the Company had remaining unused net operating loss
carryforwards of approximately $40,000 for income tax purposes that expire at
various times through 2008. The Company has no material book/tax differences and
thus no deferred tax assets/liabilities are recorded.
F-12
<PAGE>
PEACH AUTO PAINTING & COLLISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
6. INCOME TAXES -- CONTINUED
The following table provides a reconciliation of income tax expense between
the statutory U.S. federal income tax rate and the actual effective rate of the
income tax expense.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1993 1994 1995 1996
<S> <C> <C> <C> <C>
(UNAUDITED)
Income tax expense at statutory rate.................................. 34.0% 34.0% 34.0% 34.0%
State income taxes, net of federal income tax benefits................ -- 4.7 4.7 4.7
Utilization of net operating loss carryforward........................ -- (9.5) (16.6) (6.6)
Effect of exclusion of S-Corporation's income tax expense............. (34.0) (22.4) (14.3) (21.4)
0% 6.8% 7.8% 10.7%
</TABLE>
The following unaudited pro forma income tax information is presented in
accordance with Statement of Financial Accounting Standard No. 109 (SFAS 109) as
if the Company had been a C Corporation subject to federal and state income
taxes throughout all periods presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1993 1994 1995 1996
<S> <C> <C> <C> <C>
Earnings before pro forma adjustments, per statement of income...... $481,900 $576,923 $1,557,910 $ 713,236
Pro forma statement:
Provision for income taxes to increase tax expense to estimated
effective rate of 40%.......................................... 192,760 230,769 623,164 285,294
Pro forma net income................................................ $289,140 $346,154 $ 934,746 $ 427,942
</TABLE>
7. COMMITMENTS
Prior to the closing of the Offering, Peach Auto Painting and Collision,
Inc. will enter into employment contracts with two executive employees. The
contracts provide for base annual compensation and incentive compensation to be
determined by the Board of Directors.
The Company has entered into lease agreements for six stores which will
open during the first quarter of 1997. The total lease obligation for the six
stores is approximately $2,771,195, which consists of lease terms ranging from 3
to 15 years.
F-13
<PAGE>
NO UNDERWRITER, DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, IN CONNECTION WITH THIS OFFERING, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THERE HAS NOT BEEN ANY CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SECURITIES OFFERED HEREBY, OR AN OFFER TO SELL OR SOLICITATION OF
AN OFFER TO BUY ANY SUCH SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary................................... 1
Risk Factors......................................... 5
The Formation Transactions........................... 8
Use of Proceeds...................................... 9
Dilution............................................. 10
Capitalization....................................... 11
Management's Discussion and
Analysis of Financial Condition and
Results of Operations.............................. 12
Business............................................. 17
Management........................................... 26
Principal Stockholders............................... 30
Certain Relationships and Related Transactions....... 30
Description of Securities............................ 31
Shares Eligible for Future Sale...................... 33
Underwriting......................................... 34
Legal Matters........................................ 35
Experts.............................................. 35
Available Information................................ 35
Index to Consolidated Financial Statements........... F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WITH
RESPECT TO THEIR SOLICITATIONS TO PURCHASE THE SECURITIES OFFERED HEREBY.
PEACH AUTO
PAINTING AND
COLLISION, INC.
1,500,000 SHARES OF
COMMON STOCK
PROSPECTUS
RICKEL & ASSOCIATES, INC.
, 1997
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the General Corporation Law of the state of Delaware
("Delaware Law"), a corporation may indemnify its directors, officers, employees
and agents and its former directors, officers, employees and agents and those
who serve, at the corporation's request, in such capacities with another
enterprise, against expenses (including attorneys' fees), as well as judgments,
fines and settlements in nonderivative lawsuits, actually and reasonably
incurred in connection with the defense of any action, suit or proceeding in
which they or any of them were or are made parties or are threatened to be made
parties by reason of their serving or having served in such capacity. Delaware
Law provides, however, that such person must have acted in good faith and in a
manner he or she reasonably believed to be in (or not opposed to) the best
interests of the corporation and, in the case of a criminal action, such person
must have had no reasonable cause to believe his or her conduct was unlawful. In
addition, Delaware Law does not permit indemnification of any action or suit by
or in the right of the corporation, where such person has been adjudged liable
to the corporation, unless, and only to the extent that, a court determines that
such person fairly and reasonably is entitled to indemnity for costs the court
deems proper in light of liability adjudication. Indemnity is mandatory to the
extent a claim, issue or matter has been successfully defended.
The Company's Certificate of Incorporation and Bylaws provide, under
certain circumstances, for the indemnification of the Company's present or
former directors, officers, employees, agents and persons who, at the request of
the Company, are or were serving in a similar capacity for another corporation
or entity. The Articles also allow the Board of Directors to purchase and
maintain insurance on behalf of the Company's present or former directors,
officers or persons who are or were serving at the request of the Company as a
director or officer of another corporation or entity.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following statement sets forth the expenses payable in connection with
this registration statement (estimated except for the registration fee), all of
which will be borne by the Company:
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee............................................. $ 4,182
Legal fees and expenses................................................................... $135,000
Accountant's fees and expenses............................................................ $125,000
Printing expenses......................................................................... $ 70,000
Miscellaneous............................................................................. $ 50,000
Total.............................................................................. $384,182
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the period commencing three years prior to the filing of this
Registration Statement, three predecessor companies of the Company issued shares
of common stock when they were incorporated. Such share issuances were made in
reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act of 1933, as amended. Giving effect to the conversion of shares in
the Merger Transactions, these predecessor companies issued a total of 1,056,077
shares of common stock for total consideration of $183,219. No underwriters were
used to place these shares. The following table sets forth details of the sales:
<TABLE>
<CAPTION>
SECURITIES SOLD
NUMBER OF SELLING
SHARES PRICE
PREDECESSOR COMPANY NAME DATE TITLE (1) PERSONS TO WHOM ISSUED CASH
<S> <C> <C> <C> <C> <C>
Griffin Holding Company, Inc. 11/16/95 Common stock, $1.00 par value 1,000 Edward D. Griffin, Jr. $1,000
Peach Auto Painting & Collision of
Durham, Inc. 2/20/95 Common stock, no par value 400 Lenward C. Wilbanks, Jr. 200
2/20/95 Common stock, no par value 400 F. Yvonne Wilbanks 200
2/20/95 Common stock, no par value 200 Dallas R. Barbee 100
Peach Auto Painting & Collision of
Texas, Inc. 3/31/95 Common stock, no par 60 Lenward C. Wilbanks, Jr. 600
3/31/95 Common stock, no par 20 Laura W. Rodier 200
3/31/95 Common stock, no par 20 Lisa W. Griffin 200
<CAPTION>
PREDECESSOR COMPANY NAME NON-CASH ASSETS
<S> <C>
Griffin Holding Company, Inc. --
Peach Auto Painting & Collision of
Durham, Inc. --
--
--
Peach Auto Painting & Collision of
Texas, Inc. $ 108,431
36,144
36,144
</TABLE>
II-1
<PAGE>
(1) Does not reflect conversion of shares in connection with the Merger
Transactions. Giving effect to the Merger Transactions, the share issuances
were as follows:
<TABLE>
<CAPTION>
COMPANY SHARES
<S> <C>
Griffin Holding Company, Inc........................................................... 273,735
Peach Auto Painting & Collision of Durham, Inc......................................... 193,145
Peach Auto Painting & Collision of Texas, Inc.......................................... 517,009
</TABLE>
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
1.1* Form of Underwriting Agreement by and between the Company and Rickel & Associates, Inc.
3.1* Certificate of Incorporation of the Company.
3.2* Bylaws of the Company.
4.1* Form of Underwriter's Warrant to Purchase Common Stock by and between the Company and Rickel & Associates, Inc.
relating to a warrant to purchase in the aggregate 150,000 shares of Common Stock.
5.1* Opinion of Smith Helms Mulliss & Moore, L.L.P. regarding the legality of the Common Stock offered hereby.
10.1* Form of Agreement among certain stockholders indemnifying and holding the Company harmless against and from any
and all claims relating to the allocation of Common Stock in connection with the Merger Transactions.
10.2* Form of Indemnification Agreement by and among the Company and each member of the Board of Directors of the
Company.
10.3* Form of Employment Agreement by and between the Company and Mr. Lenward C. Wilbanks, Jr.
10.4* Form of Employment Agreement by and between the Company and Mr. Joseph W. Walters, Jr.
10.5* 1996 Stock Option Plan
10.6* Form of Executive Supplemental Employment Agreement by and between the Company and Mr. Lenward C. Wilbanks, Jr.
23.1* Consent of Smith Helms Mulliss & Moore, L.L.P. (included in Exhibit 5.1 hereof).
23.2* Consent of Ernst & Young, L.L.P.
24.1+ Power of Attorney (included on the signature page of this registration statement).
</TABLE>
* Filed herewith.
+ Included in earlier filing of Registration Statement.
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(A) To provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the underwriter to permit prompt delivery to each
purchaser.
(B) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(C) (1) That it will, for determining any liability under the Securities
Act, treat the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the small business issuer under Rule 424(b)(1), or (4),
or 497(h) under the Securities Act as part of this registration statement as of
the time the Commission declared it effective.
(2) That it will, for determining any liability under the Securities Act,
treat each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial BONA FIDE
offering of those securities.
II-2
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Columbus, State of Georgia, on January 3, 1997.
PEACH AUTO PAINTING AND COLLISION, INC.
By: /s/ Lenward C. Wilbanks, Jr.
LENWARD C. WILBANKS, JR., PRESIDENT
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
(SIGNATURE) (TITLE) (DATE)
<C> <S> <C>
/s/ LENWARD C. WILBANKS, JR. President, Chief Executive Officer, Director January 3, 1997
LENWARD C. WILBANKS, JR.
/s/ JOSEPH W. WALTERS, JR. Chief Financial Officer, Treasurer, Secretary January 3, 1997
JOSEPH W. WALTERS, JR. (Principal Accounting Officer)
/s/ LISA W. GRIFFIN Vice President of Purchasing, Director January 3, 1997
LISA W. GRIFFIN
/s/ LAURA W. RODIER Vice President of Marketing, Director January 3, 1997
LAURA W. RODIER
</TABLE>
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
<C> <S> <C>
1.1 * Form of Underwriting Agreement by and between the Company and Rickel &
Associates, Inc.
3.1 * Certificate of Incorporation of the Company.
3.2 * Bylaws of the Company.
4.1 * Form of Underwriter's Warrant to Purchase Common Stock by and between
the Company and Rickel & Associates, Inc. relating to a warrant to
purchase in the aggregate 150,000 shares of Common Stock.
5.1 * Opinion of Smith Helms Mulliss & Moore, L.L.P. regarding the legality of
the Common Stock offered hereby.
10.1 * Form of Agreement among certain stockholders indemnifying and holding
the Company harmless against and from any and all claims relating to the
allocation of Common Stock in connection with the Merger Transactions.
10.2 * Form of Indemnification Agreement by and between the Company and each
member of the Board of Directors of the Company.
10.3 * Form of Employment Agreement by and between the Company and Mr. Lenward
C. Wilbanks, Jr.
10.4 * Form of Employment Agreement by and between the Company and Mr. Joseph
W. Walters, Jr.
10.5 * 1996 Stock Option Plan
10.6 * Form of Executive Supplemental Employment Agreement by and between the
Company and Mr. Lenward C. Wilbanks, Jr.
23.1 * Consent of Smith Helms Mulliss & Moore, L.L.P. (included in Exhibit 5.1
hereof).
23.2 * Consent of Ernst & Young, L.L.P.
24.1+ Power of Attorney (included on the signature page of this registration
statement).
</TABLE>
* Filed herewith.
+ Included in earlier filing of Registration Statement.
EXHIBIT 1.1
PEACH AUTO PAINTING AND COLLISION, INC.
1,500,000 Shares of Common Stock
UNDERWRITING AGREEMENT
, 1997
Rickel & Associates, Inc.
875 Third Avenue
New York, New York 10022
Dear Sirs:
Peach Auto Painting and Collision, Inc., a Delaware
corporation (the "Company"), hereby confirms its agreement with Rickel &
Associates, Inc. ("you" or the "Underwriter"), as follows:
1. Description of the Securities.
The Company proposes to issue and sell to the Underwriter
1,500,000 shares (the "Shares") of common stock, $.01 par value per share
("Common Stock" or the "Securities"), of the Company. The Company proposes to
grant to the Underwriter an option to purchase up to 225,000 additional shares
of Common Stock (the "Additional Securities"). The offering of Securities and
Additional Securities contemplated hereby may sometimes be referred to as the
"Offering."
The Company will sell to the Underwriter, for nominal
consideration, warrants to purchase up to 150,000 shares of Common Stock at a
price equal to $9.60 per share (the "Underwriter's Warrants"). The Underwriter's
Warrants and the shares of Common Stock underlying the Underwriter's Warrants
are hereinafter referred to collectively as the "Underwriter's Securities." The
Underwriter's Warrants shall be non-exercisable and non-transferable (other than
to officers and partners of the Underwriter and to members of the selling group
and their officers or partners) for a period of 12 months following the
Effective Date. Thereafter, the Underwriter's Warrants shall be exercisable and
transferable for a period of four years (provided such transfer is in accordance
with the Securities Act and any other applicable securities laws). If the
Underwriter's Warrants are not exercised during their term, they shall, by their
terms, automatically expire. The Underwriter's Securities shall be registered
for sale to the public and shall be included in the Registration Statement filed
in connection with the Offering.
<PAGE>
2. Representations and Warranties of the Company.
The Company represents and warrants to the Underwriter that:
(a) The Company has filed with the Securities and
Exchange Commission (the "Commission"), a registration statement,
and one or more amendments thereto, on Form SB-2 (File No. 333-
), including in each such registration statement and each such
amendment any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Securities under the Securities Act of 1933 (the "Act"). The
Company will, if required, file a further amendment to said registration
statement in the form to be delivered to you and will not, before the
registration statement becomes effective, file any other amendment thereto to
which you shall have reasonably objected in writing after having been furnished
with a copy thereof. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at the time such
registration statement becomes effective (including the prospectus, financial
statements, exhibits and all other documents, as amended, filed as a part
thereof), is hereinafter called the "Registration Statement," and the
prospectus, in the form filed with the Commission pursuant to Rule 424(b) of the
General Rules and Regulations of the Commission under the Act (the
"Regulations") or, if no such filing is made, the definitive prospectus used in
the Offering, is hereinafter called the "Prospectus." The Company has delivered
to you copies of each Preliminary Prospectus as filed with the Commission and
has consented to the use of such copies for purposes permitted by the Act.
(b) The Commission has not issued any orders
preventing or suspending the use of any Preliminary Prospectus, and, as of the
date filed with the Commission, each Preliminary Prospectus conformed in all
material respects with the requirements of the Act and did not include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein and necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that this representation and warranty does not apply to statements or omissions
made in reliance upon and in conformity with written information furnished to
the Company by or on your behalf for use in such Preliminary Prospectus and
except that this representation and warranty does not apply to statements or
omissions that have been cured in a subsequent preliminary prospectus or in the
Prospectus.
(c) When the Registration Statement becomes
effective under the Act and at all times subsequent thereto to and including the
Closing Date (hereinafter defined) and the Option Closing Date (hereinafter
defined) and for such longer periods as a Prospectus is required to be delivered
in connection with the
2
<PAGE>
sale of the Securities by the Underwriter, the Registration Statement and
Prospectus, and any amendment thereof or supplement thereto, will contain all
material statements which are required to be stated therein in accordance with
the Act and the Regulations, and will in all material respects conform to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty does not apply to
statements or omissions made in reliance upon and in conformity with written
information furnished to the Company by you for use in the Registration
Statement or Prospectus, or in any amendment thereof or supplement thereto. It
is understood that the statements set forth in the Prospectus with respect to
(i) the amounts of the selling concession and reallowance; (ii) the identity of
counsel to the Underwriter under the heading "Legal Matters"; (iii) the
statements with respect to the public offering of the Securities set forth under
the heading "Underwriting," including the information concerning the National
Association of Securities Dealers, Inc. ("NASD") affiliation of the Underwriter;
and (iv) the stabilization legend in the Prospectus constitute the only
information supplied by you for use in the Registration Statement or Prospectus.
(d) The Company is, and at the Closing Date and the
Option Closing Date will be, a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Peach Warehouse &
Distribution, Inc., a Georgia corporation ("Peach"), will merge with and into
the Company as of the Closing Date. Neither the Company nor Peach has any
subsidiaries. Each of the Company and Peach is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which its ownership or
leasing of any properties or the character of its operations requires such
qualification, except those jurisdictions in which the failure to so qualify
would not have a material adverse effect on the business or operations of the
Company and its subsidiaries, taken as a whole ("Material Adverse Effect"). Each
of the Company and Peach has all requisite corporate powers and authority, and
all necessary authorizations, approvals, orders, licenses, certificates and
permits of and from all governmental regulatory officials and bodies to own or
lease its properties and conduct its business as described in the Prospectus
except where the failure to have any such authorizations, approvals, orders,
licenses, certificates or permits would not have a Material Adverse Effect, and
each of the Company and Peach is doing business and has been doing business
during the period described in the Registration Statement in compliance with all
such material authorizations, approvals, orders, licenses, certificates and
permits and all material
3
<PAGE>
federal, state and local laws, rules and regulations concerning the business in
which the Company or Peach is engaged, except where the failure to comply with
any such authorizations, approvals, orders, licenses, certificates or permits or
any such laws, rules or regulations would not have a Material Adverse Effect.
The disclosures in the Registration Statement concerning the effects of federal,
state and local regulation on the Company's and Peach's business as currently
conducted and as contemplated are correct in all material respects and do not
omit to state a material fact required to be stated therein in light of the
circumstances under which such disclosures were made. The Company has all
corporate power and authority to enter into this Agreement and carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained or will have been
obtained prior to the Closing Date.
(e) This Agreement has been duly and validly
authorized and executed by the Company. The Securities and the Underwriter's
Securities have been duly authorized (and, in the case of the Shares, have been
duly reserved for issuance) and, when issued and paid for in accordance with
this Agreement (and, in the case of the Underwriter's Warrants, upon exercise of
such Warrants and payment to the Company of the exercise price therefor pursuant
to the terms thereof), all of such Shares will be validly issued, fully paid and
non-assessable; the Securities, Additional Securities and Underwriter's
Securities are not and will not be subject to the preemptive rights of any
stockholder of the Company and conform and at all times up to and including
their issuance will conform in all material respects to all statements with
regard thereto contained in the Registration Statement and Prospectus; and all
corporate action required to be taken for the authorization, issuance and sale
of the Securities, the Additional Securities and Underwriter's Securities has
been taken, and this Agreement constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms, to issue and sell, upon
exercise in accordance with the terms thereof, the number and kind of securities
called for thereby.
(f) The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof will not
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation or by-laws, in each
case as amended, of the Company or of any evidence of indebtedness, lease,
contract or other agreement or instrument to which the Company or Peach is a
party or by which the Company or Peach or any of its properties is bound, or
under any applicable law, rule, regulation, judgment, order or decree of any
government, professional advisory body, administrative agency or court, domestic
or foreign, having jurisdiction over the Company or Peach or their respective
properties, in each case except for any breach, violation or default that would
not have a Material Adverse Effect, or result in
4
<PAGE>
the creation or imposition of any material lien, charge or encumbrance upon any
of the properties or assets of the Company or Peach; and no consent, approval,
authorization or order of any court or governmental or other regulatory agency
or body is required for the consummation by the Company of the transactions on
its part herein contemplated, except such as may be required under the Act or
under state securities or blue sky laws or under the rules and regulations of
the NASD, and except where the breach, violation or failure to obtain such
consent, approval, authorization or order would not have a Material Adverse
Effect.
(g) Subsequent to the date hereof, and prior to the
Closing Date and the Option Closing Date, except as otherwise described in or
contemplated by the Prospectus, neither the Company nor Peach will issue or
acquire any equity securities.
(h) The consolidated financial statements and notes
thereto included in the Registration Statement and the Prospectus fairly present
the consolidated financial position and the results of operations of the Company
and Peach at the respective dates and for the respective periods to which they
apply; and such financial statements have been prepared in conformity with
generally accepted accounting principles, consistently applied throughout the
periods involved.
(i) Except as set forth in the Registration
Statement, neither the Company nor Peach is, and at the Closing Date and at the
Option Closing Date neither the Company nor Peach will be, in violation or
breach of, or default in, the due performance and observance of any term,
covenant or condition of any indenture, mortgage, deed of trust, note, loan or
credit agreement, or any other agreement or instrument evidencing an obligation
for borrowed money, or any other agreement or instrument to which the Company or
Peach is a party or by which the Company or Peach may be bound or to which any
of the property or assets of the Company or Peach is subject, which violations,
breaches, default or defaults, singularly or in the aggregate, would have a
Material Adverse Effect. Neither the Company nor Peach has and at the Closing
Date or Option Closing Date neither the Company nor Peach will have taken any
action in violation of the provisions of the Certificate of Incorporation or
by-laws, in each case as amended, of the Company or Peach, as the case may be,
or any statute or any order, rule or regulation of any court or regulatory
authority or governmental body having jurisdiction over or application to either
the Company or Peach or its business or properties, except for any violations
that, singularly or in the aggregate, would not have a Material Adverse Effect.
(j) The Company and Peach have, and at the Closing
Date and at the Option Closing Date will have, good and marketable title to all
properties and assets described in the Prospectus as owned by them, free and
clear of all liens, charges, encumbrances,
5
<PAGE>
claims, security interests, restrictions and defects of any material nature
whatsoever, except such as are described or referred to in the Prospectus and
liens for taxes not yet due and payable or such as in the aggregate will not
have a Material Adverse Effect. All of the material leases and subleases under
which the Company or Peach is the lessor or sublessor of properties or assets or
under which the Company or Peach holds properties or assets as lessee as
described in the Prospectus are, and will on the Closing Date and the Option
Closing Date be, in full force and effect, and except as described in the
Prospectus, each of the Company and Peach is not and will not be in default in
respect of any of the terms or provisions of any of such leases or subleases
(except for defaults which would not have a Material Adverse Effect), and no
claim has been asserted by anyone adverse to rights of the Company or Peach as
lessor, sublessor, lessee or sublessee under any of the leases or subleases
mentioned above, or affecting or questioning the right of the Company or Peach
to continue possession of the leased or subleased premises or assets under any
such lease or sublease, except as described or referred to in the Prospectus or
such as in the aggregate would not have a Material Adverse Effect, and the
Company and Peach (including through wholly owned subsidiaries) owns or leases
all such properties as are necessary to its operations as now conducted and,
except as otherwise stated in the Prospectus, as proposed to be conducted as set
forth in the Prospectus (except where the failure to own or lease such
properties would not have a Material Adverse Effect).
(k) The authorized, issued and outstanding capital
stock of the Company as of the date referenced in the Prospectus is, and the
authorized, issued and outstanding capital stock of the Company on the Closing
Date will be, as set forth in the Prospectus under "Capitalization" (in each
case based on the assumptions set forth therein and except that issuance and
sale of the Additional Securities will not be reflected therein); the shares of
issued and outstanding capital stock of the Company set forth thereunder have
been (or as of the Closing Date will be) duly authorized and validly issued and
are (or as of the Closing Date will be) fully paid and non-assessable; except as
set forth in the Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or agreements or other rights to
convert any obligation into, any shares of capital stock of the Company have
been granted or entered into by the Company; and the Common Stock and all such
options and warrants conform in all material respects, to all statements
relating thereto contained in the Registration Statement and Prospectus.
(l) Except as described in the Prospectus, neither
the Company nor Peach owns or controls any capital stock or securities of, or
has any proprietary interest in, or otherwise participates in any other
corporation, partnership, joint venture, firm, association or business
organization (other than those direct or indirect subsidiaries of the Company
disclosed in Exhibit 22 to
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the Registration Statement); provided, however, that this provision shall not be
applicable to the investment, if any, of the net proceeds from the sale of the
Securities sold by the Company or other funds thereof in interest-bearing
savings accounts, certificates of deposit, money market accounts, United States
government obligations or other short-term obligations.
(m) Ernst & Young LLP, who have reported on the
financial statements of the Company which have been filed with the Commission as
a part of the Registration Statement, are independent accountants with respect
to the Company as required by the Act and the Regulations.
(n) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, and except as
may otherwise be indicated or contemplated herein or therein, neither the
Company nor Peach has (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money; or (ii) entered into any
transaction other than in the ordinary course of business; or (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock; provided, however, that this provision shall not be applicable to any
transaction between or among the Company and its subsidiaries.
(o) There is no litigation or governmental
proceeding pending or to the knowledge of the Company or Peach threatened
against, or involving the properties or business of the Company or Peach which
might have a Material Adverse Effect, except as referred to in the Prospectus.
Further, except as referred to in the Prospectus, there are no pending actions,
suits or proceedings related to environmental matters or related to
discrimination on the basis of age, sex, religion or race, nor is the Company or
Peach charged with or, to its knowledge, under investigation with respect to any
violation of any statutes or regulations of any regulatory authority having
jurisdiction over its business or operations, which violations might have a
Material Adverse Effect, and no labor disturbances by the employees of the
Company or Peach exist or, to the knowledge of the Company or Peach, have been
threatened.
(p) Each of the Company and Peach has, and at the
Closing Date and at the Option Closing Date will have, filed all necessary
federal, state and foreign income and franchise tax returns or has requested
extensions thereof (except in any case where the failure so to file would not
have a Material Adverse Effect), and has paid all taxes which it believes in
good faith were required to be paid by it except for any such taxes that
currently, or on the Closing Date or Option Closing Date, as the case may be,
are being contested in good faith or as described in the Prospectus.
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(q) Neither the Company nor Peach has at any time
(i) made any contribution to any candidate for political office, or failed to
disclose fully any such contribution, in violation of law, or (ii) made any
payment to any state, federal, foreign governmental or professional regulatory
agency, officer or official or other person charged with similar public,
quasi-public or professional regulatory duties, other than payments or
contributions required or allowed by applicable law.
(r) Except as set forth in the Registration
Statement, to the knowledge of the Company or Peach, neither the Company or
Peach nor any officer, director, employee or agent of the Company or Peach has
made any payment or transfer of any funds or assets of the Company or Peach or
conferred any personal benefit by use of the Company's or Peach's assets or
received any funds, assets or personal benefit in violation of any law, rule or
regulation, which is required to be stated in the Registration Statement or
necessary to make the statements therein not misleading.
(s) On the Closing Date and on the Option Closing
Date, all transfer or other taxes, if any (other than income tax), which are
required to be paid, and are due and payable, in connection with the sale and
transfer of the Securities by the Company to the Underwriter will have been
fully paid or provided for by the Company as the case may be, and all laws
imposing such taxes will have been fully complied with in all material respects.
(t) There are no contracts or other documents of
the Company or Peach which are of a character required to be described in the
Registration Statement or Prospectus or filed as exhibits to the Registration
Statement which have not been so described or filed.
(v) The Company and Peach maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (1)
transactions are executed in accordance with management's general or specified
authorizations; (2) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; and (3) access to assets
is permitted only in accordance with management's general or specific
authorizations.
(w) Except as set forth in the Prospectus, no
holder of any securities of the Company has the right (which has not been
effectively waived or terminated) to require registration of any securities
because of the filing or effectiveness of the Registration Statement.
(x) The Company has not taken and at the Closing
Date will not have taken, directly or indirectly, any action
8
<PAGE>
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the Common Stock to facilitate the sale or resale of such securities.
(y) To the Company's knowledge, there are no claims
for services in the nature of a finder's origination fee with respect to the
sale of the Securities hereunder, except as set forth in the Prospectus.
(z) No right of first refusal exists with respect
to any sale of securities by the Company.
(aa) No statement, representation, warranty or
covenant made by the Company in this Agreement or made in any certificate or
document required by this Agreement to be delivered to the Underwriter was, when
made, or as of the Closing Date or as of the Option Closing Date will be
materially inaccurate, untrue or incorrect.
3. Covenants of the Company.
The Company covenants and agrees with the Underwriter that:
(a) It will deliver to the Underwriter, without
charge, two conformed copies of each Registration Statement and of each
amendment or supplement thereto, including all financial statements and
exhibits.
(b) The Company has delivered to the Underwriter,
and each of the Selected Dealers (as hereinafter defined) without charge, as
many copies as have been reasonably requested of each Preliminary Prospectus
heretofore filed with the Commission in accordance with and pursuant to the
Commission's Rule 430 under the Act and will deliver to the Underwriter and to
others whose names and addresses are furnished by the Underwriter or a Selected
Dealer, without charge, on the Effective Date, and thereafter from time to time
during such reasonable period as you may request if, in the reasonable opinion
of counsel for the Underwriter, the Prospectus is required by law to be
delivered in connection with sales by the Underwriter or a dealer, as many
copies of the Prospectus (and, in the event of any amendment of or supplement to
the Prospectus, of such amended or supplemented Prospectus) as the Underwriter
may reasonably request for the purposes contemplated by the Act. The Company
will take all necessary actions to furnish to whomever directed by the
Underwriter, when and as requested by the Underwriter, all necessary documents,
exhibits, information, applications, instruments and papers as may be reasonably
required in order to permit or facilitate the sale of the Securities.
9
<PAGE>
(c) The Company has authorized the Underwriter to
use, and make available for use by prospective dealers, the Preliminary
Prospectus, and authorizes the Underwriter, all dealers selected by you in
connection with the distribution of the Securities (the "Selected Dealers") to
be purchased by the Underwriter and all dealers to whom any of such Securities
may be sold by the Underwriter or by any Selected Dealer, to use the Prospectus,
as from time to time amended or supplemented, in connection with the sale of the
Securities in accordance with the applicable provisions of the Act, the
applicable Regulations and applicable state law, until completion of the
distribution of the Securities and for such longer period as you may reasonably
request if the Prospectus is required under the Act, the applicable Regulations
or applicable state law to be delivered in connection with sales of the
Securities by the Underwriter or the Selected Dealers.
(d) The Company will use its best efforts to cause
the Registration Statement to become effective and will notify the Underwriter
immediately, and confirm the notice in writing: (i) when the Registration
Statement or any post-effective amendment thereto becomes effective; (ii) of the
receipt of any comments from the Commission regarding the Registration Statement
or of the receipt of any stop order or of the initiation, or to the best of the
Company's knowledge, the threatening, of any proceedings for that purpose; (iii)
the suspension of the qualification of the Securities and the Underwriter's
Warrants, or underlying securities, for offering or sale in any jurisdiction or
of the initiating, or to the best of the Company's knowledge the threatening, of
any proceeding for that purpose; and (iv) of the receipt of any comments from
the Commission. If the Commission shall enter a stop order at any time, the
Company will make every reasonable effort to obtain the lifting of such order as
promptly as practicable.
(e) During the time when a prospectus relating to
the Securities is required to be delivered under the Act, the Company will use
its best efforts to comply with all requirements imposed upon it by the Act and
the Securities Exchange Act of 1934 (the "Exchange Act"), as now and hereafter
amended and by the Regulations, as from time to time in force, as necessary to
permit the continuance of sales of or dealings in the Securities in accordance
with the provisions hereof and the Prospectus and the Company shall use its best
efforts to keep the Registration Statement effective so long as a Prospectus is
required to be delivered in connection with the sale of the Securities or
Additional Securities by the Underwriter or by dealers effecting transactions
therein in connection with the initial public offering thereof. If at any time
when a prospectus relating to the Securities is required to be delivered under
the Act, any event shall have occurred as a result of which, in the reasonable
opinion of counsel for the Company or counsel for the Underwriter, the
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<PAGE>
Prospectus as then amended or supplemented (or the prospectus contained in a new
registration statement filed by the Company pursuant to Paragraph 3(q)),
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading, or
if, in the reasonable opinion of either such counsel, it is necessary at any
time to amend the Prospectus (or the prospectus contained in such new
registration statement) to comply with the Act, the Company will notify you
promptly and prepare and file with the Commission an appropriate amendment or
supplement in accordance with Section 10 of the Act and will furnish to you
copies thereof.
(f) The Company will endeavor in good faith, in
cooperation with you, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws or blue sky laws of such jurisdictions as you may reasonably designate;
provided, however, that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction or to make any changes in its capital
structure or certificate of incorporation or in any other material aspects of
its business or to enter into any material agreement with any Blue Sky
commissioner.
(g) The Company will make generally available
(within the meaning of Section 11(a) of the Act and the Regulations) to its
security holders, as soon as practicable, but in no event later than the first
day of the eighteenth full calendar month following the Effective Date, an
earnings statement of the Company, which will be in reasonable detail but which
need not be audited, covering a period of at least twelve months beginning after
the Effective Date, which earnings statements shall satisfy the requirements of
Section 11(a) of the Act and the Regulations as then in effect. The Company may
discharge this obligation in accordance with Rule 158 of the Regulations.
(h) During the period of five years commencing on
the Effective Date (unless the Company shall no longer have a class of equity
securities registered under Section 12(b) or 12(g) of the Exchange Act), the
Company will furnish to its stockholders an annual report (including financial
statements audited by its independent public accountants), in accordance with
Rule 14a-3 under the Exchange Act, and, at its expense, furnish to the
Underwriter (i) within 90 days after the end of each fiscal year of the Company,
a consolidated balance sheet of the Company and its consolidated subsidiaries
and a separate balance sheet of each subsidiary of the Company the accounts of
which are not included in such consolidated balance sheet as of the end of such
fiscal year, and consolidated statements of operations, stockholder's equity and
cash flows of the Company and its consolidated subsidiaries and
11
<PAGE>
separate statements of operations, stockholder's equity and cash flows of each
of the subsidiaries of the Company the accounts of which are not included in
such consolidated statements, for the fiscal year then ended all in reasonable
detail and all certified by independent accountants (within the meaning of the
Act and the Regulations), (ii) within 45 days after the end of each of the first
three fiscal quarters of each fiscal year, similar balance sheets as of the end
of such fiscal quarter and similar statements of operations, stockholder's
equity and cash flows for the fiscal quarter then ended, all in reasonable
detail, and subject to year end adjustment, all certified by the Company's
principal financial officer or the Company's principal accounting officer as
having been prepared in accordance with generally accepted accounting principles
applied on a consistent basis, (iii) as soon as available, each report furnished
to or filed with the Commission or any securities exchange and each report and
financial statement furnished to the Company's stockholders generally, and (iv)
as soon as available, such other material as the Underwriter may from time to
time reasonably request regarding the financial condition and operations of the
Company; provided, however, that the Underwriter shall use such other material
only in connection with its activities as Underwriter hereunder and shall
otherwise keep such other material confidential.
(i) For a period of eighteen months from the
Closing Date, the Company, at its expense, shall cause its regularly engaged
independent certified public accountants to review (but not audit), the
Company's financial statements for each of the first three quarters prior to the
announcement of quarterly financial information, the filing of the Company's
10-Q quarterly report and the mailing, if any, of quarterly financial
information to stockholders.
(j) Prior to the Closing Date or the Option Closing
Date (if any), the Company will not, directly or indirectly, without your prior
written consent, which shall not be unreasonably withheld or delayed, issue any
press release or other public announcement or hold any press conference with
respect to the Company or its activities with respect to the Offering (other
than trade releases issued in the ordinary course of the Company's business
consistent with past practices with respect to the Company's operations).
(k) The Company will deliver to you prior to
filing, any amendment or supplement to the Registration Statement or Prospectus
proposed to be filed after the Effective Date and will not file any such
amendment or supplement to which you shall reasonably object after being
furnished such copy.
(l) During the period of 120 days commencing on the
date hereof, the Company will not at any time take, directly or
indirectly, any action designed to, or which will constitute or
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<PAGE>
which might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Securities to facilitate the sale or resale of
any of the Securities.
(m) The Company will apply the net proceeds from
the Offering received by it substantially in the manner set forth
under "Use of Proceeds" in the Prospectus.
(n) Counsel for the Company, the Company's
accountants, and the officers and directors of the Company will, respectively,
furnish the opinions, the letters and the certificates referred to in
subsections of Paragraph 9 hereof, and, if the Company shall file any amendment
to the Registration Statement relating to the offering of the Securities or any
amendment or supplement to the Prospectus relating to the offering of the
Securities subsequent to the Effective Date, such counsel, such accountants, and
such officers and directors, respectively, will, at the time of such filing or
at such subsequent time as you shall specify, so long as Securities being
registered by such amendment or supplement are being underwritten by the
Underwriter, furnish to you such opinions, letters and certificates, each dated
the date of its delivery, of the same nature as the opinions, the letters and
the certificates referred to in said Paragraph 9, as you may reasonably request,
or, if any such opinion or letter or certificate cannot be furnished by reason
of the fact that such counsel or such accountants or any such officer or
director believes that the same would be inaccurate, such counsel or such
accountants or such officer or director will furnish an accurate opinion or
letter or certificate with respect to the same subject matter.
(o) The Company will comply in all material
respects with all of the provisions of any undertakings contained
in the Registration Statement.
(p) The Company will reserve and keep available for
issuance that maximum number of its authorized but unissued shares of Common
Stock which are issuable upon exercise of the Underwriter's Warrants outstanding
from time to time.
(q) For a period of five years from the Closing
Date, the Company shall continue to employ the services of a firm of independent
certified public accountants reasonably acceptable to the Underwriter in
connection with the preparation of the financial statements to be included in
any registration statement to be filed by the Company hereunder, or any
amendment or supplement thereto. During the same period, the Company shall
employ the services of a law firm(s) reasonably acceptable to the Underwriter in
connection with all legal work of the Company, including the preparation of a
registration statement to be filed by the Company hereunder, or any amendment or
supplement thereto.
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(r) The Company will effect the merger of Peach,
with and into the Company concurrently with the Closing of the
Offering.
(s) The Company agrees that it will, upon the
Effective Date, for a period of no less than two years, engage a designee of the
Underwriter as an advisor (the "Advisor") to its Board of Directors where such
Advisor shall attend meetings of the Board, receive all notices and other
correspondence and communications sent by the Company to members of its Board of
Directors and receive compensation equal to the entitlement of other non-officer
Directors. In addition, such Advisor shall be entitled to receive reimbursement
for all reasonable costs incurred in attending such meetings including, but not
limited to (if reasonably required in connection with any meeting held outside
the New York City metropolitan area), food, lodging and transportation. The
Company further agrees that, during said two year period, it shall schedule no
less than four (4) formal and "in person" meetings of its Board of Directors in
each such year and such meetings shall be held quarterly each year and advance
notice of such meetings identical to the notice given to directors shall be
given to the Advisor. Further, during such two year period, the Company shall
give notice to the Underwriter with respect to any proposed acquisitions,
mergers, reorganizations or other similar transactions. In lieu of the
Underwriter's right to designate an Advisor, the Underwriter shall have the
right during such two-year period, in its sole discretion, to designate one
person for election as a Director of the Company and the Company will utilize
its best efforts to obtain the election of such person who shall be entitled to
receive the same compensation, expense reimbursements and other benefits set
forth above.
The Company agrees to indemnify and hold the
Underwriter and such Advisor or Director harmless against any and all claims,
actions, damages, costs and expenses, and judgments arising solely out of the
attendance and participation of your designee at any such meeting described
herein. In the event the Company maintains a liability insurance policy
affording coverage for the acts of its officers and directors, it agrees, if
possible, to include the Underwriter's designee as an insured under such policy.
(v) Upon the Closing Date, the Company shall have
entered into an agreement with the Underwriter in form reasonably satisfactory
to the Underwriter (the "Consulting Agreement"), pursuant to which the
Underwriter will be retained as a management and financial consultant for a
two-year period commencing as of the Closing Date, and will be paid a fee of
$25,000 per year for a term of two years, all of which ($50,000) shall be paid
upon the Closing Date.
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(w) The Common Stock shall be quoted on either the
Nasdaq SmallCap Market, Boston Stock Exchange and Pacific Stock Exchange or The
Nasdaq National Market System ("Nasdaq"), not later than the Closing Date.
Thereafter, (unless the Company is acquired) the Company will effect and use its
best efforts to maintain such listing or cause such securities to be listed on a
national securities exchange or in a comparable inter-dealer quotation system
for at least five years from the date of this Agreement.
(x) The Company will apply for listing in Standard
and Poors Corporation Reports or Moodys OTC Guide and shall use its best efforts
to have the Company included in such publications for at least five years from
the Closing Date (unless the Common Stock is listed on the New York Stock
Exchange or the American Stock Exchange or unless the Company shall no longer
have a class of equity securities registered under Section 12(b) or 12(g) of the
Exchange Act).
(y) The Company has obtained from each person who
is currently an officer or director of the Company or a stockholder, warrant
holder or option holder of the Company, a written agreement, in form and
substance reasonably satisfactory to you and your counsel, to the effect that
such person shall not offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, without your prior written consent (or pursuant to such
other agreement with respect to the sale of capital stock as may be required by
state "Blue Sky" laws in order to qualify the Offering in any such State), any
shares of the Common Stock owned by such person or any securities convertible
into, or exchangeable for, or warrants to purchase or acquire, shares of Common
Stock, for a period of eighteen months from the Effective Date. For a period of
eighteen from the Effective Date, the Company shall not issue any shares of
Common Stock or preferred stock or any warrants, options or other rights to
purchase Common Stock or preferred stock without the consent of the Underwriter,
except for (i) the Securities and the Additional Securities, (ii) the
Underwriter's Securities, or (iii) options to purchase up to 700,000 shares of
Common Stock pursuant to the Company's stock option plan and shares of Common
Stock issuable upon the exercise of such options. Notwithstanding the foregoing,
the Company may issue any securities in a registered public offering which
provides gross proceeds to the Company of at least $12,000,000.
(z) The Company will use its best efforts to
obtain, as soon after the Closing Date as is reasonably possible, liability
insurance covering its officers and directors.
(aa) The Company agrees that it will employ the
services of a financial public relations firm reasonably acceptable to the
Underwriter for a period of at least twelve months following the Effective Date.
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4. Sale, Purchase and Delivery of Securities; Closing
Date; Public Offering.
(a) On the basis of the warranties, representations
and agreements herein contained, and subject to the satisfaction of all the
terms and conditions of this Agreement, the Company agrees to issue and sell to
the Underwriter, and the Underwriter agrees to purchase from the Company, the
Securities at a price of $8.00 per share of Common Stock, less an underwriting
discount of 8.875% of the price for such Common Stock. The Underwriter may allow
a concession not exceeding $. per share of Common Stock to Selected Dealers who
are members of the NASD, and to certain foreign dealers, and such dealers may
reallow to NASD members and to certain foreign dealers a concession not
exceeding $. per share of Common Stock.
(b) Delivery of the Securities and payment therefor
shall be made at 10:00 A.M., New York time on the Closing Date, as hereinafter
defined, at the offices of the Underwriter or such other location as may be
agreed upon by you and the Company. Delivery of certificates for the Common
Stock (in definitive form and registered in such names and in such denominations
as you shall request by written notice to the Company delivered at least four
business days' prior to the Closing Date), shall be made to you for the account
of the Underwriter against payment of the purchase price therefor by certified
or bank check payable in New York Clearing House funds to the order of the
Company. The Company will make such certificates available for inspection at
least one business day prior to the Closing Date at such place as you shall
designate.
(c) The "Closing Date" shall be , 1996,
or such other date not later than the fourth business day following the
effective date of the Registration Statement as you shall determine and advise
the Company by at least three full business days' notice.
(d) The cost of original issue tax stamps, if any,
in connection with the issuance and delivery of the Securities by the Company to
the Underwriter shall be borne by the Company. The Company will pay and hold the
Underwriter, and any subsequent holder of the Securities, harmless from any and
all liabilities with respect to or resulting from any failure or delay in paying
federal and state stamp taxes, if any, which are payable in connection with the
original issuance or sale to the Underwriter of the Securities or any portions
thereof.
(e) As soon, on or after the Effective Date, as the
Underwriter deems advisable, the Underwriter shall make a public offering of the
Securities (other than to residents of or in any jurisdiction in which
qualification of the Securities is required and has not become effective) at the
initial public offering prices
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and upon the other terms set forth in the Prospectus. The Underwriter may from
time to time increase or decrease the public offering prices of the Securities
after the distribution thereof has been completed to such extent as the
Underwriter, in its sole discretion, deems advisable.
5. Sale, Purchase and Delivery of Additional
Securities; Option Closing Date.
(a) Upon the basis of the representations,
warranties and agreements herein contained, and subject to the satisfaction of
all the terms and conditions of this Agreement, the Company agrees to sell to
the Underwriter, and the Underwriter shall have the option (the "Option") to
purchase from the Company, the Additional Securities at the same price per
Security as set forth in Paragraph 4(a) above. Additional Securities may be
purchased solely for the purpose of covering over-allotments made in connection
with the distribution and sale of the Securities as contemplated by the
Prospectus.
(b) The Option to purchase all or part of the
Additional Securities covered thereby is exercisable by you at any time and from
time to time before the expiration of a period of 45 calendar days from the date
of the Effective Date (the "Option Period") by written notice to the Company
setting forth the number of Additional Securities for which the Option is being
exercised, the name or names in which the certificates for such Additional
Securities are to be registered and the denominations of such certificates. Upon
each exercise of the Option, the Company shall sell to the Underwriter the
aggregate number of Additional Securities specified in the notice exercising
such Option.
(c) Delivery of the Additional Securities with
respect to which Options shall have been exercised and payment therefor shall be
made at 10:00 A.M., New York time on the Option Closing Date, as hereinafter
defined, at the offices of the Underwriter or at such other locations as may be
agreed upon by you and the Company. Delivery of certificates for Additional
Securities shall be made to you for the account of the Underwriter against
payment of the purchase price therefor by certified or bank check or wire
transfer in New York Clearing House Funds to the order of the Company. The
Company will make certificates for Additional Securities to be purchased at the
Option Closing Date available for inspection at least one business day prior to
such Option Closing Date at such place as you shall designate.
(d) The "Option Closing Date" shall be the date not
later than three business days after the end of the Option Period as you shall
determine and advise the Company by at least three full business days' notice,
unless some other time is agreed upon between you and the Company.
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(e) The obligations of the Underwriter to purchase
and pay for Additional Securities at such Option Closing Date shall be subject
to compliance as of such date with all the conditions specified in Paragraph 9
herein and the delivery to you of opinions, certificates and letters, each dated
such Option Closing Date, substantially similar in scope to those specified in
Paragraph 9 herein.
(f) The cost of original issue tax stamps, if any,
in connection with the issuance and delivery of the Additional Securities by the
Company to the Underwriter shall be borne by the Company. The Company will pay
and hold the Underwriter, and any subsequent holder of Additional Securities,
harmless from any and all liabilities with respect to or resulting from any
failure or delay in paying federal and state stamp taxes, if any, which are
payable in connection with the original issuance or sale to the Underwriter of
the Additional Securities or any portion thereof.
6. [intentionally omitted]
7. Representations and Warranties of the Underwriter.
The Underwriter represents and warrants to the
Company that:
(a) The Underwriter is a member in good standing of
the NASD, and has complied with all NASD requirements concerning net capital and
compensation to be received in connection with the Offering.
(b) To the Underwriter's knowledge, there are no
claims for services in the nature of a finder's or origination fee with respect
to the sale of the Securities hereunder, which the Company is, or may become,
obligated to pay.
8. Payment of Expenses.
(a) The Company shall be responsible for and shall
bear all expenses directly and necessarily incurred in connection with the
Offering, including: (i) the preparation, printing and filing of the offering
documents and amendments thereto, including NASD, SEC and filing fees,
preliminary and final Prospectus and the printing of the Underwriting Agreement,
the Agreement Among Underwriters and the Selected Dealer's Agreement, a Blue Sky
Memorandum, material to be circulated to any underwriter by the Underwriter and
other incidental material; (ii) the mailing and distribution costs for the
preliminary and final Prospectus; (iii) the issuance and delivery of
certificates representing the Securities, including original issue and transfer
taxes, if any; (iv) the qualification of the Securities and any shares of
Company's Common Stock underlying the Securities under state securities or Blue
Sky Laws, including counsel fees of the
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Underwriter relating thereto ($15,000 of which shall be due and payable upon the
commencement of Blue Sky filings together with appropriate state filing fees),
plus disbursements relating to, but not limited to, long-distance telephone
calls, photocopying, messengers, excess postage, overnight mail and courier
services; (v) the fees and disbursements of counsel for the Company and the
accountants for the Company; and (vi) advertising costs and expenses, including,
but not limited to, the costs and expenses in connection with the "road show,"
memorabilia and "tombstones" in publications selected by the Underwriter.
(b) In addition to the expenses to be paid and
borne by the Company referred to in Paragraph 8(a) above, the Company shall
reimburse you at closing for expenses incurred by you in connection with the
Offering (for which you need not make any accounting), in the amount of 3% of
the price to the public of the Securities and Additional Securities sold in the
Offering. This 3% non-accountable expense allowance shall cover the fees of your
legal counsel, but shall not include any expenses for which the Company is
responsible under Paragraph 8(a) above, including the reasonable fees and
disbursements of your legal counsel with respect to Blue Sky matters.
9. Conditions of Underwriter's Obligations.
The obligations of the Underwriter to consummate the
transactions contemplated by this Agreement shall be subject to the continuing
accuracy in all material respects of the representations and warranties of the
Company contained herein (except those representations and warranties that speak
as of a specific date) and the accuracy in all material respects of the
statements of the Company and its officers and directors made pursuant to the
provisions hereof, as of the date hereof and as of the Closing Date, and to the
performance by the Company in all material respects of its covenants and
agreements hereunder and to the following additional conditions:
(a) The Registration Statement shall have become
effective not later than 5:00 p.m., New York time, on the date following the
date of this Agreement, or such later date and time as shall be consented to in
writing by you and, on or prior to the Closing Date, no stop order suspending
the effectiveness of the Registration Statement and no proceedings for that
purpose shall have been instituted or to your knowledge or the knowledge of the
Company, shall be pending or contemplated by the Commission and any request on
the part of the Commission for additional information shall have been complied
with to the reasonable satisfaction of counsel to the Underwriter and after the
date hereof no amendment or supplement shall have been filed to the Registration
Statement or Prospectus without your prior consent, which shall not have been
unreasonably withheld or delayed.
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(b) The Underwriter shall not have advised the
Company that the Registration Statement or the Prospectus or any amendment
thereof or supplement thereto contains an untrue statement of a fact which, in
the Underwriter's reasonable opinion, is material, or omits to state a fact
which, in the Underwriter's reasonable opinion, is material and is required to
be stated therein or is necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(c) Between the time of the execution and delivery
of this Agreement and the Closing Date, there shall be no litigation instituted
against the Company or any of its officers or directors and between such dates
there shall be no proceeding instituted or, to the Company's knowledge,
threatened against the Company or any of its officers or directors before or by
any federal, state or county commission, regulatory body, administrative agency
or other governmental body, domestic or foreign, in which litigation or
proceeding an unfavorable ruling, decision or finding would have a Material
Adverse Effect.
(d) The representations and warranties of the
Company contained herein and in each certificate and document contemplated under
this Agreement to be delivered to you shall be true and correct in all material
respects at the Closing Date as if made at the Closing Date, and all covenants
and agreements contained herein to be performed on the part of the Company, and
all conditions contained herein to be fulfilled or complied with by the Company
at or prior to the Closing Date shall be fulfilled or complied with in all
material respects.
(e) At the Closing Date, you shall have received
the opinion of Smith Helms Mulliss & Moore, L.L.P., counsel to the Company,
dated as of such Closing Date, addressed to the Underwriter and in form and
substance satisfactory to counsel to the Underwriter, to the effect that:
(i) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and Peach is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia, each with all requisite
corporate power and authority to own its properties and to conduct its business
as described in the Registration Statement. Each of the Company and Peach is
duly qualified to do business as a foreign corporation and is in good standing
in all jurisdictions where its ownership, leasing, licensing or use of property
and assets or the conduct of its business makes such qualification necessary,
except where failure to be so qualified or in good standing will not have a
Material Adverse Effect;
(ii) The Company has all requisite corporate
power and authority to execute, deliver and perform the
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Underwriting Agreement, the Consulting Agreement (to be entered into as of the
Closing Date), and the Underwriter's Warrants and to consummate the transactions
contemplated thereby. The execution, delivery and performance of the
Underwriting Agreement, the Consulting Agreement and the Underwriter's Warrants
by the Company, the consummation by the Company of the transactions therein
contemplated and the compliance by the Company with the terms of the
Underwriting Agreement, the Consulting Agreement and the Underwriter's Warrants
have been duly authorized by all necessary corporate action, the Underwriting
Agreement has been duly executed and delivered by the Company, and each of the
Consulting Agreement and the Underwriter's Warrants will have been duly executed
and delivered by the Company as of the Closing Date. The Underwriting Agreement
is, and, as of the Closing Date each of the Consulting Agreement and the
Underwriter's Warrants will be, a valid and binding obligation of the Company,
enforceable in accordance with its terms, except insofar as enforceability of
indemnification and contribution provisions may be limited by applicable law or
policy or equitable principles, and except as enforceability may be limited by
bankruptcy, reorganization, moratorium, insolvency or other laws affecting the
enforceability of creditors' rights generally and rules of law governing
specific performance, injunctive relief and other equitable remedies.
(iii) The execution, delivery and performance
of the Underwriting Agreement, the Consulting Agreement and the Underwriter's
Warrants by the Company, and the consummation by the Company of the transactions
therein or herein contemplated will not, with or without the giving of notice or
the lapse of time, or both, (A) result in a violation of the Certificate of
Incorporation or by-laws of the Company, in each case as the same may be
amended, (B) to the best of such counsel's knowledge, result in a breach of, or
conflict with, any terms or provisions of or constitute a default under, or
result in the modification or termination of, or result in the creation or
imposition of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company pursuant to, any indenture, mortgage, note,
contract, commitment or other material agreement or instrument known to such
counsel to which the Company is a party or by which the Company or any of its
properties or assets are bound or affected, except where any of the foregoing
would not have a Material Adverse Effect; (C) to the best of such counsel's
knowledge, violate any existing applicable law, rule or regulation or judgment,
order or decree known to such counsel of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or business, which judgment, order or decree is binding on the
Company or to which any of its business or operations is subject, except where
any such violation would not have a Material Adverse Effect; or (D) to the best
of such counsel's knowledge, have any material adverse effect on any permit,
certification, registration, approval, consent, license or franchise necessary
for the Company to own or
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lease and operate its properties and to conduct its business or the ability of
the Company to make use thereof, in each case in the State of New York;
(iv) To the best of such counsel's knowledge,
no authorization, approval, consent, order, registration, license or permit of
any court or governmental agency or body (other than under the Act, the
Regulations and applicable state securities or Blue Sky laws) is required for
the authorization, issuance, sale and delivery of the Securities, the Additional
Securities or the Underwriter's Warrants, and the consummation by the Company of
the transactions contemplated by the Underwriting Agreement, the Consulting
Agreement or the Underwriter's Warrants;
(v) Such counsel has been advised by the staff
of the Commission that the Registration Statement was declared effective under
the Act by the Commission on , 1997; to the best of such counsel's knowledge, no
stop order suspending the effectiveness of the Registration Statement has been
issued by the Commission, and no proceedings for that purpose have been
instituted or are pending or threatened under the Act;
(vi) The Registration Statement and the
Prospectus, as of the Effective Date (except for the financial statements and
other financial data included therein or omitted therefrom, as to which such
counsel need express no opinion), comply as to form in all material respects
with the requirements of the Act and Regulations and, to the best of such
counsel's knowledge, the conditions for use of a registration statement on Form
SB-2 have been satisfied by the Company;
(vii) The description in the Registration
Statement and the Prospectus of statutes, regulations, contracts and other
documents have been reviewed by us, and, based upon such review, are accurate
summaries of such statutes, regulations, contracts and other documents in all
material respects and, to the best of such counsel's knowledge, there are no
material contracts or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement, which are not so described or filed as required.
(viii) Each share of Common Stock outstanding
as of the date of the Prospectus or immediately prior to the Closing Date has
been duly authorized and validly issued and is fully paid and nonassessable. To
the best of such counsel's knowledge, none of the Common Stock outstanding as of
either such date or time has been issued in violation of the preemptive rights
of any stockholder of the Company. The authorized Common Stock conforms in all
material respects to the description thereof contained in the Registration
Statement and Prospectus. To the best of such counsel's knowledge, except as set
forth in the
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Prospectus, no holders of any of the Company's securities has any rights,
"demand," "piggyback" or otherwise (which has not been waived or terminated), to
have such securities registered under the Act;
(ix) The issuance and sale of the Securities,
the Additional Securities and the Underwriter's Warrants have been duly
authorized and, when issued, paid for and delivered in accordance with the terms
hereof and thereof, the Securities, Additional Securities and the Underwriter's
Warrants will be validly issued, fully paid and nonassessable. Neither the
Securities nor the Additional Securities are subject to statutory preemptive
rights of any stockholder of the Company. The certificates representing the
Securities are in proper legal form;
(x) The Underwriter's Warrants constitute
valid and binding obligations of the Company, enforceable in accordance with
their respective terms, to issue and sell, upon exercise thereof and payment
pursuant to the terms thereof, the numbers and types of securities of the
Company called for thereby. All corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken. The Underwriter's Warrants conform in all material respects to the
descriptions thereof contained in the Registration Statement and Prospectus;
(xi) Good title to the Securities, free and
clear of all liens, encumbrances, equities, security interests and claims
(except those that may arise from actions or inactions of the Underwriter), has
been transferred to the Underwriter, provided that the Underwriter purchased the
Securities in good faith and without notice of any such lien, encumbrance,
equity, security or claim or any other adverse claim within the meaning of the
New York Uniform Commercial Code;
(xii) Assuming that the Underwriter exercises
the Option to purchase the Additional Securities and makes payments therefor in
accordance with the terms of the Underwriting Agreement, upon issuance of the
Additional Securities to the Underwriter pursuant hereto, good title to the
Additional Securities, free and clear of any liens, encumbrances, equities,
security interests and claims (except those that may arise from actions or
inactions of the Underwriter), will have been transferred to the Underwriter,
provided that the Underwriter purchased the Additional Securities in good faith
and without notice of any such lien, encumbrance, equity, security or claim or
any other adverse claim within the meaning of the New York Uniform Commercial
Code;
(xiii) To the best of such counsel's knowledge,
other than as set forth or contemplated in the Prospectus, there
are no claims, actions, suits, proceedings, arbitrations,
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investigations or inquiries before any governmental agency, court or tribunal,
or before any private arbitration tribunal, pending or threatened against the
Company or to which its properties or business is subject, which, individually
or in the aggregate, would have a Material Adverse Effect.
In addition, such counsel shall state that
during the course of the preparation of the Registration Statement and the
Prospectus, such counsel participated in conferences with officers of the
Company, and, while such counsel are not passing upon, has not verified or
independently investigated, and does not assume any responsibility for the
accuracy, completeness or fairness of the statements or documents contained in
the Registration Statement or the Prospectus, during the course of such
preparation and the foregoing conferences, no facts came to such counsel's
attention which caused such counsel to believe that (A) the Registration
Statement (except as to the financial statements and other financial data
contained therein, as to which such counsel need express no opinion), as of the
Effective Date, contained any untrue statement of a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or that (B) the
Prospectus (except as to the financial statements and other financial data
contained therein, as to which such counsel need express no opinion), as of its
date, contained any untrue statement or a material fact or omitted to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
In rendering such opinions, such counsel may
limit their opinions to matters governed by the federal laws of the United
States, the laws of the State of [ ] and the general corporation laws of the
State of Delaware, and may rely as to matters of fact, to the extent they deem
proper, on certificates and written statements of officers of the Company and
certificates or other written statements of officers of departments of various
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company, provided that copies of any such statements or
certificates shall be delivered to counsel to the Underwriter.
(f) On or prior to the Closing Date, counsel for
the Underwriter shall have been furnished such documents, certificates and
opinions as they may reasonably require for the purpose of enabling them to
review the matters referred to in subparagraph (e) of this Paragraph 9, or in
order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(g) Prior to the Closing Date:
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(i) There shall have been no material adverse
change in the condition or prospects or the business activities, financial or
otherwise, of the Company from the latest dates as of which such condition is
set forth in the Registration Statement and Prospectus;
(ii) There shall have been no transaction,
outside the ordinary course of business, entered into by the Company from the
latest date as of which the financial condition of the Company is set forth in
the Registration Statement and Prospectus which is material to the Company,
which is (x) required to be disclosed in the Prospectus or Registration
Statement and is not so disclosed, and (y) likely to have a Material Adverse
Effect;
(iii) The Company shall not be in default under
any material provision of any instrument relating to any outstanding
indebtedness, except as described in the Prospectus and except such as will not
have a Material Adverse Effect;
(iv) No material amount of the assets of the
Company shall have been pledged, mortgaged or otherwise encumbered, except as
set forth in the Registration Statement and Prospectus;
(v) No action, suit or proceeding, at law or
in equity, shall have been pending or to its knowledge threatened against the
Company or affecting any of its properties or businesses before or by any court
or federal or state commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding would have a Material Adverse Effect,
except as set forth in the Registration Statement and Prospectus;
(vi) No stop order shall have been issued under
the Act and no proceedings therefor shall have been initiated or,
to the Company's knowledge, threatened by the Commission; and
(vii) Each of the representations and
warranties of the Company contained in this Agreement and in each certificate
and document contemplated under this Agreement to be delivered to you was, when
originally made and is at the time such certificate is dated, true and correct
in all material respects.
(h) Concurrently with the execution and delivery of
this Agreement and at the Closing Date, you shall have received a certificate of
the Company signed by the Chief Executive Officer of the Company and the
principal financial officer of the Company, dated as of the Closing Date, to the
effect that the conditions set forth in subparagraph (g) above have been
satisfied in all material respects and that, as of the Closing Date, the
representations and warranties of the Company set forth in Paragraph 2 herein
are true and correct, as if made on and as of the Closing Date, in all material
respects. Any certificate signed by any officer of the Company and delivered to
you or to counsel for the Underwriter
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shall be deemed a representation and warranty by the Company to the
Underwriter as to the statements made therein.
(i) At the time this Agreement is executed, and at
the Closing Date, you shall have received a letter, addressed to the Underwriter
and in form and substance reasonably satisfactory in all material respects to
you and counsel for the Underwriter, from Ernst & Young LLP dated as of the date
of this Agreement and as of the Closing Date, substantially in the form of
Exhibit A hereto.
(j) All proceedings taken in connection with the
authorization, issuance or sale of the Securities, Additional Securities and the
Underwriter's Securities as herein contemplated shall be reasonably satisfactory
in form and substance to you and to counsel to the Underwriter, and the
Underwriter shall have received from such counsel an opinion, dated as the
Closing Date with respect to such of these proceedings as you may reasonably
require.
(l) The obligation of the Underwriter to purchase
Additional Securities hereunder is subject to the accuracy of the
representations and warranties of the Company contained herein on and as of the
Option Closing Date in all material respects and to the satisfaction on and as
of the Option Closing Date of the conditions set forth herein in all material
respects.
(m) On the Closing Date there shall have been duly
tendered to you for your account the appropriate number of shares of Common
Stock constituting the Securities.
10. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless the Underwriter, each of its
agents and counsel and each person, if any, who controls the Underwriter
("controlling person") within the meaning of either Section 15 of the Act or
Section 20 of the Exchange Act, against any and all losses, liabilities, claims,
damages, actions and expenses or liability, joint or several, whatsoever
(including but not limited to any and all expense whatsoever reasonably incurred
in investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever), joint or several, to which it or such
controlling persons may become subject under the Act, the Exchange Act or under
any other statute or at common law or otherwise, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any Preliminary Prospectus or the Prospectus (as
from time to time amended and supplemented); in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
the shares issuable upon exercise of the Underwriter's Warrants; or in any
application
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or other document or written communication (in this Paragraph 10 collectively
called "application") executed by the Company or based upon written information
furnished by the Company filed in any jurisdiction in order to qualify the
Securities, Additional Securities, Underwriter's Warrants and Underwriter's
Securities under the securities laws thereof or filed with the Commission or any
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in light of the circumstances under which they were made),
unless such statement or omission was made in reliance upon or in conformity
with written information furnished to the Company with respect to the
Underwriter by or on behalf of the Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment or supplement thereof, or in any application, as the case may be.
Notwithstanding the foregoing, the Company shall have no liability under this
Paragraph 10(a) if any such untrue statement or omission made in a Preliminary
Prospectus, is corrected in the Prospectus and the Underwriter failed to deliver
to the person or persons alleging the liability upon which indemnification is
being sought, at or prior to the written confirmation of such sale, a copy of
the Prospectus. This indemnity will be in addition to any liability which the
Company may otherwise have.
(b) The Underwriter agrees to indemnify and hold
harmless the Company and each of the officers and directors of the Company who
have signed the Registration Statement, each of its agents and counsel, and each
other person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to the Underwriter in Paragraph 10(a), but
only with respect to any untrue statement or alleged untrue statement of any
material fact contained in or any omission or alleged omission to state a
material fact required to be stated in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereof or
necessary to make the statements therein not misleading or in any application
made in reliance upon, and in conformity with, written information furnished to
the Company by you expressly for use in the preparation of such Preliminary
Prospectus, the Registration Statement or Prospectus with respect to the
Underwriter or directly relating to the transactions effected or to be effected
by the Underwriter in connection with the Offering. This indemnity agreement
will be in addition to any liability which the Underwriter may otherwise have.
(c) If any action is brought against any
indemnified party (the "Indemnitee") in respect of which indemnity may be sought
against another party pursuant to the foregoing (the "Indemnitor"), the
Indemnitor shall assume the defense of the action, including the employment and
fees of counsel (reasonably
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satisfactory to the Indemnitee) and payment of expenses. Any Indemnitee shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such Indemnitee unless
the employment of such counsel shall have been authorized in writing by the
Indemnitor in connection with the defense of such action. If the Indemnitor
shall have employed counsel to have charge of the defense or shall previously
have assumed the defense of any such action or claim, the Indemnitor shall not
thereafter be liable to any Indemnitee in investigating, preparing or defending
any such action or claim. Each Indemnitee shall promptly notify the Indemnitor
of the commencement of any litigation or proceedings or any other action against
the Indemnitee in respect of which indemnification is to be sought.
(d) In order to provide for just and equitable
contribution under the Act in any case in which: (i) the Underwriter makes a
claim for indemnification pursuant to Paragraph 10 hereof, but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the time to appeal has expired or the last right of appeal has
been denied) that such indemnification may not be enforced in such case
notwithstanding the fact that this Paragraph 10 provides for indemnification of
such case; or (ii) contribution under the Act may be required on the part of the
Underwriter in circumstances for which indemnification is provided under this
Paragraph 10, then, and in each such case, the Company and the Underwriter shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after any contribution from others) in such proportion so that
the Underwriter is responsible for the portion represented by dividing the total
compensation received by the Underwriter herein or in connection with the
Offering by the total purchase price of all Securities sold in the public
offering and the Company is responsible for the remaining portion; provided,
that in any such case, no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
The foregoing contribution agreement shall in no way affect
the contribution liabilities of any persons having liability under Section 11 of
the Act other than the Company and the Underwriter. As used in this Paragraph
10, the term "Underwriter" includes any officer, director, or other person who
controls the Underwriter within the meaning of Section 15 of the Act, and the
word "Company" includes any officer, director or person who controls the Company
within the meaning of Section 15 of the Act. If the full amount of the
contribution specified in this paragraph is not permitted by law, then the
Underwriter and each person who controls the Underwriter shall be entitled to
contribution from the Company to the full extent permitted by law. No
contribution shall
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be requested with regard to the settlement of any matter from any party who did
not consent in writing to the settlement.
(e) Within fifteen (15) days after receipt by any
party to this Agreement (or its representative) of notice of the commencement of
any action, suit or proceeding, such party will, if a claim for contribution in
respect thereof is made against another party (the "contributing party"), notify
the contributing party of the commencement thereof, but the omission so to
notify the contributing party will not relieve it from any liability it may have
to any other party other than for contribution hereunder.
In case any such action, suit or proceeding is brought against
any party, and such party notifies a contributing party or his or its
representative of the commencement thereof within the aforesaid fifteen (15)
days, the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution without the written consent of such contributing
party. The indemnification provisions contained in this Paragraph 11 are in
addition to any other rights or remedies which either party hereto may have with
respect to the other or hereunder.
11. Representations, Warranties, Agreements to Survive
Delivery.
The respective indemnity and contribution agreements
by the Underwriter and the Company contained in Paragraph 10 hereof, and the
covenants, representations and warranties of the Company and the Underwriter set
forth in this Agreement, shall remain operative and in full force and effect
regardless of (i) any investigation made by the Underwriter or on its behalf or
by or on behalf of any person who controls the Underwriter, or by the Company or
any controlling person of the Company or any director or any officer of the
Company, (ii) acceptance of any of the Securities and payment therefor, or (iii)
any termination of this Agreement, and shall survive the delivery of the
Securities; and any successor of the Underwriter or the Company, or of any
person who controls you or the Company or any other indemnified party, as the
case may be, shall be entitled to the benefit of such respective indemnity and
contribution agreements. The respective indemnity and contribution agreements by
the Underwriter and the Company contained in Paragraph 10 above shall be in
addition to any liability which the Underwriter and the Company may otherwise
have.
12. Effective Date of This Agreement and Termination
Thereof.
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(a) This Agreement shall become effective at 10:00
A.M., New York time, on the first full business day following the day on which
you and the Company receive notification that the Registration Statement became
effective.
(b) This Agreement may be terminated by the
Underwriter by notifying the Company at any time on or before the Closing Date,
if any domestic or international event or act or occurrence has materially
disrupted, or in your reasonable opinion will in the immediate future materially
disrupt, securities markets in the United States; or if trading in securities
generally on the New York Stock Exchange, the American Stock Exchange, or in the
over-the-counter market in the United States shall have been suspended, or
minimum or maximum prices for trading in securities generally shall have been
fixed, or maximum ranges for prices for securities shall have been required, on
the over-the-counter market by the NASD or NASDAQ or by order of the Commission
or any other governmental authority having jurisdiction; or if a moratorium in
foreign exchange trading by major international banks or persons has been
declared in the United States; or if the Company shall have sustained a loss
material or substantial to the Company taken as a whole by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in your
reasonable opinion, make it inadvisable to proceed with the offering, sale and
delivery of the Securities; or if there shall have been a material adverse
change in the conditions of the United States securities market in general, as
in your reasonable judgment would make it inadvisable to proceed with the
offering, sale and delivery of the Securities.
(c) If you elect to terminate this Agreement as
provided in this Paragraph 12, the Company shall be notified promptly by you by
telephone or facsimile, confirmed by letter.
(d) Anything in this Agreement to the contrary
notwithstanding, if this Agreement shall terminate or shall not be carried out
within the time specified herein by reason of any failure on the part of the
Company to perform any undertaking, or to satisfy any condition of this
Agreement by it to be performed or satisfied, the sole liability of the Company
to the Underwriter, in addition to the obligations assumed by the Company
pursuant to Paragraph 8 herein, will be to reimburse the Underwriter on an
accountable basis for the following: (i) reasonable Blue Sky counsel fees and
expenses to the extent set forth in Paragraph 8(a)(iv); (ii) Blue Sky filing
fees to that same extent; and (iii) such other reasonable out-of-pocket expenses
actually incurred by the Underwriter (including the reasonable fees and
disbursements of their counsel), to the extent set forth in Paragraph 8(a), in
connection with this Agreement and the proposed offering of the Securities, but
in no event to exceed the sum of $100,000 less such amounts as shall have
already been paid pursuant to Section 8(b) or
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otherwise. The Company shall not in any event be liable to the Underwriter for
the loss of anticipated profits from the transactions covered by this Agreement.
Anything in this Agreement to the contrary
notwithstanding, if this Agreement shall be terminated by you because you have
exercised your rights pursuant to Paragraph 12(b) above, the Company shall not
be under any liability to you except, on an accountable basis, for the portion
of the non-accountable expense allowance referred to in Paragraph 8(b) for which
expenses have actually been paid or incurred by you, and any balance will be
returned by you to the Company.
13. Notices.
All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to the Underwriter,
shall be mailed, delivered or telegraphed and confirmed to the Underwriter at
Rickel & Associates, Inc., 875 Third Avenue, New York, New York 10022,
Attention: Elliot J. Smith, with a copy thereof to Felice F. Mischel, Esq.,
Schneck Weltman Hashmall & Mischel LLP, 1285 Avenue of the Americas, New York,
New York 10019, and, if sent to the Company, shall be mailed, delivered or
telegraphed and confirmed to the Company at 506 45th Street, Suite A-2,
Columbus, Georgia 31904, Attention: Lenward C. Wilbanks, President, with a copy
thereof to Brad S. Markoff, Esq., Smith Helms Mulliss & Moore, L.L.P., 2800 Two
Hannover Square, Raleigh, North Carolina 27601.
14. Parties.
This Agreement shall inure solely to the benefit of and shall
be binding upon, the Underwriter, the Company and the controlling persons,
directors and officers referred to in Paragraph 10 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained. No
purchaser of any of the Securities or Additional Securities from the Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
15. Construction.
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York, without giving effect to
the rules governing conflict of laws, and shall supersede any agreement or
understanding, oral or in writing, express or implied, between the Company and
you relating to the sale of any of the Securities.
16. Jurisdiction and Venue.
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The Company agrees that the courts of the State of New York
shall have jurisdiction over any litigation arising from this Agreement, and
venue shall be proper in the Southern District of New York.
17. Counterparts.
This agreement may be executed in counterparts.
If the foregoing correctly sets forth the understanding
between you and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
PEACH AUTO PAINTING AND
COLLISION, INC.
By:___________________________
Lenward C. Wilbanks, Jr.
President
Accepted as of the date first above written:
RICKEL & ASSOCIATES, INC.
By:_________________________________
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<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
PEACH AUTO PAINTING AND COLLISION, INC.
FIRST: The name of the Corporation is Peach Auto Painting and
Collision, Inc.
SECOND: The address of its registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of
New Castle, Delaware 19801. The name of its registered agent at such address is
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: (1) The total number of shares of capital stock which the
Corporation shall have authority to issue is 21,000,000 shares of capital stock,
of which 20,000,000 shares are classified as Common Stock, par value $0.01 per
share, and 1,000,000 shares are classified as Preferred Stock, par value $0.01
per share.
(2) Subject to the limitations prescribed by law and the provisions of
this ARTICLE FOURTH, the Board of Directors may classify and reclassify any
unissued shares of Preferred Stock by setting or changing in any one or more
respects, from time to time before issuance of such shares, the preferences,
conversion or other rights, voting powers, restrictions (including restrictions
on transfers of shares), limitations as to dividends, qualifications or terms or
conditions of redemption of such shares of Preferred Stock. The power of the
Board of Directors to classify and reclassify any of the shares of Preferred
Stock shall include, without limitation, authority to determine, fix, or alter
one or more of the following:
(a) The distinctive designation of such class or series and the number
of shares to constitute such class or series; provided that, unless otherwise
prohibited by the terms of such or any other class or series, the number of
shares of any class or series may be decreased by the Board of Directors in
connection with any classification or reclassification of unissued shares, and
the number of shares of such class or series may be increased by the Board of
Directors in connection with any such classification or reclassification, and
any shares of any class or series which have been redeemed, purchased, otherwise
acquired or converted into shares of Common Stock or any other class or series
shall become part of the authorized capital stock and be subject to
classification and reclassification as provided in this sub-paragraph.
(b) Whether or not and, if so, the rates, amounts and times at which,
and the conditions under which, dividends shall be payable on shares of such
class or series, whether any such dividends shall rank senior, or junior to, or
on a parity with the dividends payable on any other class or series of stock,
and the status of any such dividends as cumulative, cumulative to a limited
extent or non-cumulative and as participating or non-participating.
<PAGE>
(c) Whether or not shares of such class or series shall have voting
rights, in addition to any voting rights provided by law and, if so, the terms
of such voting rights.
(d) Whether or not shares of such class or series shall have conversion
or exchange privileges and, if so, the terms and conditions thereof, including
provision for adjustment of the conversion or exchange rate in such events or at
such times as the Board of Directors shall determine.
(e) Whether or not shares of such class or series shall be subject to
redemption and, if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates; and whether or not there shall be
any sinking fund or purchase account in respect thereof and, if so, the terms
thereof.
(f) The rights of the holders of shares of such class or series upon
the liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the assets of, the Corporation, which rights may vary depending
upon whether such liquidation, dissolution or winding up is voluntary or
involuntary and, if voluntary, may vary at different dates, and whether such
rights shall rank senior, or junior to, or on a parity with such rights of any
other class or series of stock.
(g) Whether or not there shall be any limitations applicable, while
shares of such class or series are outstanding, upon the payment of dividends or
making of distributions on, or the acquisition of, or the use of moneys for
purchase or redemption of, any stock of the Corporation, or upon any other
action of the Corporation, including action under this sub-paragraph, and, if
so, the terms and conditions thereof.
(h) Any other preferences, rights, restrictions, including restrictions
on transferability, and qualifications of shares of such class or series not
inconsistent with law and the Certificate of Incorporation.
FIFTH: The name and address of the sole incorporator of the Corporation
are:
Bradford R. Lenox
Smith Helms Mulliss & Moore, L.L.P.
2800 Two Hannover Square
Post Office Box 27525
Raleigh, North Carolina 27601
The power of the incorporator as such shall terminate upon the filing
of this Certificate of Incorporation.
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SIXTH. The name and mailing addresses of the persons who are to serve
as directors until the first annual meeting of the stockholders or until a
successor is elected and qualified, are as follows:
Lenward C. Wilbanks, Jr. 560 45th Street, Suite A-2
Columbus, Georgia 31904
Laura W. Rodier 560 45th Street, Suite A-2
Columbus, Georgia 31904
Lisa W. Griffin 560 45th Street, Suite A-2
Columbus, Georgia 31904
SEVENTH. Unless and except to the extent that the by-laws of the
Corporation shall so require, the election of directors of the Corporation need
not be by written ballot.
EIGHTH. In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors of the Corporation is
expressly authorized to make, alter and repeal the by-laws of the Corporation,
subject to the power of the stockholders of the Corporation to alter or repeal
any by-law whether adopted by them or otherwise.
NINTH. (1) A director of the Corporation shall not be personally liable
to the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director to the fullest extent permitted by Delaware law.
(2) (a) Each person (and the heirs, executors or administrators of such
person) who was or is a party or is threatened to be made a party to, or is
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified and held harmless by the Corporation to the fullest extent permitted
by Delaware Law. The right to indemnification conferred in this ARTICLE NINTH
shall also include the right to be paid by the Corporation the expenses incurred
in connection with any such proceeding in advance of its final disposition to
the fullest extent authorized by Delaware Law. The right to indemnification
conferred in this ARTICLE NINTH shall be a contract right.
(b) The Corporation may, by action of its Board of Directors, provide
indemnification to such of the officers, employees and agents of the Corporation
to such extent and to such effect as the Board of Directors shall determine to
be appropriate and authorized by Delaware Law.
(3) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another
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corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss incurred by such person in any such capacity or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under Delaware law.
(4) The rights and authority conferred in this ARTICLE NINTH shall not
be exclusive of any other right which any person may otherwise have or hereafter
acquire.
(5) Any repeal or modification of this ARTICLE NINTH by the
stockholders of the Company shall not adversely affect any right or protection
of a director of the Company existing at the time of such repeal or
modification.
TENTH. The Corporation reserves the right at any time, and from time to
time, to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed by law; and, with the exception of those rights,
powers, preferences and privileges conferred by the above ARTICLE NINTH, all
rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to this
Certificate of Incorporation in its present form or as hereafter amended are
granted subject to the rights reserved in this article.
The undersigned incorporator hereby acknowledges, under penalties of
perjury, that the foregoing certificate of incorporation is his act and deed and
that the facts stated therein are true on this 13th day of November, 1996.
/s/ Bradford R. Lenox
Bradford R. Lenox
Sole Incorporator
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<PAGE>
EXHIBIT 3.2
BYLAWS
OF
PEACH AUTO PAINTING AND COLLISION, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. Offices
Section 1.1. REGISTERED OFFICE..........................................................................1
Section 1.2. OTHER OFFICES..............................................................................1
ARTICLE II. Stockholders
Section 2.1. ANNUAL MEETINGS............................................................................1
Section 2.2. SPECIAL MEETINGS...........................................................................1
Section 2.3. NOTICE OF MEETINGS.........................................................................1
Section 2.4. ADJOURNMENTS...............................................................................1
Section 2.5. QUORUM.....................................................................................2
Section 2.6. ORGANIZATION...............................................................................2
Section 2.7. VOTING; PROXIES............................................................................2
Section 2.8. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD....................................3
Section 2.9. LIST OF STOCKHOLDERS ENTITLED TO VOTE......................................................3
Section 2.10. ACTION BY CONSENT OF STOCKHOLDERS.........................................................4
Section 2.11. CONDUCT OF MEETINGS.......................................................................4
ARTICLE III. Board of Directors
Section 3.1. GENERAL POWERS.............................................................................4
Section 3.2. NUMBER; QUALIFICATIONS.....................................................................4
Section 3.3. ELECTION; RESIGNATION; REMOVAL; VACANCIES..................................................5
Section 3.4. ANNUAL MEETING.............................................................................5
Section 3.5. REGULAR MEETINGS...........................................................................5
Section 3.6. SPECIAL MEETINGS...........................................................................5
Section 3.7. TELEPHONIC MEETINGS PERMITTED..............................................................5
Section 3.8. QUORUM; VOTE REQUIRED FOR ACTION...........................................................5
Section 3.9. ORGANIZATION...............................................................................6
Section 3.10. INFORMAL ACTION BY DIRECTORS..............................................................6
Section 3.11. COMPENSATION..............................................................................6
ARTICLE IV. Committees
Section 4.1. COMMITTEES.................................................................................6
Section 4.2. COMMITTEE RULES............................................................................6
ARTICLE V. Officers
Section 5.1. EXECUTIVE OFFICERS; ELECTION; QUALIFICATIONS; TERM OF OFFICE; RESIGNATION;
REMOVAL; VACANCIES..............................................................................7
Section 5.2. POWERS AND DUTIES OF EXECUTIVE OFFICERS....................................................7
Section 5.3. VOTING OF STOCKS...........................................................................7
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ARTICLE VI. Stock
Section 6.1. CERTIFICATES...............................................................................8
Section 6.2. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF NEW CERTIFICATES.................8
ARTICLE VII. Indemnification
Section 7.1. RIGHT TO INDEMNIFICATION...................................................................8
Section 7.2. PREPAYMENT OF EXPENSES.....................................................................8
Section 7.3. CLAIMS.....................................................................................9
Section 7.4. NON-EXCLUSIVITY OF RIGHTS..................................................................9
Section 7.5. OTHER INDEMNIFICATION......................................................................9
Section 7.6. AMENDMENT OR REPEAL........................................................................9
ARTICLE VIII. Miscellaneous
Section 8.1. FISCAL YEAR................................................................................9
Section 8.2. SEAL.......................................................................................9
Section 8.3. WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND COMMITTEES
...............................................................................................9
Section 8.4. INTERESTED DIRECTORS; QUORUM...............................................................9
Section 8.5. FORM OF RECORDS...........................................................................10
Section 8.6. AMENDMENT OF BY-LAWS......................................................................10
Section 8.7. DIVIDENDS.................................................................................10
</TABLE>
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<PAGE>
BY-LAWS
OF
PEACH AUTO PAINTING AND COLLISION, INC.
ARTICLE I. Offices
Section 1.1. REGISTERED OFFICE. The registered office shall be c/o The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801.
Section 1.2. OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II. Stockholders
Section 2.1. ANNUAL MEETINGS. An annual meeting of stockholders shall
be held for the election of directors at such date, time and place, either
within or without the State of Delaware, as may be designated by resolution of
the Board of Directors from time to time. Any other proper business may be
transacted at the annual meeting.
Section 2.2. SPECIAL MEETINGS. Special meetings of stockholders for any
purpose or purposes may be called at any time by the Board of Directors, or by a
committee of the Board of Directors that has been duly designated by the Board
of Directors and whose powers and authority, as expressly provided in a
resolution of the Board of Directors, include the power to call such meetings,
but such special meetings may not be called by any other person or persons.
Section 2.3. NOTICE OF MEETINGS. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given that shall state the place, date and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the certificate of incorporation or
these by-laws, the written notice of any meeting shall be given not less than
ten nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
Section 2.4. ADJOURNMENTS. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
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Section 2.5. QUORUM. Except as otherwise provided by law, the
certificate of incorporation or these by-laws, at each meeting of stockholders
the presence in person or by proxy of the holders of shares of stock having a
majority of the votes which could be cast by the holders of all outstanding
shares of stock entitled to vote at the meeting shall be necessary and
sufficient to constitute a quorum. In the absence of a quorum, the stockholders
so present may, by majority vote, adjourn the meeting from time to time in the
manner provided in Section 2.4 of these by-laws until a quorum shall attend.
Shares of its own stock belonging to the Corporation or to another corporation,
if a majority of the shares entitled to vote in the election of directors of
such other corporation is held, directly or indirectly, by the Corporation,
shall neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing shall not limit the right of the Corporation to vote
stock, including but not limited to its own stock, held by it in a fiduciary
capacity.
Section 2.6. ORGANIZATION. Meetings of stockholders shall be presided
over by the Chairman of the Board, if any, or in his absence by the Chief
Executive Officer, or in his absence by the President, or in his absence by a
Vice President, or in the absence of the foregoing persons by a chairman
designated by the Board of Directors, or in the absence of such designation by a
chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting. The chairman of the meeting shall announce
at the meeting of stockholders the date and time of the opening and the closing
of the polls for each matter upon which the stockholders will vote.
Section 2.7. VOTING; PROXIES. Except as otherwise provided by the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
him which has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders or to express consent or dissent
to corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
A proxy shall be irrevocable if it states that it is irrevocable and if, and
only as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A stockholder may revoke any proxy which is not irrevocable
by attending the meeting and voting in person or by filing an instrument in
writing revoking the proxy or by delivering a proxy in accordance with
applicable law bearing a later date to the Secretary of the Corporation. Voting
at meetings of stockholders need not be by written ballot and, unless otherwise
required by law, need not be conducted by inspectors of election unless so
determined by the holders of shares of stock having a majority of the votes
which could be cast by the holders of all outstanding shares of stock entitled
to vote thereon which are present in person or by proxy at such meeting. At all
meetings of stockholders for the election of directors a plurality of the votes
cast shall be sufficient to elect. All other elections and questions shall,
unless otherwise provided by law, the certificate of incorporation or these
by-laws, be decided by the affirmative vote of a majority of shares of stock of
the Corporation present, in person or by proxy, at a meeting of stockholders.
Section 2.8. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without
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a meeting, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors and which record date: (1) in the case of
determination of stockholders entitled to vote at any meeting of stockholders or
adjournment thereof, shall, unless otherwise required by law, not be more than
sixty nor less than ten days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten days from the date upon
which the resolution fixing the record date is adopted by the Board of
Directors; and (3) in the case of any other action, shall not be more than sixty
days prior to such other action. If no record date is fixed: (1) the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (2) the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(3) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 2.9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present. Upon the willful
neglect or refusal of the directors to produce such a list at any meeting for
the election of directors, they shall be ineligible for election to any office
at such meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of stockholders or
the books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 2.10. ACTION BY CONSENT OF STOCKHOLDERS. Unless otherwise
restricted by the certificate of incorporation, any action required or permitted
to be taken at any annual or special meeting of the stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
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holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted and shall be
delivered (by hand or by certified or registered mail, return receipt requested)
to the Corporation by delivery to its registered office in the State of
Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of minutes of
stockholders are recorded. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
Section 2.11. CONDUCT OF MEETINGS. The Board of Directors of the
Corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of stockholders shall have the right and
authority to prescribe such rules, regulations and procedures and to do all such
acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) rules and procedures for maintaining
order at the meeting and the safety of those present; (iii) limitations on
attendance at or participation in the meeting to stockholders of record of the
Corporation, their duly authorized and constituted proxies or such other persons
as the chairman of the meeting shall determine; (iv) restrictions on entry to
the meeting after the time fixed for the commencement thereof; and (v)
limitations on the time allotted to questions or comments by participants.
Unless and to the extent determined by the Board of Directors or the chairman of
the meeting, meetings of stockholders shall not be required to be held in
accordance with the rules of parliamentary procedure.
ARTICLE III. Board of Directors
Section 3.1. GENERAL POWERS. Except as otherwise provided in Delaware
Law or the certificate of incorporation, the business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors.
Section 3.2. NUMBER; QUALIFICATIONS. The number of directors which
shall constitute the whole Board shall be fixed from time to time by resolution
of the Board of Directors but shall not be less than three nor more than nine.
Directors need not be stockholders.
Section 3.3. ELECTION; RESIGNATION; REMOVAL; VACANCIES. The Board of
Directors shall initially consist of the persons named as directors by the
incorporator, and each director so elected shall hold office until the first
annual meeting of stockholders or until his successor is elected and qualified.
At the first annual meeting of stockholders and at each annual meeting
thereafter, the stockholders shall elect directors each of whom shall hold
office for a term of one year or until his successor is elected and qualified.
Any director or the entire Board of Directors may be removed, with or without
cause, at any time by the affirmative vote of the holders of a majority of the
outstanding stock of the Corporation entitled to vote. Any director may resign
at any time upon
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written notice to the Corporation. Any newly created directorship or any vacancy
occurring in the Board of Directors for any cause may be filled by a majority of
the remaining members of the Board of Directors, although such majority is less
than a quorum, or by a plurality of the votes cast at a meeting of stockholders,
and each director so elected shall hold office until the expiration of the term
of office of the director whom he has replaced or until his successor is elected
and qualified.
Section 3.4. ANNUAL MEETING. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
place either within or without the State of Delaware, on such date and at such
time as shall be specified in a notice thereof given as provided in this Article
or in a waiver of notice thereof signed by any director who chooses to waive the
requirement of notice.
Section 3.5. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware and
at such times as the Board of Directors may from time to time determine, and if
so determined notices thereof need not be given.
Section 3.6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the President, any Vice President, the Secretary, or
by any member of the Board of Directors. Notice of a special meeting of the
Board of Directors shall be given by the person or persons calling the meeting
at least twenty-four hours before the special meeting.
Section 3.7. TELEPHONIC MEETINGS PERMITTED. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
by-law shall constitute presence in person at such meeting.
Section 3.8. QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of the
Board of Directors a majority of the whole Board of Directors shall constitute a
quorum for the transaction of business. Except in cases in which the certificate
of incorporation or these by-laws otherwise provide, the vote of a majority of
the directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors. When a meeting is adjourned to another time or place
(whether or not a quorum is present), notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Board of Directors may
transact any business which might have been transacted at the original meeting.
If a quorum shall not be present at any meeting of the Board of Directors the
directors present thereat may adjourn the meeting, from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 3.9. ORGANIZATION. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his
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absence by the Chief Executive Officer, or in his absence by the President, or
in their absence by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 3.10. INFORMAL ACTION BY DIRECTORS. Unless otherwise restricted
by the certificate of incorporation or these by-laws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board of
Directors or such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or such committee.
Section 3.11. COMPENSATION. Unless otherwise restricted by the
certificate of incorporation or these bylaws, the Board of Directors shall have
authority to fix the compensation of directors, including fees and reimbursement
of expenses.
ARTICLE IV. Committees
Section 4.1. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of the committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent permitted by law and to the extent provided in the resolution of
the Board of Directors, shall have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it.
Section 4.2. COMMITTEE RULES. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such rules
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article III of these by-laws.
ARTICLE V. Officers
Section 5.1. EXECUTIVE OFFICERS; ELECTION; QUALIFICATIONS; TERM OF
OFFICE; RESIGNATION; REMOVAL; VACANCIES. The Board of Directors shall elect a
Chief Executive Officer, President and Secretary, and it may, if it so
determines, choose a Chairman of the Board and a Vice Chairman of the Board from
among its members. The Board of Directors or the Chief Executive Officer may
also choose a General Counsel, one or more Vice Presidents, one or more
Assistant Secretaries, a Treasurer, one or more Assistant Treasurers and such
other officers as the Board of Directors or the Chief Executive Officer, as the
case may be, deems appropriate. Unless otherwise provided by the Board of
Directors, the Chief Executive Officer shall also constitute the President. Each
such officer
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shall hold office until the first meeting of the Board of Directors after the
annual meeting of stockholders next succeeding his election, and until his
successor is elected and qualified or until his earlier resignation or removal.
Any officer may resign at any time upon written notice to the Corporation. The
Board of Directors may remove any officer with or without cause at any time, but
such removal shall be without prejudice to the contractual rights of such
officer, if any, with the Corporation. Any number of offices may be held by the
same person, except that no one person shall hold the offices and perform the
duties of President and Secretary. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise may be filled for the
unexpired portion of the term by the Board of Directors at any regular or
special meeting.
Section 5.2. POWERS AND DUTIES OF EXECUTIVE OFFICERS. The officers of
the Corporation shall have such powers and duties in the management of the
Corporation as may be prescribed in a resolution by the Board of Directors and,
to the extent not so provided, as generally pertain to their respective offices,
subject to the control of the Board of Directors. The Board of Directors may
require any officer, agent or employee to give security for the faithful
performance of his duties.
Section 5.3. VOTING OF STOCKS. Unless otherwise ordered by the Board of
Directors, the Chief Executive Officer or General Counsel, or any other officer
of the Corporation designated by the Chief Executive Officer, shall have full
power and authority on behalf of the Corporation to attend and to act and to
vote in person or by proxy at any meeting of the holders of securities of any
corporation in which the Corporation may own or hold stock or other securities,
and at any such meeting shall possess and may exercise in person or by proxy any
and all rights, powers and privileges incident to the ownership of such stock or
other securities which the Corporation, as the owner or holder thereof, might
have possessed and exercised if present. The Chief Executive Officer, or any
other officer of the Corporation designated by the Chief Executive Officer, may
also execute and deliver on behalf of the Corporation powers of attorney,
proxies, waivers of notice and other instruments relating to the stocks or
securities owned or held by the Corporation. The Board of Directors may, from
time to time, by resolution confer like powers upon any other person or persons.
ARTICLE VI. Stock
Section 6.1. CERTIFICATES. Every holder of stock shall be entitled to
have a certificate signed by or in the name of the Corporation by the Chairman
or Vice Chairman of the Board of Directors, if any, or the Chief Executive
Officer, the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, of the Corporation
certifying the number of shares owned by him in the Corporation. Any or all of
the signatures on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent,
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
Section 6.2. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF
NEW CERTIFICATES. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the
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lost, stolen or destroyed certificate, or his legal representatives, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VII. Indemnification
Section 7.1. RIGHT TO INDEMNIFICATION. The Corporation shall indemnify
and hold harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any person who was or is made or
is threatened to be made a party or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding"), by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director or officer of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
(including attorneys' fees) reasonably incurred by such person. The Corporation
shall be required to indemnify a person in connection with a proceeding (or part
thereof) initiated by such person only if the proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.
Section 7.2. PREPAYMENT OF EXPENSES. The Corporation may, in its
discretion, pay the expenses (including attorneys' fees) incurred in defending
any proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a director or officer in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the director or officer to repay all amounts advanced if it should be
ultimately determined that the director or officer is not entitled to be
indemnified under this Article or otherwise.
Section 7.3. CLAIMS. If a claim for indemnification or payment of
expenses under this Article is not paid in full within sixty days after a
written claim therefor has been received by the Corporation, the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification or payment of
expenses under applicable law.
Section 7.4. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Article VII shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision of the
certificate of incorporation, these by-laws, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 7.5. OTHER INDEMNIFICATION. The Corporation's obligation, if
any, to indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or nonprofit entity shall be reduced by any amount such person
may collect as indemnification from such other corporation, partnership, joint
venture, trust, enterprise or nonprofit enterprise.
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Section 7.6. AMENDMENT OR REPEAL. Any repeal or modification of the
foregoing provisions of this Article VII shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
ARTICLE VIII. Miscellaneous
Section 8.1. FISCAL YEAR. The fiscal year of the Corporation shall be
the calendar year ending December 31, unless otherwise determined by resolution
of the Board of Directors.
Section 8.2. SEAL. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed, affixed or otherwise reproduced.
Section 8.3. WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS
AND COMMITTEES. Any written waiver of notice, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at nor the purpose of any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Section 8.4. INTERESTED DIRECTORS; QUORUM. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose, if: (1) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (2) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (3) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
Section 8.5. FORM OF RECORDS. Any records maintained by the Corporation
in the regular course of its business, including its stock ledger, books of
account and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time.
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Section 8.6. AMENDMENT OF BY-LAWS. These by-laws may be altered or
repealed, and new by-laws made, by the Board of Directors, but the stockholders
may make additional by-laws and may alter and repeal any by-laws whether adopted
by them or otherwise.
Section 8.7. DIVIDENDS. Subject to limitations contained in Delaware
Law and the certificate of incorporation, the Board of Directors may declare and
pay dividends upon the shares of capital stock of the Corporation, which
dividends may be paid either in cash, in property or in shares of the capital
stock of the Corporation.
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EXHIBIT 4.1
NO SALE OR TRANSFER OF THIS WARRANT OR THE SECURITIES
UNDERLYING THIS WARRANT MAY BE MADE UNTIL
THE EFFECTIVENESS OF A REGISTRATION STATEMENT
OR OF A POST-EFFECTIVE AMENDMENT THERETO
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"),
COVERING THIS WARRANT OR THE SECURITIES UNDERLYING
THIS WARRANT, OR UNTIL THE COMPANY IS IN RECEIPT OF AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT. TRANSFER OF
THIS WARRANT IS RESTRICTED UNDER PARAGRAPH 2 BELOW.
UNDERWRITER'S WARRANT TO PURCHASE
COMMON STOCK
PEACH AUTO PAINTING AND COLLISION, INC.
(A DELAWARE CORPORATION)
Dated , 1997
THIS CERTIFIES THAT, for value received, Rickel & Associates,
Inc. (the "Underwriter") or its registered assigns (the "Holder") is the owner
of options (the "Underwriter's Option") to purchase from Peach Auto Painting and
Collision, Inc., a Delaware corporation (the "Company"), during the period and
at the prices hereinafter specified, up to 150,000 shares of the Company's
common stock, par value $.01 per share (the "Common Stock" or the "Securities").
This Underwriter's Option is issued pursuant to an
Underwriting Agreement dated , 1997, between the Company and the Underwriter
in connection with a public offering through the Underwriter (the "Public
Offering"), of 1,500,000
<PAGE>
shares of Common Stock, and, pursuant to the Underwriter's overallotment option,
an additional 225,000 shares of Common Stock.
1. Exercise of the Underwriter's Option.
(a) The rights represented by this Underwriter's Option
shall be exercisable at the prices and during the period specified below, upon
the terms and subject to the conditions as set forth herein:
(i) During the period from , 1997 to
, 1998, inclusive, the Holder shall have no right to
purchase any Securities hereunder.
(ii) Between , 1998 and , 2002,
inclusive, the Holder shall have the option to purchase shares of Common Stock
and Warrants hereunder at a price of $ per share, the purchase price of the
Common Stock being % of the public offering price for the Securities set forth
in the Prospectus forming a part of the registration statement on Form SB-2
(File No. 333- ) of the Company, as amended (the "Registration Statement").
(iii) After , 2002, the Holder shall have
no right to purchase any Securities hereunder and this Underwriter's Option
shall expire effective at 5:00 p.m., New York time on such date.
(b) The rights represented by this Underwriter's Option may be
exercised at any time within the period above specified, in whole or in part, by
(i) the surrender of this Underwriter's Option
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(with the purchase form at the end hereof properly executed) at the principal
executive office of the Company (or such other office or agency of the Company
as it may designate by notice in writing to the Holder at the address of the
Holder appearing on the books of the Company); (ii) payment to the Company of
the exercise price then in effect for the number of shares of Common Stock
specified in the above-mentioned purchase form together with applicable stock
transfer taxes, if any; and (iii) delivery to the Company of a duly executed
agreement signed by the person(s) designated in the purchase form to the effect
that such person(s) agree(s) to be bound by the provisions of Paragraph 5 and
subparagraphs (b), (c) and (d) of Paragraph 6 hereof. This Underwriter's Option
shall be deemed to have been exercised, in whole or in part to the extent
specified, immediately prior to the close of business on the date this
Underwriter's Option is surrendered and payment is made in accordance with the
foregoing provisions of this Paragraph 1, and the person or persons in whose
name or names the certificates for the Securities shall be issuable upon such
exercise shall become the holder or holders of record of such Common Stock at
that time and date. The Common Stock so purchased shall be delivered to the
Holder within a reasonable time, not exceeding ten (10) business days, after the
rights represented by this Underwriter's Option shall have been so exercised.
2. Restrictions on Transfer.
This Underwriter's Option shall not be transferred, sold,
assigned or hypothecated for a period of one year commencing
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, 1997, except that it may be transferred to successors of the Holder, and
may be assigned in whole or in part to any person who is an officer of the
Underwriter or an officer or partner of any other member of the selling group
during such period. Any such assignment shall be effected by the Holder by (i)
completing and executing the transfer form at the end hereof and (ii)
surrendering this Underwriter's Option with such duly completed and executed
transfer form for cancellation, accompanied by funds sufficient to pay any
transfer tax, at the office or agency of the Company referred to in Paragraph 1
hereof, accompanied by a certificate (signed by a duly authorized representative
of the Holder), stating that each transferee is a permitted transferee under
this Paragraph 2; whereupon the Company shall issue, in the name or names
specified by the Holder (including the Holder), a new Underwriter's Option or
Underwriter's Options of like tenor and representing in the aggregate rights to
purchase the same number of Securities as are then purchasable hereunder. The
Holder acknowledges that this Underwriter's Option may not be offered or sold
except pursuant to an effective registration statement under the Act or an
opinion of counsel satisfactory to the Company that an exemption from
registration under the Act is available.
3. Covenants of the Company
(a) The Company covenants and agrees that all Common Stock
issuable upon the exercise of this Underwriter's Option will, upon issuance
thereof and payment therefor in accordance with the terms hereof be duly and
validly issued, fully paid and
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nonassessable and no personal liability will attach to the holder thereof by
reason of being such a holder, other than as set forth herein.
(b) The Company covenants and agrees that during the period
within which this Underwriter's Option may be exercised, the Company will at all
times have authorized and reserved a sufficient number of shares of Common Stock
to provide for the exercise of this Underwriter's Option.
(c) The Company covenants and agrees that for so long as the
Securities shall be outstanding (unless the Securities shall no longer be
registered under Paragraph 12(b) or 12(g) of the Securities Exchange Act of
1934, as amended) the Company shall use its best efforts to cause all shares of
Common Stock issuable upon the exercise of the Underwriter's Option to be quoted
by the Nasdaq Stock Market or listed on a national securities exchange.
4. No Rights of Stockholder.
This Underwriter's Option shall not entitle the Holder to any
voting rights or other rights as a stockholder of the Company, either at law or
in equity, and the rights of the Holder are limited to those expressed in this
Underwriter's Option and are not enforceable against the Company except to the
extent set forth herein.
5. Registration Rights.
(a) During the period of four years from , 1998, the Company
shall advise the Holder, whether the Holder holds this Underwriter's Option or
has exercised this Underwriter's Option and
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holds Common Stock, by written notice at least 30 days prior to the filing of
any post-effective amendment to the Registration Statement or of any new
registration statement or post-effective amendment thereto under the Act,
covering any securities of the Company, for its own account or for the account
of others, and upon the request of the Holder made during such four-year period,
include in any such post-effective amendment or registration statement such
information as may be required to permit a public offering of any of the Common
Stock (the "Registerable Securities"); provided, that this Paragraph 5(a) shall
not apply to any registration statement filed pursuant to Paragraph 5(b) hereof
or to registrations of shares in connection with an employee benefit plan or a
merger, consolidation or other comparable acquisition or solely for registration
of non-convertible debt or preferred equity securities of the Company; and
provided, further, that, notwithstanding the foregoing, the Holder shall have no
right to include any Registrable Securities in any new registration statement or
post-effective amendment thereto unless as of the effective date thereof the
Registration Statement (as it may hereafter be amended or supplemented) or any
new registration statement under which the Registrable Securities are registered
shall have ceased to be effective or the prospectus contained in such
Registration Statement shall have ceased to be current. The Company shall supply
prospectuses in order to facilitate the public sale or other disposition of the
Registerable Securities, use its best efforts to register and qualify any of the
Registerable
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Securities for sale in such states in which the Common Stock is offered and sold
in the Public Offering as such Holder reasonably designates and do any and all
other acts and things which may be necessary to enable such Holder to consummate
the public sale of the Registerable Securities, provided that, without limiting
the foregoing, the Company shall not be obligated to execute or file any general
consent to service of process or to qualify as a foreign corporation to do
business under the laws of any such jurisdiction, and furnish indemnification in
the manner provided in Paragraph 6 hereof. The Holder shall furnish information
reasonably requested by the Company in accordance with such post-effective
amendments or registration statements, including its intentions with respect
thereto, and shall furnish indemnification as set forth in Paragraph 6. The
Company shall continue to advise the Holders of the Registerable Securities of
its intention to file a registration statement or amendment pursuant to this
Paragraph 5(a) until the earliest of (i) , 2002; or (ii) such time as all of the
Registerable Securities have been registered and sold under the Act; or (iii)
all of the Registrable Securities have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent public distribution of them
shall not require registration or qualification of them under the Act, or (iv)
in the opinion of legal counsel for the Company, the Registrable Securities may
be offered and sold by the holders thereof without being registered under the
Act and such securities,
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<PAGE>
upon receipt by the purchasers thereof pursuant to such sale, will not
constitute "restricted securities" as such term is defined in Rule 144 under the
Act.
(b) If any fifty-one (51%) percent holder (as defined below)
shall give notice to the Company at any time during the four (4) year period
beginning one (1) year from , 1998 to the effect that such holder desires to
register under the Act any Registerable Securities, under such circumstances
that a public distribution (within the meaning of the Act) of any such
Registerable Securities will be involved (and the Registration Statement or any
new registration statement under which such Registerable Securities are
registered shall have ceased to be effective or the Prospectus contained therein
shall have ceased to be current), then the Company will as promptly as
practicable after receipt of such notice, but not later than thirty (30) days
after receipt of such notice, at the Company's option, file a post-effective
amendment to the current Registration Statement or a new registration statement
pursuant to the Act to the end that the Registerable Securities may be publicly
sold under the Act as promptly as practicable thereafter and the Company will
use its best efforts to cause such registration to become and remain effective
as provided herein (including the taking of such steps as are reasonably
necessary to obtain the removal of any stop order); provided, that such
fifty-one (51%) percent holder shall furnish the Company with appropriate
information in connection therewith as the Company may reasonably request; and
provided, further, that the
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<PAGE>
Company shall not be required to file such a post-effective amendment or
registration statement pursuant to this Paragraph 5(b) on more than one
occasion; and provided, further, that, the registration rights of the 51% holder
under this Paragraph 5(b) shall be subject to the "piggyback" registration
rights of other holders of securities of the Company to include such securities
in any registration statement or post-effective amendment filed pursuant to this
Paragraph 5(b). The Company will maintain such registration statement or
post-effective amendment current under the Act for a period of at least nine
months from the effective date thereof. The Company shall supply prospectuses in
order to facilitate the public sale of the Registerable Securities, use its best
efforts to register and qualify any of the Registerable Securities for sale in
such states in which the Common Stock is offered and sold in the Public Offering
as such holder reasonably designates and furnish indemnification in the manner
provided in Paragraph 6 hereof, provided that, without limiting the foregoing,
the Company shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction.
(c) The Holder may, in accordance with Paragraphs 5(a) or (b),
at his or its option, and subject to the limitations set forth in Paragraph 1(a)
hereof, request the registration of any of the Registerable Securities in a
filing made by the Company prior to the acquisition of the Securities upon
exercise of this Underwriter's Option. The Holder may thereafter exercise this
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<PAGE>
Underwriter's Option at any time or from time to time subsequent to the
effectiveness under the Act of the registration statement in which the Common
Stock underlying the Underwriter's Options were included.
(d) The term "51% holder," as used in this Paragraph 5, shall
include any owner or combination of owners of Underwriter's Options or
Registerable Securities if the aggregate number of shares of Common Stock
underlying the Underwriter's Options and Registerable Securities held of record
by it or them, would constitute a majority of the aggregate of such shares of
Common Stock underlying the Underwriter's Option and Registrable Securities as
of the date of the initial issuance of the Underwriter's Option.
(e) The following provisions of this Paragraph 5 shall
also be applicable:
(i) Within ten (10) days after receiving any notice
pursuant to Paragraph 5(b), the Company shall give notice to the other Holders
of Underwriter's Options or Registerable Securities, advising that the Company
is proceeding with such post-effective amendment or registration and offering to
include therein the Registerable Securities of such other Holders, provided that
they shall furnish the Company with all information in connection therewith as
shall be necessary or appropriate and as the Company shall reasonably request in
writing. Following the effective date of such post-effective amendment or
registration, the Company shall, upon the request of any Holder of Registerable
Securities,
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<PAGE>
forthwith supply such number of prospectuses meeting the requirements of the
Act, as shall be reasonably requested by such Holder. The Company shall use its
best efforts to qualify the Registerable Securities for sale in such states in
which the Common Stock is offered and sold in the Public Offering as the 51%
holder shall reasonably designate at such times as the registration statement is
effective under the Act, provided that, without limiting the foregoing, the
Company shall not be obligated to execute or file any general consent to service
of process or to qualify as a foreign corporation to do business under the laws
of any such jurisdiction.
(ii) The Company shall bear the entire cost and
expense of any registration of securities initiated by it under Paragraph 5(a)
hereof notwithstanding that the Registerable Securities subject to this
Underwriter's Option may be included in any such registration. The Company shall
also comply with the one request for registration made by the 51% holder
pursuant to Paragraph 5(b) hereof at the Company's own expense and without
charge to any holder of the Registerable Securities. Notwithstanding the
foregoing, any Holder whose Registerable Securities are included in any such
registration statement pursuant to this Paragraph 5 shall, however, bear the
fees of any counsel retained by him and any transfer taxes or underwriting
discounts or commissions applicable to the Registerable Securities sold by him
pursuant thereto and, in the case of a registration pursuant to Paragraph 5(a)
hereof, any additional registration or "blue sky" or
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state securities fees attributable to the registration or qualification of such
Holder's Registerable Securities.
(iii) If the underwriter or managing underwriter in any
underwritten offering made pursuant to Paragraph 5(a) hereof shall advise the
Company that it declines to include a portion or all of the Registerable
Securities requested by the Holders to be included in the registration
statement, then distribution of all or a specified portion of the Registerable
Securities shall be excluded from such registration statement (in case of an
exclusion as to a portion of such Registerable Securities, such portion to be
allocated among such Holders in proportion to the respective numbers of
Registerable Securities requested to be registered by each such Holder). In such
event the Company shall give the Holder prompt notice of the number of
Registerable Securities excluded. Further, in such event the Company shall,
commencing six (6) months after the completion of such underwritten offering,
file and use its best efforts to have declared effective, at its sole expense
(subject to the last sentence of Paragraph 5(a)(ii)), a registration statement
relating to such excluded securities.
(iv) Notwithstanding anything to the contrary contained
herein, the Company shall have the right at any time after it shall have given
written notice pursuant to Paragraph 5(a) or 5(b) (irrespective of whether a
written request for inclusion of any Registerable Securities shall have been
made) to elect not to file or to delay any such proposed registration statement
or post-effective amendment thereto, or to withdraw the same after the
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filing but prior to the effective date thereof. In addition, the Company may
delay the filing of any registration statement or post-effective amendment
requested pursuant to Paragraph 5(b) hereof by not more than 120 days if the
Company, prior to the time it would otherwise have been required to file such
registration statement or post-effective amendment thereto, determines in good
faith that the filing of the registration statement would require the disclosure
of non-public material information that, in its judgment, would be detrimental
to the Company if so disclosed or would otherwise adversely affect a financing,
acquisition, disposition, merger or other material transaction.
(v) If a registration pursuant to Paragraph 5(a) hereof
involves an underwritten offering, the Company shall have the right to select
the investment banker or investment bankers and manager or managers that will
serve as underwriter with respect to the underwritten offering. No Holder of
Registerable Securities may participate in any underwritten offering under this
Agreement unless such holder completes and executes all questionnaires, powers
of attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwritten offering, in each case, in the form and
upon terms reasonably acceptable to the Company and the underwriters. The
requested registration pursuant to Paragraph 5(b) hereof shall not involve an
underwritten offering unless the Company shall first give its written approval
of each underwriter that participates in the offering, such approval not to be
unreasonably withheld.
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<PAGE>
6. Indemnification.
(a) Whenever pursuant to Paragraph 5, a registration statement
relating to any Registerable Securities is filed under the Act, amended or
supplemented, the Company will indemnify and hold harmless each Holder of the
Registerable Securities covered by such registration statement, amendment or
supplement (such holder hereinafter referred to as the "Distributing Holder"),
each person, if any, who controls (within the meaning of the Act) the
Distributing Holder, and each officer, employee, partner or agent of the
Distributing Holder, if the Distributing Holder is a broker or dealer, and each
underwriter (within the meaning of the Act) of such securities and each person,
if any, who controls (within the meaning of the Act) any such underwriter and
each officer, employee, agent or partner of such underwriter against any losses,
claims, damages or liabilities, joint or several, to which the Distributing
Holder, any such underwriter or any other person may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any such
registration statement or any preliminary prospectus or final prospectus
constituting a part thereof or any amendment or supplement thereto, or arise out
of or are based upon the omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not
14
<PAGE>
misleading; and will reimburse the Distributing Holder and each such underwriter
or such other person for any legal or other expenses reasonably incurred by the
Distributing Holder, or underwriter or such other person, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case (i) to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, said preliminary
prospectus, said final prospectus or said amendment or supplement in reliance
upon and in conformity with written information furnished by such Distributing
Holder, any other Distributing Holder or any such underwriter for use in the
preparation thereof, or (ii) such losses, claims, damages or liabilities arise
out of or are based upon any actual or alleged untrue statement or omission made
in or from any preliminary prospectus, but corrected in the final prospectus, as
amended or supplemented.
(b) Whenever pursuant to Paragraph 5 a registration statement
relating to the Registerable Securities is filed under the Act, or is amended or
supplemented, the Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, and each
person, if any, who controls the Company (within the meaning of the Act) against
any losses, claims, damages or liabilities to which
15
<PAGE>
the Company or any such director, officer or controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in any such
registration statement or any preliminary prospectus or final prospectus
constituting a part thereof, or any amendment or supplement thereto, or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in said registration statement, said preliminary prospectus,
said final prospectus or said amendment or supplement in reliance upon and in
conformity with written information furnished by such Distributing Holder for
use in the preparation thereof; and will reimburse the Company or any such
director, officer or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action.
(c) Promptly after receipt by an indemnified party under this
Paragraph 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission to so notify the
16
<PAGE>
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under this Paragraph 6.
(d) In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election to so assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Paragraph 6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
7. Adjustments of Price and Number of
Shares of Common Stock.
(a) Computation of Adjusted Price. Except as
hereinafter provided, in case the Company shall, at any time after the date of
closing of the sale of securities pursuant to the Public Offering (the "Closing
Date"), issue or sell any shares of Common Stock (other than the issuances or
sales referred to in Paragraph 7(f) hereof), including shares held in the
Company's treasury and shares of Common Stock issued upon the exercise of any
options, rights or warrants to subscribe for shares of Common Stock
17
<PAGE>
(other than the issuances or sales of Common Stock pursuant to rights to
subscribe for such Common Stock distributed pursuant to Paragraph 7(j) hereof)
and shares of Common Stock issued upon the direct or indirect conversion or
exchange of securities for shares of Common Stock, for a consideration per share
less than both the "Market Price" (as defined in Paragraph 7(a)(vi) hereof) per
share of Common Stock on the trading day immediately preceding such issuance or
sale and the Warrant Price in effect immediately prior to such issuance or sale,
or without consideration, then forthwith upon such issuance or sale, the Warrant
Price in respect of the Common Stock issuable upon exercise of the Underwriter's
Option shall (until another such issuance or sale) be reduced to the price
(calculated to the nearest full cent) determined by multiplying the Warrant
Price in effect immediately prior to such issuance or sale by a fraction, the
numerator of which shall be the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issuance or sale multiplied by the Warrant
Price immediately prior to such issuance or sale plus (2) the consideration
received by the Company upon such issuance or sale, and the denominator of which
shall be the product of (x) the total number of shares of Common Stock
outstanding immediately after such issuance or sale, multiplied by (y) the
Warrant Price immediately prior to such issuance or sale; provided, however,
that in no event shall the Warrant Price be adjusted pursuant to this
computation to an amount in excess of the Warrant Price in effect immediately
prior to such computation, except in the case of a combination of outstanding
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<PAGE>
shares of Common Stock, as provided by Paragraph 7(c) hereof. For the purposes
of this Paragraph 7, the term "Warrant Price" shall mean the exercise price per
share of Common Stock issuable upon exercise of the Underwriter's Option
(initially $ per share), as adjusted from time to time pursuant to the
provisions of this Paragraph 7.
For the purposes of any computation to be made in accordance
with this Paragraph 7(a), the following provisions shall be applicable:
(i) In case of the issuance or sale of
shares of Common Stock for a consideration part or all of which shall be cash,
the amount of the cash consideration therefor shall be deemed to be the amount
of cash received by the Company for such shares (or, if shares of Common Stock
are offered by the Company for subscription, the subscription price, or, if such
securities shall be sold to underwriters or dealers for public offering without
a subscription offering, the public offering price) before deducting therefrom
any compensation paid or discount allowed in the sale, underwriting or purchase
thereof by underwriters or dealers or others performing similar services, or any
expenses incurred in connection therewith.
(ii) In case of the issuance or sale
(otherwise than as a dividend or other distribution on any stock of the Company)
of shares of Common Stock for a consideration part or all of which shall be
other than cash, the amount of the
19
<PAGE>
consideration therefor other than cash shall be deemed to be the value of such
consideration as determined in good faith by the Board of Directors of the
Company.
(iii) Shares of Common Stock issuable by
way of dividend or other distribution on any stock of the Company shall be
deemed to have been issued immediately after the opening of business on the day
following the record date for the determination of shareholders entitled to
receive such dividend or other distribution and shall be deemed to have been
issued without consideration.
(iv) The reclassification of securities
of the Company other than shares of Common Stock into securities including
shares of Common Stock shall be deemed to involve the issuance of such shares of
Common Stock for a consideration other than cash immediately prior to the close
of business on the date fixed for the determination of security holders entitled
to receive such shares, and the value of the consideration allocable to such
shares of Common Stock shall be determined as provided in subparagraph (ii) of
this Paragraph 7(a).
(v) The number of shares of Common Stock
at any one time outstanding shall include the aggregate number of shares issued
or issuable upon the exercise of options, rights, warrants and upon the
conversion or exchange of convertible or exchangeable securities.
20
<PAGE>
(vi) As used herein, the phrase "Market
Price" at any date shall be deemed to be the average of the last reported sale
price, or, in case no such reported sale takes place on such day, the average of
the last reported sale prices for the last three trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading or as reported in the NASDAQ Stock
Market, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or quoted on the NASDAQ Stock Market, the closing
bid quotation as furnished by the National Association of Securities Dealers,
Inc. through NASDAQ or a similar organization if NASDAQ is no longer reporting
such information, or if the Common Stock is not quoted on NASDAQ, as determined
in good faith by resolution of the Board of Directors of the Company, based on
the best information available to it for the day immediately preceding such
issuance or sale, the day of such issuance or sale and the day immediately after
such issuance or sale. If the Common Stock is listed or admitted to trading on a
national securities exchange and also quoted on the NASDAQ Stock Market, the
Market Price shall be determined as hereinabove provided by reference to the
prices reported in the NASDAQ Stock Market; provided that if the Common Stock is
listed or admitted to trading on the New York Stock Exchange, the Market Price
shall be determined as hereinabove provided by reference to the prices reported
by such exchange.
21
<PAGE>
(b) Options, Rights, Warrants and Convertible
and Exchangeable Securities. Except in the case of the Company issuing rights to
subscribe for shares of Common Stock distributed pursuant to Paragraph 7(j)
hereof, if the Company shall at any time after the Closing Date issue options,
rights or warrants to subscribe for shares of Common Stock, or issue any
securities convertible into or exchangeable for shares of Common Stock, in each
case other than the issuances or sales referred to in Paragraph 7(f) hereof, (i)
for a consideration per share less than the lesser of (a) the Warrant Price in
effect immediately prior to the issuance of such options, rights or warrants, or
such convertible or exchangeable securities, or (b) the Market Price on the
trading day immediately preceding such issuance, or (ii) without consideration,
the Warrant Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities, as the case
may be, shall be reduced to a price determined by making a computation in
accordance with the provisions of Paragraph 7(a) hereof, provided that:
(i) The aggregate maximum number of
shares of Common Stock, as the case may be, issuable under all the outstanding
options, rights or warrants shall be deemed to be issued and outstanding at the
time all the outstanding options, rights or warrants were issued, and for a
consideration equal to the minimum purchase price per share provided for in the
options, rights or warrants at the time of issuance, plus the consideration
22
<PAGE>
(determined in the same manner as consideration received on the issue or sale of
shares in accordance with the terms of Paragraph 7(a) hereof), if any, received
by the Company for the options, rights or warrants, and if no minimum price is
provided in the options, rights or warrants, then the consideration shall be
equal to zero; provided, however, that upon the expiration or other termination
of the options, rights or warrants, if any thereof shall not have been
exercised, the number of shares of Common Stock deemed to be issued and
outstanding pursuant to this subparagraph (b) (and for the purposes of
subparagraph (v) of Paragraph 7(a) hereof) shall be reduced by such number of
shares as to which options, warrants and/or rights shall have expired or
terminated unexercised, and such number of shares shall no longer be deemed to
be issued and outstanding, and the Warrant Price then in effect shall forthwith
be readjusted and thereafter be the price which it would have been had
adjustment been made on the basis of the issuance only of shares actually issued
or issuable upon the exercise of those options, rights or warrants as to which
the exercise rights shall not have expired or terminated unexercised.
(ii) The aggregate maximum number of
shares of Common Stock issuable upon conversion or exchange of any convertible
or exchangeable securities shall be deemed to be issued and outstanding at the
time of issuance of such securities, and for a consideration equal to the
consideration (determined in the same manner as consideration received on the
issue or sale of shares of
23
<PAGE>
Common Stock in accordance with the terms of Paragraph 7(a) hereof) received by
the Company for such securities, plus the minimum consideration, if any,
receivable by the Company upon the conversion or exchange thereof; provided,
however, that upon the expiration or other termination of the right to convert
or exchange such convertible or exchangeable securities (whether by reason of
redemption or otherwise), the number of shares deemed to be issued and
outstanding pursuant to this subparagraph (ii) (and for the purpose of
subparagraph (v) of Paragraph 7(a) hereof) shall be reduced by such number of
shares as to which the conversion or exchange rights shall have expired or
terminated unexercised, and such number of shares shall no longer be deemed to
be issued and outstanding, and the Warrant Price then in effect shall forthwith
be readjusted and thereafter be the price which it would have been had
adjustment been made on the basis of the issuance only of the shares actually
issued or issuable upon the conversion or exchange of those convertible or
exchangeable securities as to which the conversion or exchange rights shall not
have expired or terminated unexercised. No adjustment will be made pursuant to
this subparagraph (ii) upon the issuance by the Company of any convertible or
exchangeable securities pursuant to the exercise of any option, right or warrant
exercisable therefor, to the extent that adjustments in respect of such options,
rights or warrants were previously made pursuant to the provisions of
subparagraph (i) of this subparagraph 7(b).
24
<PAGE>
(iii) If any change shall occur in the
price per share provided for in any of the options, rights or warrants referred
to in subparagraph (i) of this Paragraph 7(b), or in the price per share at
which the securities referred to in subparagraph (ii) of this Paragraph 7(b) are
convertible or exchangeable, or if any such option, rights or warrants are
exercised at a price greater than the minimum purchase price provided for in
such options, rights or warrants, or any such securities are converted or
exercised for more than the minimum consideration receivable by the Company upon
such conversion or exchange, the options, rights or warrants or conversion or
exchange rights, as the case may be, shall be deemed to have expired or
terminated on the date when such price change became effective in respect of
shares not theretofore issued pursuant to the exercise or conversion or exchange
thereof, and the Company shall be deemed to have issued upon such date new
options, rights or warrants or convertible or exchangeable securities at the new
price in respect of the number of shares issuable upon the exercise of such
options, rights or warrants or the conversion or exchange of such convertible or
exchangeable securities; provided, however, that no adjustment shall be made
pursuant to this subparagraph (iii) with respect to any change in the price per
share provided for in any of the options, rights or warrants referred to in
subparagraph (i) of this Paragraph 7, or in the price per share at which the
securities referred to in subparagraph (ii) of this Paragraph 7(b) are
convertible or exchangeable, which change results from the
25
<PAGE>
application of the anti-dilution provisions thereof in connection with an event
for which, subject to subparagraph (iv) of Paragraph 7(f), an adjustment to the
Warrant Price and the number of securities issuable will be required to be made
pursuant to this Paragraph 7.
(c) Subdivision and Combination. In case the
Company shall at any time after the Closing Date subdivide or combine the
outstanding shares of Common Stock, the Warrant Price shall forthwith be
proportionately decreased in the case of subdivision or increased in the case of
combination.
(d) Adjustment in Number of Shares. Upon each
adjustment of the Warrant Price pursuant to the provisions of this Paragraph 7,
the number of shares of Common Stock issuable upon the exercise of the
Underwriter's Option shall be adjusted to the nearest full whole number by
multiplying a number equal to the Warrant Price in effect immediately prior to
such adjustment by the number of shares of Common Stock issuable upon exercise
of the Underwriter's Option immediately prior to such adjustment and dividing
the product so obtained by the adjusted Warrant Price.
(e) Reclassification, Consolidation, Merger,
etc. In case of any reclassification or change of the outstanding
shares of Common Stock (other than a change in par value to no par
value, or from no par value to par value, or as a result of a
26
<PAGE>
subdivision or combination), or in the case of any consolidation of the Company
with, or merger of the Company into, another corporation (other than a
consolidation or merger which does not result in any reclassification or change
of the outstanding shares of Common Stock, except a change as a result of a
subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Company as an entirety, the Holder shall thereafter have the
right to purchase the kind and number of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance as if the Holder were the owner of the shares of
Common Stock underlying the Underwriter's Option immediately prior to any such
events at a price equal to the product of (x) the number of shares issuable upon
exercise of the Underwriter's Option and (y) the Warrant Price in effect
immediately prior to the record date for such reclassification, change,
consolidation, merger, sale or conveyance as if such Holder had exercised the
Underwriter's Option.
(f) No Adjustment of Warrant Price in Certain
Cases. Notwithstanding anything herein to the contrary, no
adjustment of the Warrant Price shall be made:
27
<PAGE>
(i) Upon the issuance or sale of the
Underwriter's Option, the shares of Common Stock issuable
upon the exercise of the Underwriter's Option; or
(ii) Upon the issuance or sale of the shares
of Common Stock issued by the Company in the Public Offering
(including pursuant to the Underwriter's overallotment option)
or other shares of Common Stock or warrants issued by the
Company upon consummation of the Public Offering; or
(iii) Upon (i) the issuance of options
pursuant to the Company's employee stock option plan in effect
on the date hereof or as hereafter amended in accordance with
the terms thereof or any other employee or executive stock
option plan approved by stockholders of the Company or the
sale by the Company of any shares of Common Stock pursuant to
the exercise of any such options, or (ii) the sale by the
Company of any shares of Common Stock pursuant to the exercise
of any options or warrants issued and outstanding on the date
of closing of the sale of Common Stock pursuant to the Public
Offering or (iii) the issuance or sale by the Company of any
shares of Common Stock pursuant to the Company's restricted
stock plan in effect on the date hereof; or
28
<PAGE>
(iv) If the amount of said adjustment shall
be less than two cents (2(cent)) per share of Common Stock.
(g) Redemption of Underwriter's Option.
Notwithstanding anything to the contrary contained in this Agreement or
elsewhere, the Underwriters Option cannot be redeemed by the Company under any
circumstances.
(h) Dividends and Other Distributions with Respect
to Outstanding Securities. In the event that the Company shall at any time after
the Closing Date and prior to the exercise and expiration of the Underwriter's
Option declare a dividend (other than a dividend consisting solely of shares of
Common Stock or a cash dividend or distribution payable out of current or
retained earnings) or otherwise distribute to the holders of Common Stock any
monies, assets, property, rights, evidences of indebtedness, securities (other
than such a cash dividend or distribution or dividend consisting solely of
shares of Common Stock), whether issued by the Company or by another person or
entity, or any other thing of value, the Holders of the unexercised
Underwriter's Option shall thereafter be entitled, in addition to the shares of
Common Stock or other securities receivable upon the exercise thereof, to
receive, upon the exercise of such Underwriter's Option, the same monies,
property, assets, rights, evidences of indebtedness, securities or any other
thing of value that they would have been entitled to receive at the time of such
dividend or distribution as
29
<PAGE>
if the Holders were the owners of the shares of Common Stock underlying the
Underwriter's Option. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance of the
provisions of this Paragraph 7(h).
(i) Subscription Rights for Shares of Common Stock
or Other Securities. In case the Company or an affiliate of the Company shall at
any time after the date hereof and prior to the exercise of the Underwriter's
Option in full issue any rights to subscribe for shares of Common Stock or any
other securities of the Company or of such affiliate to all the holders of
Common Stock of the Company, the Holders of the unexercised Underwriter's Option
shall be entitled, in addition to the shares of Common Stock or other securities
receivable upon the exercise of the Underwriter's Option, to receive such rights
at the time such rights are distributed to the other stockholders of the Company
but only to the extent of the number of shares of Common Stock, if any, for
which the Underwriter's Option remains exercisable.
(j) Notice in Event of Dissolution. In case of the
dissolution, liquidation or winding-up of the Company, all rights under the
Underwriter's Option shall terminate on a date fixed by the Company, such date
to be no earlier than ten (10) days prior to the effectiveness of such
dissolution, liquidation or winding-up and not later than five (5) days prior to
such effectiveness.
30
<PAGE>
Notice of such termination of purchase rights shall be given to the last
registered Holder of the Underwriter's Option, as the same shall appear on the
books and records of the Company, by registered mail at least thirty (30) days
prior to such termination date.
(k) Computations. The Company may retain a firm of
independent public accountants (who may be any such firm regularly employed by
the Company) to make any computation required under this Paragraph, and any
certificate setting forth such computation signed by such firm shall be
conclusive evidence of the correctness of any computation made under this
Paragraph 7.
8. Fractional Shares.
(a) The Company shall not be required to issue fractions of
shares of Common Stock on the exercise of this Underwriter's Option, provided,
however, that if the Holder exercises the Underwriter's Option in full, any
fractional shares of Common Stock shall be eliminated by rounding any fraction
up to the nearest whole number of shares of Common Stock.
(b) The Holder of this Underwriter's Option, by acceptance
hereof, expressly waives his right to receive any fractional share of Common
Stock upon exercise of this Underwriter's Option.
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<PAGE>
9. Miscellaneous.
(a) This Underwriter's Option shall be governed by and in
accordance with the laws of the State of New York without regard to the
conflicts of law principles thereof.
(b) All notices, requests, consents and other communications
hereunder shall be made in writing and shall be deemed to have been duly made
when delivered, or mailed by registered or certified mail, return receipt
requested: (i) if to a Holder, to the address of such Holder as shown on the
books of the Company, or (ii) if to the Company, 506 45th Street, Suite A-2,
Columbus, Georgia 31904.
(c) The Company and the Underwriter may from time to time
supplement or amend this Underwriter's Option without the approval of any other
Holders in order to cure any ambiguity, to correct or supplement any provision
contained herein which may be defective or inconsistent with any provisions
herein, or to make any other provisions in regard to matters or questions
arising hereunder which the Company and the Underwriter may deem necessary or
desirable and which the Company and the Underwriter deem not to materially
adversely affect the interest of the Holders.
(d) All the covenants and provisions of this Underwriter's
Option by or for the benefit of the Company and the Holders shall bind and inure
to the benefit of their respective successors and assigns hereunder.
(e) Nothing in this Underwriter's Option shall be
construed to give to any person or corporation other than the
32
<PAGE>
Company and the Underwriter and any other registered Holder or Holders, any
legal or equitable right, and this Underwriter's Option shall be for the sole
and exclusive benefit of the Company and the Underwriter and any other Holder or
Holders.
(f) This Underwriter's Option may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the Company has caused this Underwriter's
Warrant to be signed by its duly authorized officer and this Underwriter's
Option to be dated , 1997.
PEACH AUTO PAINTING AND
COLLISION, INC.
By:
Lenward C. Wilbanks, Jr.
President
33
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of the Underwriter's Option)
The undersigned, the Holder of the foregoing Underwriter's
Option, hereby irrevocably elects to exercise the purchase rights represented by
such Underwriter's Option for, and to purchase thereunder, ______ shares of
Common Stock of Peach Auto Painting and Collision, Inc. and herewith makes
payment of $________ therefor, and requests that the certificates for
Common Stock be issued in the name(s) of, and delivered to ____________________
whose address(es) is (are)
___________________________________________________________ and whose social
security or taxpayer identification number is
.
Dated: __________________
_________________________*
_________________________
Address
* Signature must conform in all respects to name of registered
Holder.
34
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Underwriter's Option)
For value received, the undersigned hereby sells, assigns, and
transfers unto _____________________ the right to purchase shares of Common
Stock of Peach Auto Painting and Collision, Inc. represented by the foregoing
Underwriter's Option to the extent of __________ shares of Common Stock, and
appoints ________________, attorney to transfer such rights on the books of
Peach Auto Painting and Collision, Inc. with full power of substitution in the
premises.
Dated: __________________
_________________________
(name of holder)
_________________________
Address
_________________________
In the presence of:
_________________________
_________________________
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<PAGE>
Exhibit 5.1
(919) 755-87
January 3, 1997
Peach Auto Painting and Collision, Inc.
506 45th Street
Suite A-2
Columbus, Georgia 31904
Ladies and Gentlemen:
This opinion is furnished in connection with the registration pursuant
to the Securities Act of 1933, as amended (the "Securities Act"), of 1,500,000
shares (the "Shares") of common stock, $.01 par value per Share, of Peach Auto
Painting and Collision, Inc., a Delaware corporation (the "Company").
In connection with rendering this opinion, we have examined the
Articles of Incorporation and Bylaws of the Company, each as amended to date;
such records of the corporate proceedings of the Company as we determined
material; a registration statement on Form SB-2 under the Securities Act
relating to the Shares and Amendment No. 1 thereto (the "Registration
Statement") and the prospectus contained therein (the "Prospectus"); and such
other certificates, receipts, records and documents as we considered necessary
for the purposes of this opinion. In rendering this opinion, we have relied on
representations of officers of the Company.
We are attorneys admitted to practice in the State of North Carolina.
We express no opinion concerning the laws of any jurisdiction other than the
laws of the United States of America, the State of North Carolina and the
Delaware General Corporation Law, as they exist under current statutes and
jurisprudence.
Based upon the foregoing, we are of the opinion that when the Shares
have been issued and paid for in accordance with the terms of the Prospectus,
the Shares will be legally issued, fully paid and nonassessable.
The foregoing assumes that all requisite steps will be taken
<PAGE>
Peach Auto Painting and Collision, Inc.
January 2, 1997
Page 2
to comply with the requirements of the Securities Act and applicable
requirements of state laws regulating the offer and sale of securities.
We hereby consent to the inclusion of this opinion in the
Registration Statement (Registration No. 333-16109) and the
Prospectus and the reference to our firm included in such
Registration Statement and Prospectus.
Very truly yours,
SMITH HELMS MULLISS & MOORE, L.L.P.
<PAGE>
<PAGE>
EXHIBIT 10.1
GEORGIA
SHAREHOLDERS' AGREEMENT OF SHARE ALLOCATION
MUSCOGEE COUNTY
THIS AGREEMENT (the "Agreement"), made and entered into as of the ___
day of __________, 1997, by and among Lenward C. Wilbanks, Jr., Frances Yvonne
Wilbanks, Laura W. Rodier, Lisa W. Griffin, Edward D. Griffin, Jr., Jeffrey W.
Hudson, Dallas R. Barbee, Jan Barbee, and the estate of William H. Roberts (each
a "Shareholder" and collectively the "Shareholders"), and Peach Warehouse &
Distribution, Inc., a Georgia corporation (the "Corporation").
WITNESSETH:
WHEREAS, the Shareholders owned the common stock of the Companies (the
"Companies") set forth on Schedule A hereto in the amounts set forth on Schedule
A; and
WHEREAS, the Companies merged with and into the Corporation effective
January 1, 1997 (the "First Merger Transactions"); and
WHEREAS, the Shareholders will exchange their common stock in each of
the Companies for common stock in the Corporation; and
WHEREAS, the Shareholders collectively will then own all of the
outstanding shares of capital stock of the Corporation (said shares together
with any additional shares of the Corporation's capital stock acquired by the
Shareholders or other individuals being hereinafter referred to as the Stock);
and
WHEREAS, the Corporation intends to merge with and into Peach Auto
Painting and Collision, Inc., a Delaware corporation ("Peach"), whereupon each
Shareholder's shares of Stock of the Corporation will be exchanged on a one for
one basis for shares of the common stock of Peach (the "Second Merger
Transaction"); and
WHEREAS, the Corporation will cease to exist and Peach will be the
successor corporation to the Corporation and will be bound by the terms of this
Agreement; and
WHEREAS, the parties hereto desire to avoid any future disagreements or
claims against each other or the Corporation or Peach arising out of the
allocation of Stock in connection with the First Merger Transactions.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
1. AGREEMENT WITH ALLOCATION. Each party hereto has reviewed the attached
Schedule A and agrees with the stated ownership interests in the common
stock of the Companies as therein stated. Each party hereto has also
reviewed, on Schedule A, (a) the ratios used to convert his shares of
the common stock of the Companies to shares of Stock of the Corporation
and (b) the number of shares of Stock of the Corporation he will
receive in the First Merger Transactions. Each party hereby agrees that
the attached Schedule A is accurate with respect to his ownership
interests in the common stock of the Companies and the Stock of the
Corporation following the First Merger Transactions.
2. NO FUTURE CLAIMS. Each party hereby represents, agrees, covenants, and
warrants, on behalf of himself and his heirs, successors, and assigns,
that he does not have, and will not make, any claim for more shares of
common stock of any of the Companies or Stock of the Corporation than
that which is set forth on the attached Schedule A.
3. RELEASE. The Shareholders, for themselves and their respective
affiliates, successors, heirs, administrators, executors, assigns and
agents (and if applicable, their officers, directors, employees,
stockholders and partners) hereby release and forever discharge the
Corporation, its affiliates, its successors (including, but not limited
to, Peach), and each of their respective officers, employees,
directors, stockholders, partners and agents from any and
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<PAGE>
all claims, actions and causes of action that any Shareholder may
have, or in the future may possess, for, upon, or by reason of any
matter, cause or thing whatsoever, arising out of or related to the
subject matter of this Agreement.
4. INDEMNIFICATION. Each Shareholder hereby agrees to indemnify the
Corporation, its affiliates, its successors (including, but not limited
to, Peach), and each of their respective officers, employees,
directors, stockholders, partners and agents against and hold them
harmless from any loss, liability, claim, damage or expense (including,
without limitation, reasonable legal fees and expenses and any losses
that may result from the granting of injunctive relief in any suit,
action or proceeding) suffered or incurred by the Corporation, its
affiliates, its successors (including, but not limited to, Peach), and
each of their respective officers, employees, directors, stockholders,
partners and agents for or on account of or arising from or in
connection with any breach of any representation or warranty of such
Shareholder contained in this Agreement.
5. THIRD PARTY BENEFICIARIES. Each Shareholder agrees that (i) the
Corporation and its Board of Directors and officers (the "Third Party
Beneficiaries") are specifically named as third party beneficiaries of
the representations, covenants and agreements made by each Shareholder
herein and may pursue enforcement thereof, (ii) none of the
Shareholders would have entered into this Agreement in the absence of
the representations, covenants and agreements made by each Shareholder
in Sections 1, 2 and 3 hereof and the designation of the Third Party
Beneficiaries under clause (i) above, and (iii) the execution and
performance of this Agreement by the other parties to the Agreement
shall therefore constitute the receipt of adequate consideration for
such representations, covenants and agreements and for the designation
of the Third Party Beneficiaries.
6. RECAPITALIZATION, ETC. As referred to herein, the Stock shall include
any securities that may be distributed with respect thereto or issued
in exchange therefor or in lieu thereof in connection with any stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation or other reorganization of the Corporation or Peach.
7. CONSTRUCTION OF AGREEMENT. This Agreement represents the entire
integrated agreement among the parties hereto with respect to the
subject matter hereof, and supersedes all prior negotiations or
agreements, whether written or oral. Whenever the context of this
Agreement permits, the masculine gender shall include the feminine and
neuter genders and any reference to singular or plural shall be
interchangeable with the other. The invalidity or unenforceability of
any one or more provisions of this Agreement shall not affect any other
provisions, and the Agreement shall be construed in all respects as if
any such invalid or unenforceable provisions were omitted.
8. BINDING EFFECT. This Agreement shall be binding upon the parties hereto
and their respective legal representatives, successors and assigns.
9. AMENDMENT AND TERMINATION. Except and unless as otherwise indicated
herein, this Agreement may be amended only by an instrument in writing
executed by all the parties hereto.
10. ATTORNEY FEES, BREACHES AND DAMAGES. The parties hereby declare that it
may be impossible to measure in money the damages that will accrue in
the event of a breach of this Agreement. Therefore, if any party
hereto, or any person acting on his behalf, shall institute any action
or proceeding to enforce the provisions hereof, any person against whom
such action or proceeding is brought hereby waives, on behalf of
himself and his personal representatives, heirs, successors and
assigns, the claim or defense therein that such party has an adequate
remedy at law, and each party acknowledges that the person asserting a
violation of this Agreement shall be entitled to the remedy of specific
performance. Said remedy of specific performance, however, shall be in
addition to, and not in limitation of, any other rights and remedies at
law or in equity that may be available with respect to a breach or
threatened breach hereof. The party in breach (or that is threatening
to breach) (the "Breaching Party") also agrees to reimburse the
non-breaching party for all costs and expenses, including reasonable
attorneys' fees, incurred by the non-breaching party in attempting to
enforce the obligations of the Breaching Party.
11. NO IMPLIED WAIVERS. No failure or delay by any party in exercising any
right, power, or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power, or
privilege preclude any other or further exercise thereof.
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<PAGE>
12. HEADINGS. The headings and other captions in this Agreement are for
convenience and reference only and shall not be used in interpreting,
construing or enforcing any of the provisions of this Agreement.
13. COUNTERPARTS. This Agreement may be executed in multiple counterparts
by the various parties and the failure to have the signatures of all
parties on a single Agreement shall not affect the validity or
enforceability of any part of this Agreement against any party who
executes any counterpart of the Agreement.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA WITHOUT THE
APPLICABILITY OF ANY CONFLICT OF LAW PROVISIONS. EACH SHAREHOLDER
AGREES THAT ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATED IN ANY
WAY TO THIS AGREEMENT SHALL BE BROUGHT SOLELY IN A COURT OF COMPETENT
JURISDICTION SITTING IN MUSCOGEE COUNTY, GEORGIA.
I HAVE READ THE ABOVE AGREEMENT AND UNDERSTAND ITS TERMS. I WOULD NOT
SIGN THIS AGREEMENT IF I DID NOT UNDERSTAND IT AND AGREE TO BE BOUND BY ITS
TERMS.
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<PAGE>
INTENDING TO BE LEGALLY BOUND UNDER THE TERMS AND CONDITIONS SET FORTH
IN THIS AGREEMENT, WE SET OUR HANDS AND SEALS THE DAY AND YEAR FIRST ABOVE
WRITTEN.
________________________________________
Peach Warehouse & Distribution, Inc.
By: Lenward C. Wilbanks, Jr., President
_________________________________
Lenward C. Wilbanks, Jr.
_________________________________
Frances Yvonne Wilbanks
_________________________________
Laura W. Rodier
_________________________________
Lisa W. Griffin
_________________________________
Edward D. Griffin, Jr.
_________________________________
Jeffrey W. Hudson
_________________________________
Dallas R. Barbee
_________________________________
Jan Barbee
The estate of William H. Roberts
By: ____________________________
4
Exhibit 10.2
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT (the "AGREEMENT") between Peach Auto Painting
and Collision, Inc., a Delaware corporation (the "COMPANY"), and ____________, a
director and/or an officer of the Company (the "INDEMNITEE"), dated as of
__________, 1997.
R E C I T A L S:
1. It is essential that the Company retain as directors and officers
the most capable persons available.
2. Both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors/officers of public
companies in today's environment.
3. The Indemnitee has agreed to serve as a director and/or an officer
of the Company.
4. The Articles of Incorporation (the "ARTICLES OF INCORPORATION") and
the Bylaws of the Company (the "BYLAWS") provide for certain indemnification of
the officers and directors of the Company.
5. In recognition of Indemnitee's need for substantial protection
against personal liability and to provide Indemnitee with specific contractual
assurance that the protection provided by the Articles of Incorporation will be
available to Indemnitee (regardless of, among other things, any amendment to or
revocation of the Articles of Incorporation or Bylaws, or any Change in Control
(as herein defined), the Company wishes to provide in this Agreement for the
indemnification of and the advancement of expenses to Indemnitee to the fullest
extent permitted by law and as set forth in this Agreement, and, to the extent
insurance is maintained, for the continued coverage of Indemnitee under the
Company's directors' and officers' liability insurance policies.
NOW THEREFORE, in consideration of the premises and intending to be
legally bound hereby, the parties hereto agree as follows:
Section 1. INDEMNIFICATION.
In the event that the Indemnitee was or is made a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, or is or was otherwise involved, in any action,
suit, proceeding, arbitration, alternate dispute resolution mechanism, or any
inquiry or investigation, whether civil, criminal, administrative or
investigative (hereinafter a "PROCEEDING"), by reason of the fact that the
Indemnitee or a person of whom the Indemnitee is the legal representative is or
was a director, officer or employee of the Company or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such actual or threatened proceeding is alleged action in an official capacity
as a director, officer, employee, or agent or in any other capacity while
serving as a director, officer, employee or agent, the Indemnitee shall be
indemnified and held harmless by
<PAGE>
the Company to the fullest extent authorized by the Delaware General
Corporation Law (the "DGCL"), the Articles of Incorporation and the Bylaws as
the same exist or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Company to provide
broader indemnification rights than said permitted the Company to provide prior
to such amendment), against all expenses, liability and loss (including, without
limitation, attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
the Indemnitee in connection therewith, and such indemnification shall continue
as to the Indemnitee if the Indemnitee ceases to be a director, officer,
employee or agent and shall inure to the benefit of the Indemnitee's heirs,
executors and administrators; PROVIDED, HOWEVER, that, except as provided in
Section 2 with respect to proceedings seeking to enforce rights to
indemnification, the Company shall indemnify the Indemnitee in connection with a
Proceeding (or part thereof) initiated by the Indemnitee only if such Proceeding
(or part thereof) was authorized by the Board of Directors of the Company.
Section 2. SUIT TO RECOVER.
If a claim under Section 1 is not paid in full by the Company
within thirty days after a written claim has been received by the Company, the
Indemnitee may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim and, if successful in whole or in part, the
Indemnitee shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expense incurred in defending any actual or threatened
Proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Company) that the Indemnitee has
not met the standards of conduct which make it permissible under the DGCL for
the Company to indemnify the Indemnitee for the amount claimed, but the burden
of proving such defense shall be on the Company. Neither the failure of the
Company (including its Board of Directors, independent legal counsel or
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the Indemnitee is proper in the circumstances
because the Indemnitee has met the applicable standard of conduct set forth in
the DGCL, nor an actual determination by the Company (including it Board of
Directors, independent legal counsel or stockholders) that the Indemnitee has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the Indemnitee has not met the applicable standard of
conduct.
Section 3. "CHANGE IN CONTROL".
Following any "CHANGE IN CONTROL" of the Company of the type
required to be reported under Item 1 of Form 8-K promulgated under the
Securities Exchange Act of 1934, as amended, any determination as to entitlement
to indemnification shall be made by Independent Legal Counsel selected by the
Indemnitee, such Independent Legal Counsel to be retained by the Board of
Directors on behalf of the Company. "INDEPENDENT LEGAL COUNSEL" shall mean an
attorney or firm of attorneys who shall not have otherwise performed services
for the Company or Indemnitee within the last five years (other than with
respect to matters concerning the rights of Indemnitee under this Agreement, or
of other indemnitees under similar indemnity agreements).
Section 4. INSURANCE.
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The Company will attempt to procure insurance to protect
itself and any director or officer of the Company against any expense, liability
or loss, such insurance shall cover the Indemnitee to at least the same extent
as any other director or officer of the Company. Furthermore, the Company will
attempt to procure insurance against any liability on the part of the Indemnitee
regardless of whether the Company has the power to indemnify Indemnitee under
applicable law.
Section 5. ADVANCE OF EXPENSES.
The right to indemnification conferred by this Agreement shall
include the right to be paid by the Company the expenses incurred in defending
any actual or threatened Proceeding in advance of its final disposition;
PROVIDED, HOWEVER, that, if the DGCL requires, the payment of such expenses
incurred by the Indemnitee in advance of the final disposition of any actual or
threatened proceeding shall be made only upon delivery to the Company of an
undertaking, by or on behalf of the Indemnitee, to repay all amounts so advanced
if it shall ultimately be determined that the Indemnitee is not entitled to be
indemnified under this Agreement or otherwise.
Section 6. INDEMNIFICATION FOR ADDITIONAL EXPENSES.
The Company shall indemnify Indemnitee against any and all
expenses (including reasonable attorneys' fees) and, if requested by Indemnitee,
shall (within ten business days of such request) advance such expenses to
Indemnitee, which are incurred by Indemnitee in connection with any action
brought by Indemnitee for (i) indemnification or advance payment of expenses by
the Company under this Agreement, the Articles of Incorporation or any other
agreement, certificate of incorporation or Company bylaw now or hereafter in
effect relating to claims and/or (ii) recovery under any directors' and
officers' liability insurance policies maintained by the Company; PROVIDED,
HOWEVER, that the payment of expenses incurred by Indemnitee in advance of the
final disposition of such action will be made only upon receipt by the Company
of an undertaking by the Indemnitee to repay all amounts advanced if it should
be ultimately determined that the Indemnitee is not entitled to be indemnified
under this Agreement or otherwise.
Section 7. PARTIAL INDEMNITY.
If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for a portion of the expenses,
judgments, fines, penalties and amounts paid in settlement of a claim but not,
however, for the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover,
notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in defense of any or
all claims or in defense of any issue or matter therein, including dismissal
without prejudice, Indemnitee shall be indemnified against all expenses incurred
in connection therewith.
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<PAGE>
Section 8. BURDEN OF PROOF.
In connection with any determination by the Reviewing Party or
otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the
burden of proof shall be on the Company to establish that Indemnitee is not so
entitled.
"REVIEWING PARTY" shall mean any person or group of persons
consisting of a member or members of the Company's Board of Directors or any
other person or body appointed by the Board who is not a party to the particular
Proceeding for which Indemnitee is seeking indemnification or Independent Legal
Counsel, who shall determine whether Indemnitee is entitled to be indemnified
hereunder.
Section 9. NO PRESUMPTION.
For purposes of this Agreement, the termination of any claim,
action, suit or proceeding, by judgment, order, settlement (whether with or
without court approval) or conviction or upon a plea of NOLO CONTENDERE, or its
equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law. In addition,
neither the failure of a Reviewing Party to have made a determination as to
whether Indemnitee has met any particular standard of conduct or had any
particular belief, nor an actual determination by a Reviewing Party that
Indemnitee has not met such standard of conduct or did not have such belief,
prior to the commencement of legal proceedings by Indemnitee to secure a
judicial determination that Indemnitee should be indemnified under the
applicable law shall be a defense to Indemnitee's claim or create a presumption
that Indemnitee has not met any particular standard of conduct or did not have
any particular belief.
Section 10. NON-EXCLUSIVITY.
The rights conferred in this Agreement shall not be exclusive
of any other right which the Indemnitee may have or hereafter have or hereafter
acquire under any statute, provision of the Articles of Incorporation, Bylaws,
agreement, vote of stockholders or of disinterested directors or otherwise.
Section 11. SUBROGATION.
In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
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<PAGE>
Section 12. NO DUPLICATION OF PAYMENTS.
The Company shall not be liable under this Agreement to make
any payment in connection with any claim made against Indemnitee to the extent
Indemnitee has otherwise actually received payment (under any insurance policy,
the Articles of Incorporation or otherwise) of the amounts otherwise
indemnifiable hereunder.
Section 13. BINDING FACTS.
This Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto and their respective successors,
assigns, including any direct or indirect successor by purchase, merger,
consolidation or otherwise to all or substantially all of the business and/or
assets of the Company, spouses, heirs, executors and personal and legal
representatives. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as an officer or director of the Company or of any
other enterprise at the Company's request. In addition, the Company will bring
no action against the Indemnitee or the Indemnitee's heirs or personal
representatives relating to the Indemnitee's service as a director, after the
expiration of one year from the date the Indemnitee ceases (for any reason) to
serve as a director of the Company, and any claim or cause of action of the
Company will be extinguished and deemed released unless asserted by the filing
of a legal action before the expiration of such period.
Section 14. SEVERABILITY.
The provisions of this Agreement shall be severable in the
event that any of the provisions hereof (including any provision within a single
section, paragraph or sentence) is held by a court of competent jurisdiction to
be invalid, void or otherwise unenforceable in any respect, and the validity and
enforceability of any such provision in every other respect and of remaining
provisions hereof shall not be in any way impaired and shall remain enforceable
to the fullest extent permitted by law.
Section 15. AMENDMENT.
This Agreement may not be changed, modified or amended except
in writing signed by the parties hereto.
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<PAGE>
IN WITNESS WHEREOF, the Company and the Indemnitee have
executed this Agreement as of the day and year first above written.
COMPANY:
PEACH AUTO PAINTING AND
COLLISION, INC.
By:_________________________________________
Lenward C. Wilbanks, Jr., President
INDEMNITEE:
____________________________________________
6
<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the ___ day of _______, 1997, by
and between Peach Auto Painting and Collision, Inc., a Delaware corporation (the
"Company"), and Lenward C. Wilbanks, Jr., a resident of Columbus, Georgia (the
"Employee").
W I T N E S S E T H :
WHEREAS, the Company desires to obtain the services of Employee, for
its own benefit and for the benefit of any existing and future Affiliated
Company (defined as any corporation or other business entity that directly or
indirectly controls, is controlled by, or is under common control with the
Company), and Employee desires to secure employment from the Company upon the
following terms and conditions;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree that the following provisions
shall constitute their agreement of employment:
1. Employment. The Company hereby employs the Employee, and the
Employee hereby accepts employment with the Company, for the term set forth in
Section 2 below, in the position and with the duties and responsibilities set
forth in Section 3 below, and upon the other terms and conditions hereinafter
stated.
2. Period of Employment. The term of this Agreement (the "Period of
Employment") shall commence on the date the Company completes an initial public
offering of its common stock (the "Commencement Date") and, unless otherwise
terminated as hereinafter provided, shall continue for three (3) years. In the
event that this Agreement expires and a new written agreement is not entered
into by the parties, the provisions of Sections 9, 10, and 11 of this Agreement
will apply with respect to any continued employment of the Employee by the
Company or by any successor to the business of the Company.
<PAGE>
3. Position; Duties; Extent of Services.
(a) Duties; Position. The Employee shall serve initially as
President and Chief Executive Officer of the Company, and he shall
have such title, responsibilities, duties and authorities and shall
perform such services of an executive character as shall be designated
from time to time by the Board of Directors of the Company. The Company
shall retain full direction and control of the means and methods by
which Employee performs the above services and of the place(s) at which
such services are to be provided.
(b) Other Activities. Except upon the prior written consent of
the Board, Employee, during the Period of Employment, will not (i)
accept any other employment, or (ii) engage, directly or indirectly, in
any other business activity (whether or not pursued for pecuniary
advantage) that is or may be competitive with, or that might place him
in a competing position to that of the Company or any Affiliated
Company with respect to the operation or management of any production
auto painting or auto collision repair facility or other similar
business.
4. Compensation. In consideration of the services to be rendered by the
Employee to the Company and in consideration of the Employee's other covenants
hereunder, the Employee will receive a base salary at the rate of $150,000 per
year, payable at such intervals as may be established by the Company from time
to time for salary payments to its management employees. The Employee shall
receive such salary increases and/or bonuses as the Board of Directors of the
Company may from time to time approve in its discretion. In no event, however,
will the Employee's gross annual salary be less than $150,000. The Employee
shall also be entitled to participate in such incentive compensation plans as
the Company may from time to time maintain for its executive employees generally
and as described at Section 5 hereof.
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<PAGE>
5. 1996 Comprehensive Stock Option Plan. The Company has established
and the Employee will participate in the Peach Auto Painting and Collision 1996
Comprehensive Stock Option Plan (the "Plan").
6. Employee Benefits. The Employee will be entitled to participate, in
accordance with the provisions thereof, in the employee benefit plans made
available by the Company to its employees generally. In the event of the death
or total disability of the Employee, the Employee or his estate or beneficiaries
shall also be entitled to benefits in accordance with Section 8 hereof.
7. Business Expense Reimbursements. During the period of his employment
under this Agreement, the Employee will be entitled to reimbursement for all
reasonable, out-of-pocket expenses incurred by him in performing services
hereunder, provided that such expenses are incurred in accordance with the
applicable policies of the Company. The Employee shall be entitled to such
reimbursement upon presentation by the Employee, from time to time, of an
itemized account of such expenses and appropriate documentation therefor.
8. Termination of Employment.
(a) Death. In the event of the death of the Employee during
his employment under this Agreement, the following payments shall be
made to the Employee's designated beneficiary, or, in the absence of
such designation, to the estate or other legal representative of the
Employee: (i) his base salary for the month in which his death occurs,
and (ii) such bonuses (if any) as have been earned by the Employee and
not paid to him at the time of his death. Any rights and benefits the
Employee or his estate or any other person may have under employee
benefit plans and programs of the Company generally in the event of the
Employee's death shall be determined in accordance with the terms of
such plans and programs. Except as provided in this Section 8, neither
the Employee's estate nor any other person shall have
3
<PAGE>
any rights or claims against the Company in the event of the death of
the Employee during his employment hereunder.
(b) Long-Term Disability. In the event of the Employee's
disability (as hereinafter defined) during his employment under this
Agreement, the Period of Employment may be terminated by the Company.
For the first six months following termination of employment due to
disability, the Employee shall be paid his base salary at the rate in
effect at the time of the commencement of disability. Thereafter, the
Employee shall be entitled to benefits in accordance with and subject
to the terms and provisions of the Company's long-term disability plan
for senior management employees, as in effect at the time of the
commencement of disability. For purposes of this Agreement,
"disability" shall mean that Employee cannot perform the main duties of
his regular business activity with the Company at the time of the
disability due to illness or disease or injury and, at the time of the
disability, the Employee is receiving care from a licensed physician,
unrelated to the Employee, for the condition causing the disability
within the scope of such physician's license. Anything herein to the
contrary notwithstanding, if, during the six-month period following a
termination of employment under this Section 8 in which salary
continuation payments are payable by the Company, the Employee becomes
reemployed or otherwise engaged (whether as an employee, partner,
consultant, or otherwise), any salary or other remuneration or benefits
earned by him from such employment or engagement shall offset any
payments due him under this Section 8. In the event of the Employee's
disability, any rights and benefits the Employee may have under
employee benefit plans and programs of the Company generally shall be
determined in accordance with the terms of such plans and programs.
Upon termination of the Employee's employment by reason of disability
under this Section 8, the Employee shall be entitled, in
4
<PAGE>
addition to the other payments provided for in this Section 8,
to payment of such bonuses (if any) as may have been earned by
the Employee and not paid to him at the time of such
termination. Except as provided in this Section 8, neither the
Employee nor his estate, or any other person, shall have any
rights or claims against the Company in the event of the
termination of the Employee's employment by reason of
disability.
(c) Termination for Cause. Nothing herein shall prevent the
Company from terminating the Period of Employment for Cause (as
hereinafter defined). Upon termination for Cause, the Employee shall
receive his base salary only through the date of termination, and
neither the Employee nor any other person shall be entitled to any
further payments from the Company, for salary, unpaid bonuses or any
other amounts. Any rights and benefits the Employee may have under
employee benefit plans and programs of the Company generally following
a termination of the Employee's employment for Cause shall be
determined in accordance with the terms of such plans and programs. For
purposes of this Agreement, termination for Cause shall mean (i)
termination due to (y) willful or gross neglect of duties for which
employed, or (z) willful misconduct in the performance of duties for
which employed, in either such instance so as to cause material harm to
the Company, all such facts to be determined in good faith by the Board
of Directors of the Company, (ii) termination due to the Employee's
committing fraud, misappropriation or embezzlement in the performance
of his duties as an employee of the Company, or (iii) termination due
to the Employee's committing any felony for which he is convicted and
which, as determined in good faith by the Board of Directors of the
Company, constitutes a crime involving moral turpitude.
(d) Termination by the Company Other than for Cause. Except
for a termination following a Change in Control as provided at Section
11 hereof, notwithstanding any other
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<PAGE>
term or provision of this Agreement, the Company may terminate the
Period of Employment at any time and for whatever reason it deems
appropriate, or for no reason. In the event such termination by the
Company occurs, including an election not to renew this Agreement under
the provisions of Section 2 hereof, and is not due to disability as
provided in Section 8(b) above or for Cause as provided in Section 8(c)
above, the Employee shall be entitled to payment of his base salary, at
the rate in effect at the time of such termination, for the period
ending the earlier of three months following the third anniversary of
the Commencement Date, or the expiration of six months from the date of
such termination; provided, however, that such salary continuation
payments shall cease in the event of the Employee's death prior to
completion of such payments. In the event of a termination of the
Employee's employment under this Section 8(d) after this Agreement has
expired, and in the event that a new written agreement is not entered
into by the parties, the Employee shall receive his base salary for
each of the succeeding six months following such termination. The
Employee shall also be entitled to such bonuses (if any) as have been
earned by the Employee and not paid to him at the time of such
termination. Following a termination of his employment by the Company
under the circumstances described above in this Section 8(d), the
Employee will make reasonable efforts to find other employment and,
upon his becoming reemployed or otherwise engaged (whether as an
employee, partner, consultant, or otherwise), any salary or other
remuneration or benefits accruing to him from such other employment or
engagement shall offset any salary continuation payments due him under
this Section 8. Any rights and benefits the Employee may have under
employee benefit plans and programs of the Company generally following
a termination of the Employee's employment under the circumstances
described in this Section 8(d) shall be determined in accordance with
the terms of such plans and
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<PAGE>
programs. Except as provided in this Section 8(d), neither the Employee
nor any other person shall have any rights or claims against the
Company by reason of the termination of the Employee's employment under
the circumstances described in this Section 8(d).
(e) By Employee For Good Reason. Employee may terminate,
without liability, the Period of Employment for Good Reason (as defined
below) upon ten (10) days' advance written notice to the Company. The
Company shall pay Employee the compensation to which he is entitled
pursuant to Section 4 through the date of termination and thereafter
all obligations of the Company hereunder shall terminate. Good Reason
shall exist if: (i) there is an assignment to Employee of any duties
materially inconsistent with or which constitute a material change in
Employee's position, duties, responsibilities, or status with the
Company, or a material change in Employee's reporting responsibilities,
title, or offices; or removal of Employee from or failure to re-elect
Employee to any of such positions, except in connection with the
termination of the Period of Employment for Cause, or due to
disability, retirement, death, or termination of the Period of
Employment by Employee other than for Good Reason; (ii) there is a
reduction by the Company in Employee's annual salary then in effect; or
(iii) the Company acts in any way that would have a disproportionately
material adverse effect on Employee's participation in or
disproportionately and materially reduce Employee's benefit under any
benefit plan of the Company in which Employee is participating or
deprive Employee of any material fringe benefit enjoyed by Employee
when compared to other executives of the Company.
(f) Voluntary Termination by the Employee. At any time,
Employee may terminate, without liability, the Period of Employment for
any reason, by giving thirty (30) days' advance written notice to the
Company. If Employee terminates his employment
7
<PAGE>
pursuant to this Section 8(f), the Company shall have the option, in
its complete discretion, to terminate Employee immediately without the
running of the notice period. The Company shall pay Employee the
compensation to which he is entitled pursuant to Section 4 through the
end of the notice period, or, if elected, through the day upon which
early termination is elected pursuant to the foregoing sentence, and
thereafter all obligations of the Company hereunder shall terminate.
9. Covenants Not to Compete.
(a) Except as provided in Section 8(d) with regard to a
termination of the Period of Employment by the Company other than for
Cause, the Employee promises and agrees that, until the expiration of
one year following the termination or expiration of the Period of
Employment, he will not for himself or any third party, directly or
indirectly (i) engage in the operation or management of any production
auto painting or auto collision repair facility or other similar
business in any of the states in which the Company is engaged in
business at the time of such termination, or (ii) interfere with,
disrupt or attempt to disrupt the relationship, contractual or
otherwise, between the Company and any third party, including but not
limited to its employees, contractors, tenants and lessees.
(b) It is the desire and intent of the parties that the
provisions of this Section 9 shall be enforced to the fullest extent
permitted under the laws and public policies of each
jurisdiction in which enforcement is sought. Accordingly, if any
particular portion of this Section 9 shall be adjudicated to be invalid
or unenforceable, such adjudication shall apply only with respect to
the operation of that portion in the particular jurisdiction in which
such adjudication is made, and all other portions shall continue in
full force and effect.
8
<PAGE>
(c) It is expressly agreed that the provisions and covenants
in this Section 9 shall not apply and shall be of no force or effect in
the event the Company terminates the Employee's employment under this
Agreement and such termination is not due to disability or for Cause.
10. Confidential Information: Rights to Materials.
(a) Confidential Information. The Employee promises and agrees
that he will not, either while in the Company's employ or at any time
thereafter, disclose to any person not employed by the Company, or not
engaged to render services to the Company, or use, for himself or any
other person, firm, corporation or entity, any confidential information
of the Company obtained by him while in the employ of the Company,
including, without limitation, any of the Company's methods, processes,
techniques, practices, research data, marketing and sales information,
personnel data, customer lists, financial data, plans, know-how, trade
secrets, and proprietary information of the Company; provided, however,
that this provision shall not preclude the Employee from use or
disclosure of information known generally to the public (other than
information known generally to the public as a result of a violation of
this Section 10(a) by the Employee), from use or disclosure of
information acquired by the Employee outside of his affiliation with
the Company, from disclosure required by law or court order, or from
disclosure or use appropriate and in the ordinary course of carrying
out his duties as an employee of the Company.
(b) Rights to Materials. The Employee further promises and
agrees that, upon termination of his employment for whatever reason and
at whatever time, he will not take with him, without the prior written
consent of an officer authorized to act in the matter by the Board of
Directors of the Company, any records, files, memoranda, reports,
customer lists,
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<PAGE>
drawings, plans, sketches, documents, specifications,
and the like (or any copies thereof) relating to the business of the
Company or any of its current or future Affiliated Companies.
11. Change in Control. In the event of (i) the adoption of a plan of
merger or consolidation of the Company with any other corporation, trust or
partnership as a result of which the holders of the voting interests of the
Company as a group would receive less than 50% of the voting interests of the
surviving or resulting entity, (ii) the approval by the Board of Directors of
the Company of an agreement providing for the sale or transfer (other than as
security for obligations of the Company) of substantially all the assets of the
Company, or (iii) in the absence of a prior expression of approval by the Board
of Directors of the Company, and subsequent to the Commencement Date, the
acquisition of more than 20% of the Company's voting capital stock by any person
within the meaning of Section 13(d)(3) of the Exchange Act (any such event being
a Change in Control); then upon any termination of the Period of Employment by
the Company other than for cause under the provisions of Section 8(d) or upon a
termination caused by the Employee's refusal to relocate his principal place of
work to a location outside the state of Georgia at the request of the Company,
the Employee shall be entitled to the payment of his base salary at the rate in
effect at the time of such termination, for a period ending the later of the
expiration of the then current Period of Employment or six months following the
date of termination.
12. Injunctive Relief. The Employee acknowledges and agrees that the
Company would suffer irreparable injury in the event of a breach by him of any
of the provisions of Section 9 or Section 10 of this Agreement and that the
Company shall be entitled to an injunction restraining him from any breach or
threatened breach thereof. The Employee further agrees that, in the event of his
breach of any provision of Section 9 or 10 hereof, the Company shall be entitled
to cease any payments otherwise due and payable to the Employee hereunder.
Nothing herein shall be construed,
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<PAGE>
however, as prohibiting the Company from pursuing any other remedies at law or
in equity which it may have for any such breach or threatened breach of any
provision of Section 9 or 10 hereof, including the recovery of damages from the
Employee.
13. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the Employee and his personal representatives,
estate and heirs and the Company and its successors and assigns, including
without limitation any corporation or other entity to which the Company may
transfer all or substantially all of its assets and business (by operation of
law or otherwise) and to which the Company may assign this Agreement. The
Employee may not assign this Agreement or any part hereof without the prior
written consent of the Company, which consent may be withheld by the Company for
any reason it deems appropriate.
14. Entire Agreement. This Agreement contains the entire agreement of
the parties with respect to the employment of the Employee by the Company and
supersedes and replaces all other understandings and agreements, whether oral or
in writing, if any there be, previously entered into be the parties with respect
to such employment.
15. Amendment; Waiver. No provisions of this Agreement may be amended,
modified or waived unless such amendment, modification or waiver is agreed to in
writing and signed by the Employee and by a duly authorized officer of the
Company. No waiver by either party of any breach by the other party of any
provision of this Agreement shall be deemed a waiver of any other breach.
16. Notices. Any notice to be given hereunder shall be in writing and
delivered personally, or sent by certified mail or registered mail, postage
prepaid, return receipt requested, addressed to the party concerned at, if to
the Company, the Company's address and if to the Employee, at the Employee's
home address.
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<PAGE>
17. Severability. If any one or more of the provisions contained in
this Agreement shall be invalid, illegal, or unenforceable in any respect under
any applicable law, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
18. Withholding. Anything herein to the contrary notwithstanding, all
payments made by the Company hereunder shall be subject to the withholding of
such amounts relating to taxes as the Company may reasonably determined it
should withhold pursuant to any applicable law or regulation.
19. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws and judicial decisions of the State of Georgia.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
PEACH AUTO PAINTING AND COLLISION, INC.
--------------------------------------------
(Corporate Seal) By:_________________________________________
Title:________________________________________
ATTEST:
_____________________
Secretary
______________________________________(SEAL)
(Employee)
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<PAGE>
Exhibit 10.4
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the ___ day of _______, 1997, by
and between Peach Auto Painting and Collision, Inc., a Delaware corporation (the
"Company"), and Joseph W. Walters, Jr., a resident of Columbus, Georgia (the
"Employee").
W I T N E S S E T H :
WHEREAS, the Company desires to obtain the services of Employee, for
its own benefit and for the benefit of any existing and future Affiliated
Company (defined as any corporation or other business entity that directly or
indirectly controls, is controlled by, or is under common control with the
Company), and Employee desires to secure employment from the Company upon the
following terms and conditions;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree that the following provisions
shall constitute their agreement of employment:
1. Employment. The Company hereby employs the Employee, and the
Employee hereby accepts employment with the Company, for the term set forth in
Section 2 below, in the position and with the duties and responsibilities set
forth in Section 3 below, and upon the other terms and conditions hereinafter
stated.
2. Period of Employment. The term of this Agreement (the "Period of
Employment") shall commence on the date the Company completes an initial public
offering of its common stock (the "Commencement Date") and, unless otherwise
terminated as hereinafter provided, shall continue for three (3) years. In the
event that this Agreement expires and a new written agreement is not entered
into by the parties, the provisions of Sections 9, 10, and 11 of this Agreement
will apply with respect to any continued employment of the Employee by the
Company or by any successor to the business of the Company.
<PAGE>
3. Position; Duties; Extent of Services.
(a) Duties; Position. The Employee shall serve initially as
Vice President and Chief Financial Officer of the Company, and he shall
have such title, responsibilities, duties and authorities and shall
perform such services of an executive character as shall be designated
from time to time by the Board of Directors of the Company. The Company
shall retain full direction and control of the means and methods by
which Employee performs the above services and of the place(s) at which
such services are to be provided.
(b) Other Activities. Except upon the prior written consent of
the Board, Employee, during the Period of Employment, will not (i)
accept any other employment, or (ii) engage, directly or indirectly, in
any other business activity (whether or not pursued for pecuniary
advantage) that is or may be competitive with, or that might place him
in a competing position to that of the Company or any Affiliated
Company with respect to the operation or management of any production
auto painting or auto collision repair facility or other similar
business.
4. Compensation. In consideration of the services to be rendered by the
Employee to the Company and in consideration of the Employee's other covenants
hereunder, the Employee will receive a base salary at the rate of $90,000 per
year, payable at such intervals as may be established by the Company from time
to time for salary payments to its management employees. The Employee shall
receive such salary increases and/or bonuses as the Board of Directors of the
Company may from time to time approve in its discretion. In no event, however,
will the Employee's gross annual salary be less than $90,000. The Employee shall
also be entitled to participate in such incentive compensation plans as the
Company may from time to time maintain for its executive employees generally and
as described at Section 5 hereof.
2
<PAGE>
5. 1996 Comprehensive Stock Option Plan. The Company has established
and the Employee will participate in the Peach Auto Painting and Collision 1996
Comprehensive Stock Option Plan (the "Plan").
6. Employee Benefits. The Employee will be entitled to participate, in
accordance with the provisions thereof, in the employee benefit plans made
available by the Company to its employees generally. In the event of the death
or total disability of the Employee, the Employee or his estate or beneficiaries
shall also be entitled to benefits in accordance with Section 8 hereof.
7. Business Expense Reimbursements. During the period of his employment
under this Agreement, the Employee will be entitled to reimbursement for all
reasonable, out-of-pocket expenses incurred by him in performing services
hereunder, provided that such expenses are incurred in accordance with the
applicable policies of the Company. The Employee shall be entitled to such
reimbursement upon presentation by the Employee, from time to time, of an
itemized account of such expenses and appropriate documentation therefor.
8. Termination of Employment.
(a) Death. In the event of the death of the Employee during
his employment under this Agreement, the following payments shall be
made to the Employee's designated beneficiary, or, in the absence of
such designation, to the estate or other legal representative of the
Employee: (i) his base salary for the month in which his death occurs,
and (ii) such bonuses (if any) as have been earned by the Employee and
not paid to him at the time of his death. Any rights and benefits the
Employee or his estate or any other person may have under employee
benefit plans and programs of the Company generally in the event of the
Employee's death shall be determined in accordance with the terms of
such plans and programs. Except as provided in this Section 8, neither
the Employee's estate nor any other person shall have
3
<PAGE>
any rights or claims against the Company in the event of the
death of the Employee during his employment hereunder.
(b) Long-Term Disability. In the event of the Employee's
disability (as hereinafter defined) during his employment under this
Agreement, the Period of Employment may be terminated by the Company.
For the first six months following termination of employment due to
disability, the Employee shall be paid his base salary at the rate in
effect at the time of the commencement of disability. Thereafter, the
Employee shall be entitled to benefits in accordance with and subject
to the terms and provisions of the Company's long-term disability plan
for senior management employees, as in effect at the time of the
commencement of disability. For purposes of this Agreement,
"disability" shall mean that Employee cannot perform the main duties of
his regular business activity with the Company at the time of the
disability due to illness or disease or injury and, at the time of the
disability, the Employee is receiving care from a licensed physician,
unrelated to the Employee, for the condition causing the disability
within the scope of such physician's license. Anything herein to the
contrary notwithstanding, if, during the six-month period following a
termination of employment under this Section 8 in which salary
continuation payments are payable by the Company, the Employee becomes
reemployed or otherwise engaged (whether as an employee, partner,
consultant, or otherwise), any salary or other remuneration or benefits
earned by him from such employment or engagement shall offset any
payments due him under this Section 8. In the event of the Employee's
disability, any rights and benefits the Employee may have under
employee benefit plans and programs of the Company generally shall be
determined in accordance with the terms of such plans and programs.
Upon termination of the Employee's employment by reason of disability
under this Section 8, the Employee shall be entitled, in
4
<PAGE>
addition to the other payments provided for in this Section 8, to
payment of such bonuses (if any) as may have been earned by the
Employee and not paid to him at the time of such termination. Except as
provided in this Section 8, neither the Employee nor his estate, or any
other person, shall have any rights or claims against the Company in
the event of the termination of the Employee's employment by reason of
disability.
(c) Termination for Cause. Nothing herein shall prevent the
Company from terminating the Period of Employment for Cause (as
hereinafter defined). Upon termination for Cause, the Employee shall
receive his base salary only through the date of termination, and
neither the Employee nor any other person shall be entitled to any
further payments from the Company, for salary, unpaid bonuses or any
other amounts. Any rights and benefits the Employee may have under
employee benefit plans and programs of the Company generally following
a termination of the Employee's employment for Cause shall be
determined in accordance with the terms of such plans and programs. For
purposes of this Agreement, termination for Cause shall mean (i)
termination due to (y) willful or gross neglect of duties for which
employed, or (z) willful misconduct in the performance of duties for
which employed, in either such instance so as to cause material harm to
the Company, all such facts to be determined in good faith by the Board
of Directors of the Company, (ii) termination due to the Employee's
committing fraud, misappropriation or embezzlement in the performance
of his duties as an employee of the Company, or (iii) termination due
to the Employee's committing any felony for which he is convicted and
good faith by the Board of Directors of the Company, constitutes a
crime involving moral turpitude.
(d) Termination by the Company Other than for Cause. Except
for a termination following a Change in Control as provided at Section
11 hereof, notwithstanding any other
5
<PAGE>
term or provision of this Agreement, the Company may terminate the
Period of Employment at any time and for whatever reason it deems
appropriate, or for no reason. In the event such termination by the
Company occurs, including an election not to renew this Agreement under
the provisions of Section 2 hereof, and is not due to disability as
provided in Section 8(b) above or for Cause as provided in Section 8(c)
above, the Employee shall be entitled to payment of his base salary, at
the rate in effect at the time of such termination, for the period
ending the earlier of three months following the third anniversary of
the Commencement Date, or the expiration of six months from the date of
such termination; provided, however, that such salary continuation
payments shall cease in the event of the Employee's death prior to
completion of such payments. In the event of a termination of the
Employee's employment under this Section 8(d) after this Agreement has
expired, and in the event that a new written agreement is not entered
into by the parties, the Employee shall receive his base salary for
each of the succeeding six months following such termination. The
Employee shall also be entitled to such bonuses (if any) as have been
earned by the Employee and not paid to him at the time of such
termination. Following a termination of his employment by the Company
under the circumstances described above in this Section 8(d), the
Employee will make reasonable efforts to find other employment and,
upon his becoming reemployed or otherwise engaged (whether as an
employee, partner, consultant, or otherwise), any salary or other
remuneration or benefits accruing to him from such other employment or
engagement shall offset any salary continuation payments due him under
this Section 8. Any rights and benefits the Employee may have under
employee benefit plans and programs of the Company generally following
a termination of the Employee's employment under the circumstances
described in this Section 8(d) shall be determined in accordance with
the terms of such plans and
6
<PAGE>
programs. Except as provided in this Section 8(d), neither the Employee
nor any other person shall have any rights or claims against the
Company by reason of the termination of the Employee's employment under
the circumstances described in this Section 8(d).
(e) By Employee For Good Reason. Employee may terminate,
without liability, the Period of Employment for Good Reason (as defined
below) upon ten (10) days' advance written notice to the Company. The
Company shall pay Employee the compensation to which he is entitled
pursuant to Section 4 through the date of termination and thereafter
all obligations of the Company hereunder shall terminate. Good Reason
shall exist if: (i) there is an assignment to Employee of any duties
materially inconsistent with or which constitute a material change in
Employee's position, duties, responsibilities, or status with the
Company, or a material change in Employee's reporting responsibilities,
title, or offices; or removal of Employee from or failure to re-elect
Employee to any of such positions, except in connection with the
termination of the Period of Employment for Cause, or due to
disability, retirement, death, or termination of the Period of
Employment by Employee other than for Good Reason; (ii) there is a
reduction by the Company in Employee's annual salary then in effect; or
(iii) the Company acts in any way that would have a disproportionately
material adverse effect on Employee's participation in or
disproportionately and materially reduce Employee's benefit under any
benefit plan of the Company in which Employee is participating or
deprive Employee of any material fringe benefit enjoyed by Employee
when compared to other executives of the Company.
(f) Voluntary Termination by the Employee. At any time,
Employee may terminate, without liability, the Period of Employment for
any reason, by giving thirty (30) days' advance written notice to the
Company. If Employee terminates his employment
7
<PAGE>
pursuant to this Section 8(f), the Company shall have the option, in
its complete discretion, to terminate Employee immediately without the
running of the notice period. The Company shall pay Employee the
compensation to which he is entitled pursuant to Section 4 through the
end of the notice period, or, if elected, through the day upon which
early termination is elected pursuant to the foregoing sentence, and
thereafter all obligations of the Company hereunder shall terminate.
9. Covenants Not to Compete.
(a) Except as provided in Section 8(d) with regard to a
termination of the Period of Employment by the Company other than for
Cause, the Employee promises and agrees that, until the expiration of
one year following the termination or expiration of the Period of
Employment, he will not for himself or any third party, directly or
indirectly (i) engage in the operation or management of any production
auto painting or auto collision repair facility or other similar
business in any of the states in which the Company is engaged in
business at the time of such termination, or (ii) interfere with,
disrupt or attempt to disrupt the relationship, contractual or
otherwise, between the Company and any third party, including but not
limited to its employees, contractors, tenants and lessees.
(b) It is the desire and intent of the parties that the
provisions of this Section 9 shall be enforced to the fullest extent
permitted under the laws and public policies of each
jurisdiction in which enforcement is sought. Accordingly, if any
particular portion of this Section 9 shall be adjudicated to be invalid
or unenforceable, such adjudication shall apply only with respect to
the operation of that portion in the particular jurisdiction in which
such adjudication is made, and all other portions shall continue in
full force and effect.
8
<PAGE>
(c) It is expressly agreed that the provisions and covenants
in this Section 9 shall not apply and shall be of no force or effect in
the event the Company terminates the Employee's employment under this
Agreement and such termination is not due to disability or for Cause.
10. Confidential Information: Rights to Materials.
(a) Confidential Information. The Employee promises and agrees
that he will not, either while in the Company's employ or at any time
thereafter, disclose to any person not employed by the Company, or not
engaged to render services to the Company, or use, for himself or any
other person, firm, corporation or entity, any confidential information
of the Company obtained by him while in the employ of the Company,
including, without limitation, any of the Company's methods, processes,
techniques, practices, research data, marketing and sales information,
personnel data, customer lists, financial data, plans, know-how, trade
secrets, and proprietary information of the Company; provided, however,
that this provision shall not preclude the Employee from use or
disclosure of information known generally to the public (other than
information known generally to the public as a result of a violation of
this Section 10(a) by the Employee), from use or disclosure of
information acquired by the Employee outside of his affiliation with
the Company, from disclosure required by law or court order, or from
disclosure or use appropriate and in the ordinary course of carrying
out his duties as an employee of the Company.
(b) Rights to Materials. The Employee further promises and
agrees that, upon termination of his employment for whatever reason and
at whatever time, he will not take with him, without the prior written
consent of an officer authorized to act in the matter by the Board of
Directors of the Company, any records, files, memoranda, reports,
customer lists,
9
<PAGE>
drawings, plans, sketches, documents, specifications, and the like (or
any copies thereof) relating to the business of the Company or any of
its current or future Affiliated Companies.
11. Change in Control. In the event of (i) the adoption of a plan of
merger or consolidation of the Company with any other corporation, trust or
partnership as a result of which the holders of the voting interests of the
Company as a group would receive less than 50% of the voting interests of the
surviving or resulting entity, (ii) the approval by the Board of Directors of
the Company of an agreement providing for the sale or transfer (other than as
security for obligations of the Company) of substantially all the assets of the
Company, or (iii) in the absence of a prior expression of approval by the Board
of Directors of the Company, and subsequent to the Commencement Date, the
acquisition of more than 20% of the Company's voting capital stock by any person
within the meaning of Section 13(d)(3) of the Exchange Act (any such event being
a Change in Control); then upon any termination of the Period of Employment by
the Company other than for cause under the provisions of Section 8(d) or upon a
termination caused by the Employee's refusal to relocate his principal place of
work to a location outside the state of Georgia at the request of the Company,
the Employee shall be entitled to the payment of his base salary at the rate in
effect at the time of such termination, for a period ending the later of the
expiration of the then current Period of Employment or six months following the
date of termination.
12. Injunctive Relief. The Employee acknowledges and agrees that the
Company would suffer irreparable injury in the event of a breach by him of any
of the provisions of Section 9 or Section 10 of this Agreement and that the
Company shall be entitled to an injunction restraining him from any breach or
threatened breach thereof. The Employee further agrees that, in the event of his
breach of any provision of Section 9 or 10 hereof, the Company shall be entitled
to cease any payments otherwise due and payable to the Employee hereunder.
Nothing herein shall be construed,
10
<PAGE>
however, as prohibiting the Company from pursuing any other remedies at law or
in equity which it may have for any such breach or threatened breach of any
provision of Section 9 or 10 hereof, including the recovery of damages from the
Employee.
13. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the Employee and his personal representatives,
estate and heirs and the Company and its successors and assigns, including
without limitation any corporation or other entity to which the Company may
transfer all or substantially all of its assets and business (by operation of
law or otherwise) and to which the Company may assign this Agreement. The
Employee may not assign this Agreement or any part hereof without the prior
written consent of the Company, which consent may be withheld by the Company for
any reason it deems appropriate.
14. Entire Agreement. This Agreement contains the entire agreement of
the parties with respect to the employment of the Employee by the Company and
supersedes and replaces all other understandings and agreements, whether oral or
in writing, if any there be, previously entered into be the parties with respect
to such employment.
15. Amendment; Waiver. No provisions of this Agreement may be amended,
modified or waived unless such amendment, modification or waiver is agreed to in
writing and signed by the Employee and by a duly authorized officer of the
Company. No waiver by either party of any breach by the other party of any
provision of this Agreement shall be deemed a waiver of any other breach.
16. Notices. Any notice to be given hereunder shall be in writing and
delivered personally, or sent by certified mail or registered mail, postage
prepaid, return receipt requested, addressed to the party concerned at, if to
the Company, the Company's address and if to the Employee, at the Employee's
home address.
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<PAGE>
17. Severability. If any one or more of the provisions contained in
this Agreement shall be invalid, illegal, or unenforceable in any respect under
any applicable law, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
18. Withholding. Anything herein to the contrary notwithstanding, all
payments made by the Company hereunder shall be subject to the withholding of
such amounts relating to taxes as the Company may reasonably determined it
should withhold pursuant to any applicable law or regulation.
19. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws and judicial decisions of the State of Georgia.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
PEACH AUTO PAINTING AND COLLISION, INC.
--------------------------------------------
(Corporate Seal) By:_________________________________________
Title:________________________________________
ATTEST:
_____________________
Secretary
______________________________________(SEAL)
(Employee)
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Exhibit 10.5
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PEACH AUTO PAINTING AND COLLISION, INC.
1996 STOCK OPTION PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN: DEFINITIONS
The name of the plan is the Peach Auto Painting and Collision, Inc.
1996 Stock Option Plan (the "Plan"). The purpose of the Plan is to encourage and
enable the officers, employees and directors of Peach Auto Painting and
Collision, Inc. (the "Company") and any Subsidiaries upon whose judgment,
initiative and efforts the Company largely depends for the successful conduct of
its business to acquire a proprietary interest in the Company. It is anticipated
that providing such persons with a direct stake in the Company's welfare will
assure a closer identification of their interests with those of the Company,
thereby stimulating their efforts on the Company's behalf and strengthening
their desire to remain with the Company.
The following terms shall be defined as set forth below:
"ACT" means the Securities Exchange Act of 1934, as amended.
"AWARD" or "AWARDS," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, Restricted Stock Awards, and Phantom Stock.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means and shall be limited to a vote of the Board of Directors
resolving that the participant should be dismissed as a result of (i) any
material breach by the participant of any agreement to which the participant and
the Company are parties, (ii) any act (other than retirement) or omission to act
by the participant which may have a material and adverse effect on the business
of the Company or any Subsidiary or on the participant's ability to perform
services for the Company or any Subsidiary, including, without limitation, the
commission of any crime (other than ordinary traffic violations), or (iii) any
material misconduct or neglect of duties by the participant in connection with
the business or affairs of the Company or any Subsidiary.
"CHANGE OF CONTROL" is defined in Section 13.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"COMMITTEE" means the Board or any Committee of the Board referred to
in Section 2.
"DISABILITY" means disability as set forth in Section 22(e)(3) of the
Code.
"DISINTERESTED PERSON" means an Independent Director who qualifies as
such under Rule 16b-3(c)(2)(i) promulgated under the Act, or any successor
definition under the Act.
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"EFFECTIVE DATE" means the date on which the Plan is approved by
shareholders as set forth in Section 15.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related rules, regulations and interpretations.
"FAIR MARKET VALUE" on any given date means the mean of the last
reported bid and ask prices at which the Shares are quoted and traded on such
date or, if no Shares are traded on such date, the most recent date on which the
Shares were traded, as reflected on the NASDAQ or, if applicable, any other
national stock exchange on which the Shares are traded.
"INCENTIVE STOCK OPTION" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the Code.
"INDEPENDENT DIRECTOR" means a member of the Board who is not also an
employee of the Company or any Subsidiary.
"NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option.
"OPTION" or "STOCK OPTION" means any option to purchase Shares granted
pursuant to Section 5.
"PHANTOM STOCK" means Awards granted pursuant to Section 8.
"RESTRICTED STOCK AWARD" means Awards granted pursuant to Section 7.
"RESTRICTED SHARES" means Shares subject to restrictions as provided in
Section 7 and the subject of a Restricted Stock Award.
"SHARE" means one or more, respectively, of the Company's shares of
common stock, par value $.01 per share, subject to adjustments pursuant to
Section 3.
"STOCK APPRECIATION RIGHTS" ("SARS") means Awards granted pursuant to
Section 6.
"SUBSIDIARY" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities, beginning with
the Company if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50% or more of the economic interest or the total combined voting
power of all classes of stock or other interests in one of the other
corporations or entities in the chain.
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SECTION 2. ADMINISTRATION OF PLAN: COMMITTEE AUTHORITY TO SELECT
PARTICIPANTS AND DETERMINE AWARDS
(a) Committee. The Plan shall be administered by all of the Independent
Director members of the Compensation Committee of the Board, or any other
committee of not less than two Independent Directors performing similar
functions, as appointed by the Board from time to time. Each member of the
Committee shall be a Disinterested Person after the date of the closing of the
Company's initial public offering.
(b) Powers of Committee. The Committee shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:
(i) to select the officers and other employees of the Company
and its Subsidiaries to whom Awards may be granted from time to time;
(ii) to determine the time or times of grant, and the extent,
if any, of Incentive Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Phantom Stock, and Restricted Stock Awards, or any
combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of Shares to be covered by any
Award;
(iv) to determine and modify the terms and conditions,
including restrictions, not inconsistent with the terms of the Plan, of
any Award, which terms and conditions may differ among individual
Awards and participants, and to approve the form of written instruments
evidencing the Awards;
(v) to accelerate the exercisability or vesting of all or any
portion of any Award;
(vi) subject to the provisions of Section 5(a)(iii), to extend
the period in which Stock Options may be exercised;
(vii) to determine whether, to what extent, and under what
circumstances Shares and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or
credit amounts constituting interest (at rates determined by the
Committee) or dividends or deemed dividends on such deferrals; and
(viii) to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Awards (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in
connection with the Plan; and to otherwise supervise the administration
of the Plan.
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All decisions and interpretations of the Committee shall be binding on
all persons, including the Company and Plan participants.
SECTION 3. SHARES AVAILABLE UNDER THE PLAN; MERGERS; SUBSTITUTIONS
(a) Shares Issuable. The maximum number of shares reserved and
available for issuance under the Plan shall be 700,000 Shares. For purposes of
this limitation, the Shares underlying any Awards which are forfeited, canceled,
reacquired by the Company, satisfied without the issuance of Shares or otherwise
terminated (other than by exercise) shall be added back to the Shares available
for issuance under the Plan so long as the participants to whom such Awards had
been previously granted received no benefits of ownership of the underlying
Shares to which the Award related. Subject to such overall limitation, Shares
may be issued up to such maximum number pursuant to any type or types of Award,
including Incentive Stock Options. Shares issued under the Plan may be
authorized but unissued Shares or Shares reacquired by the Company.
(b) Stock Dividends, Mergers, etc. In the event of a stock dividend,
stock split or similar change in capitalization affecting the Shares, the
Committee shall make appropriate adjustments in (i) the number and kind of stock
or securities on which Awards may thereafter be granted, (ii) the number and
kind of stock or securities remaining subject to outstanding Awards, and (iii)
the option or purchase price in respect of such stock or securities. In the
event of any merger, consolidation, dissolution or liquidation of the Company,
the Committee in its sole discretion may, as to any outstanding Awards, make
such substitution or adjustment in the aggregate number of Shares reserved for
issuance under the Plan and the number and purchase price (if any) of Shares
subject to such Awards as it may determine and as may be permitted by the terms
of such transaction, or amend or terminate such Awards upon such terms and
conditions as it shall provide (which, in the case of the termination of the
vested portion of any Award, shall require payment or other consideration which
the Committee deems equitable in the circumstances).
(c) Substitute Awards. The Committee may grant Awards under the Plan in
substitution for stock and stock-based awards held by employees of another
corporation who concurrently become employees of the Company or a Subsidiary as
the result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Committee may direct that
the substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.
SECTION 4. ELIGIBILITY
Participants in the Plan will be such full or part-time officers and
other employees of the Company and its Subsidiaries who are responsible for or
contribute to the management, growth, or profitability of the Company and its
Subsidiaries and who are selected from time to time by the Committee, in its
sole discretion. Independent Directors are also eligible to participate in the
Plan but only to the extent provided in Section 8 below.
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SECTION 5. STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock
Options or Non-Qualified Stock Options. To the extent that any Option does not
qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock
Option.
No Incentive Stock Option shall be granted under the Plan after
November 13, 2006.
(a) Stock Options Granted to Employees. The Committee in its discretion
may grant Stock Options to employees of the Company or any Subsidiary. Stock
Options granted to employees pursuant to this Section 5(a) shall be subject to
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem desirable:
(i) Exercise Price. The exercise price per share for the
Shares covered by a Stock Option granted pursuant to this Section 5(a)
shall be determined by the Committee at the time of grant but shall not
be less than 100% of Fair Market Value on the date of grant.
Notwithstanding the foregoing, with respect to Non-Qualified Stock
Options which are granted in lieu of cash bonus, the exercise price per
share shall not be less than 50% of the Fair Market Value on the date
of grant. If an employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code) more
than 10% of the combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation and an Incentive Stock
Option is granted to such employee, the option price of such Incentive
Stock Option shall not be less than 110% of Fair Market Value on the
grant date.
(ii) Option Term. The term of each Stock Option shall be fixed
by the Committee, but no Incentive Stock Option shall be exercisable
more than ten years after the date the Option is granted. If an
employee owns or is deemed to own (by reason of the attribution rules
of Section 424(d) of the Code) more than 10% of the combined voting
power of all classes of stock of the Company or any Subsidiary or
parent corporation and an Incentive Stock Option is granted to such
employee, the term of such option shall be no more than five years from
the date of grant.
(iii) Exercisability; Rights of a Shareholder. Stock Options
shall become vested and exercisable at such time or times, whether or
not in installments, as shall be determined by the Committee at or
after the grant date. The Committee may at any time accelerate the
exercisability of all or any portion of any Stock Option. An optionee
shall have the rights of a shareholder only as to Shares acquired upon
the exercise of a Stock Option and not as to unexercised Stock Options.
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(iv) Method of Exercise. Stock Options may be exercised in
whole or in part, by giving written notice of exercise to the Company,
specifying the number of Shares to be purchased. Payment of the
purchase price may be made by one or more of the following methods or
by such other method as the Compensation Committee may allow:
(A) In cash, by certified or bank check or other
instrument acceptable to the Committee;
(B) In the form of Shares that are not then subject
to restrictions under any Company plan and that have been held
by the optionee for at least six months, if permitted by the
Committee in its discretion. Such surrendered Shares shall be
valued at Fair Market Value on the exercise date; or
(C) By the optionee delivering to the Company a
properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company
cash or a check payable and acceptable to the Company to pay
the purchase price; provided that in the event the optionee
chooses to pay the purchase price as so provided, the optionee
and the broker shall comply with such procedures and enter
into such agreements of indemnity and other agreements as the
Committee shall prescribe as a condition of such payment
procedure. Payment instruments will be received subject to
collection.
The delivery of certificates representing the Shares to be purchased pursuant to
the exercise of a Stock Option will be contingent upon receipt from the optionee
(or a purchaser acting in his stead in accordance with the provisions of the
Stock Option) by the Company of the full purchase price for such Shares and the
fulfillment of any other requirements contained in the Stock Option or
applicable provisions or laws.
(v) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of
descent and distribution and all Stock Options shall be exercisable,
during the optionee's lifetime, only by the optionee.
(vi) Termination by Reason of Death. If any optionee's
employment by the Company and its Subsidiaries terminates by reason of
death, the Stock Option may thereafter be exercised, to the extent
exercisable at the date of death, by the legal representative or
legatee of the optionee, for a period of six months (or such longer
periods as the Committee shall specify at any time) from the date of
death, or until the expiration of the stated term of the Option, if
earlier.
(vii) Termination by Reason of Disability.
(A) Any Stock Option held by an optionee whose
employment by the Company and its Subsidiaries has terminated
by reason of Disability may thereafter be exercised, to the
extent it was exercisable at the time of such termination, for
a period of six months (or such longer period as the Committee
shall specify at any time
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) from the date of such termination of employment, or until
the expiration of the stated term of the Option, if earlier.
(B) The Committee shall have sole authority and
discretion to determine whether a participant's employment has
been terminated by reason of Disability.
(C) Except as otherwise provided by the Committee at
the time of grant the death of an optionee during a period
provided in this Section 5(a)(vii) for the exercise of a
Non-Qualified Stock Option, shall extend such period of six
months from the date of death, subject to termination on the
expiration of the stated term of the Option, if earlier.
(viii) Termination for Cause. If any optionee's employment by
the Company and its Subsidiaries has been terminated for Cause, any
Stock Option held by such optionee shall immediately terminate and be
of no further force and effect; provided, however, that the Committee
may, in its sole discretion, provide that such Stock Option can be
exercised for a period of up to 30 days from the date of termination of
employment or until the expiration of the stated term of the Option, if
earlier.
(ix) Other Termination. Unless otherwise determined by the
Committee, if an optionee's employment by the Company and its
Subsidiaries terminate for any reason other than death, Disability, or
for Cause, any Stock Option held by such optionee may thereafter be
exercised, to the extent it was exercisable on the date of termination
of employment for three months (or such longer period as the Committee
shall specify at any time) from the date of termination of employment
or until the expiration of the stated term of the Option, if earlier.
(x) Annual Limit on Incentive Stock Options. To the extent
required for "incentive stock option" treatment under Section 422 of
the Code, the aggregate Fair Market Value (determined as of the time of
grant) of the Shares with respect to which Incentive Stock Options
granted under this Plan and any other plan of the Company or its
Subsidiaries become exercisable for the first time by an optionee
during any calendar year shall not exceed $100,000.
(xi) Form of Settlement. Shares issued upon exercise of a
Stock Option shall be free of all restrictions under the Plan, except
as otherwise provided in this Plan.
(b) Reload Options. At the discretion of the Committee, Options granted
under Section 5(a) may include a so-called "reload" feature pursuant to which an
optionee exercising an option by the delivery of a number of Shares in
accordance with Section 5(a)(iv)(B) hereof would automatically be granted
additional Options (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with the same expiration
date as the original Option being exercised, and with such other terms as the
Committee may provide) to purchase that number of Shares equal to the number
delivered to exercise the original Option.
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(c) Stock Options Granted to Independent Directors.
(i) Automatic Grant of Options. Each Independent Director
shall automatically be granted a Non-Qualified Stock Option to purchase
10,000 Shares upon assuming his or her position on the Board. The
exercise price per Share for the Shares covered by a Stock Option
granted pursuant to this Section 5(c) shall be equal to, (i) as to each
Independent Director serving on the Board on the date of the initial
public offering, initial public offering price and, (ii) as to each
Independent Director elected to serve on the Board subsequent to the
initial public offering, the Fair Market Value of a single Share on the
date the Stock Option is granted.
(ii) Exercise; Termination; Non-transferability.
(A) Except as provided in Section 13, no Option
granted under Section 5(c)(i) may be exercised before the
first anniversary of the date upon which it was granted. The
shares subject to such Option shall become exercisable in 25%
increments on each anniversary of the date of grant beginning
with the first such anniversary such that 100% of the shares
subject to an Option shall be exercisable on or after the
fourth anniversary of the date of grant; provided, however,
that the Independent Director who has received a grant under
Section 5(c) must be a member of the Board on any such
anniversary date. No Option issued under this Section 5(c)
shall be exercisable after the expiration of ten years from
the date upon which such Option is granted.
(B) The rights of an Independent Director in an
Option granted under Section 5(c) shall terminate six months
after such Director ceases to be a Director of the Company or
the specified expiration date, if earlier; provided, however,
that if the Independent Director ceases to be a Director for
Cause, the rights shall terminate immediately on the date on
which he ceases to be a Director.
(C) No Stock Option granted under this Section 5(c)
shall be transferable by the optionee otherwise than by Will
or by the laws of descent and distribution, and such Options
shall be exercisable, during the optionee's lifetime only by
the optionee. Any Option granted to an Independent Director
and outstanding on the date of his death may be exercised by
the legal representative or legatee of the optionee for a
period of six months from the date of death or until the
expiration of the stated term of the Option, if earlier.
(D) Options granted under this Section 5(c) may be
exercised only by written notice to the Company specifying the
number of Shares to be purchased. Payment of the full purchase
price of the Shares to be purchased may be made by one or more
of the methods specified in Section 5(a)(iv). An optionee
shall have the rights of a shareholder only as to Shares
acquired upon the exercise of a Stock Option and not as to
unexercised Stock Options.
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(iii) Limited to Independent Directors. The provisions of this
Section 5(c) shall apply only to Options granted or to be granted to
Independent Directors, and shall not be deemed to modify, limit or
otherwise apply to any other provision of this Plan or to any Option
issued under this Plan to a participant who is not an Independent
Director of the Company. To the extent inconsistent with the provisions
of any other Section of this Plan, the provisions of this Section 5(c)
shall govern the rights and obligations of the Company and Independent
Directors respecting Options granted or to be granted to Independent
Directors. The provisions of this Section 5(c) which affect the price,
date of exercisability, option period or amount of Shares under an
Option shall not be amended more than once in any six-month period,
other than to comport with changes in the Code or ERISA.
SECTION 6. STOCK APPRECIATION RIGHTS.
The Committee may from time to time grant SARs unrelated to Options or
related to Options or portions of Options granted to participants under the
Plan. Each SAR shall be evidenced by a written instrument and shall be subject
to such terms and conditions as the Committee may determine. Subject to such
terms and conditions established by the Committee the participant may exercise
an SAR or portion thereof, and thereupon shall be entitled to receive payment of
an amount equal to the aggregate appreciation in value of the Shares as to which
the SAR is awarded, as measured by the difference between the purchase price of
such Shares and their Fair Market Value at the date of exercise. Such payments
may be made in cash, in Shares valued at Fair Market Value as of the date of
exercise, or in any combination thereof, as the Committee in its discretion
shall determine.
SECTION 7. RESTRICTED STOCK AWARDS
(a) Nature of Restricted Stock Award. The Committee may grant
Restricted Stock Awards to any employee of the Company or any Subsidiary. A
Restricted Stock Award is an Award entitling the recipient to acquire, at no
cost or for a purchase price determined by the Committee, Shares subject to such
restrictions and conditions as the Committee may determine at the time of grant.
Conditions may be based on continuing employment and/or achievement of
pre-established performance goals and objectives.
(b) Acceptance of Award. A participant who is granted a Restricted
Stock Award shall have no rights with respect to such Award unless the
participant shall have accepted the Award within 60 days (or such shorter date
as the Committee may specify) following the award date by making payment to the
Company, if required, by certified or bank check or other instrument or form of
payment acceptable to the Committee in an amount equal to the specified purchase
price, if any, of the Shares covered by the Award and by executing and
delivering to the Company a written instrument that sets forth the terms and
conditions of the Restricted Shares in such form as the Committee shall
determine.
(c) Rights as a Shareholder. Upon complying with Section 7(b) above, a
participant shall have all the rights of a shareholder with respect to the
Restricted Shares including voting and dividend rights, subject to
non-transferability restrictions and Company repurchase or forfeiture rights
described in this Section 7 and subject to such conditions contained in the
written instrument
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evidencing the Restricted Stock Award. Unless the Committee shall otherwise
determine, certificates evidencing the Restricted Shares shall remain in the
possession of the Company until such Shares are vested as provided in Section
7(e) below.
(d) Restrictions. Restricted Shares may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein. In the event of termination of employment by the
Company and its Subsidiaries for any reason (including death, retirement,
Disability, or for Cause), the Company shall have the right, at the discretion
of the Committee, to repurchase at their original purchase price as established
at Section 7(a) above Restricted Shares with respect to which conditions have
not lapsed, or to require forfeiture of such Shares to the Company if acquired
at no cost, from the participant or the participant's legal representative. The
Company must exercise such right of repurchase or forfeiture not later than the
90th day following such termination of employment (unless otherwise specified in
the written instrument evidencing the Restricted Stock Award).
(e) Vesting of Restricted Shares. The Committee at the time of grant
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the
non-transferability of the Restricted Shares and the Company's right of
repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or
the attainment of such pre-established performance goals, objectives and other
conditions, the Shares on which all restrictions have lapsed shall no longer be
Restricted Shares and shall be deemed "vested."
(f) Waiver, Deferral and Reinvestment of Dividends. The written
instrument evidencing the Restricted Stock Award may require or permit the
immediate payment, waiver, deferral or investment of dividends paid on the
Restricted Shares.
SECTION 8. PHANTOM STOCK
The Committee may from time to time grant Phantom Stock Awards under
the Plan. Each Phantom Stock Award shall be evidenced by a written instrument
and shall be subject to such terms and conditions as the Committee may
determine. Subject to such terms and conditions as may be established by the
Committee, the participant may exercise a Phantom Stock Award or portion
thereof, and thereupon shall be entitled to receive payment of an amount equal
to the Fair Market Value at the date of exercise of the Shares as to which the
Phantom Stock is awarded. Such payments may be made in cash, in Shares valued at
Fair Market Value as of the date of exercise, or in any combination thereof, as
the Committee in its discretion shall determine.
SECTION 9. TAX WITHHOLDING
(a) Payment by Participant. Each participant shall, no later than the
date as of which the value of an Award of any Shares or other amounts received
thereunder first becomes includable in the gross income of the participant for
federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of any federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its
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Subsidiaries shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the participant.
(b) Payment in Shares. A participant may elect to have such tax
withholding obligation satisfied, in whole or in part, by (i) authorizing the
Company to withhold from the Shares to be issued pursuant to any Award a number
of Shares with an aggregate Fair Market Value (as of the date the withholding is
effected) that would satisfy the withholding amount due, or (ii) transferring to
the Company Shares owned by the participant with an aggregate Fair Market Value
(as of the date the withholding is effected) that would satisfy the withholding
amount due. With respect to any participant who is subject to Section 17 of the
Act, the following additional restrictions shall apply:
(A) the election to satisfy tax withholding obligations
relating to an Award in the manner permitted by this Section 9(b) shall
be made either (1) during the period beginning on the third business
day following the date of release of quarterly or annual summary
statements of revenues of the Company and ending on the twelfth
business day following such date, or (2) at least six months prior to
the date as of which the receipt of such Award first becomes a taxable
event for federal income tax purposes;
(B) such election shall be irrevocable;
(C) such election shall be subject to the consent or
disapproval of the Committee, and
(D) the Shares withheld to satisfy tax withholding must
pertain to an Award which has been outstanding for at least six months.
SECTION 10. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness, or
for any other purposes approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.
SECTION 11. AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the
Committee may, at any time, amend or cancel any outstanding Award (or provide
substitute Awards at the same or reduced exercise or purchase price or with no
exercise or purchase price, but such price, if any, must satisfy the
requirements which would apply to the substitute or amended Award as if it were
then initially
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granted under this Plan) for the purpose of satisfying changes in law or for any
outstanding Award without the holder's consent. To the extent required by the
Code to ensure that Options granted hereunder qualify as Incentive Stock Options
and to the extent required by the Act to ensure that Awards and Options granted
under the Plan are exempt under Rule 16B-3 promulgated under the Act, Plan
amendments shall be subject to approval by the Company's shareholders.
SECTION 12. STATUS OF PLAN
With respect to the portion of any Award which has not been exercised
and any payments in cash, Shares or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Shares or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the provisions of the foregoing sentence.
SECTION 13. CHANGE OF CONTROL PROVISIONS
Upon the occurrence of a Change of Control as defined in this Section
13:
(a) Each outstanding Stock Option shall automatically become fully
exercisable notwithstanding any provision to the contrary herein.
(b) Restrictions and conditions on Restricted Stock Awards shall
automatically be deemed waived, and the recipients of such Awards shall become
entitled to receipt of the Shares subject to such Awards unless the Committee
shall otherwise expressly provide at the time of grant.
(c) "CHANGE OF CONTROL" shall mean the occurrence of any one of the
following events:
(i) any "PERSON," as such term is used in Section 13(d) and
14(d) of the Act (other than the Company, any of its Subsidiaries, any
trustee, fiduciary or other person or entity holding securities under
any employee benefit plan of the Company or any of its Subsidiaries),
together with all "affiliates" and "associates" (as such terms are
defined in Rule 12b-2 under the Act) of such person, shall become the
"beneficial owner" (as such term is defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the Company representing
40% or more of either (a) the combined voting power of the Company's
then outstanding securities having the right to vote in an election of
the Company's Board of Directors ("Voting Securities") or (B) the then
outstanding Shares of the Company (in either such case other than as a
result of acquisition of securities directly from the Company); or
(ii) persons who, as of November 13, 1996, constitute the
Company's Board of Directors (the "Incumbent Directors") cease for any
reason, including, without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least a
majority of the Board, provided that any person becoming a director of
the Company subsequent to November 13, 1996 whose election or
nomination for election was approved
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by a vote of at least a majority of the Incumbent Directors shall, for
purposes of this Plan, be considered an Incumbent Director; or
(iii) the shareholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the
shareholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13D-3 under the Act),
directly or indirectly, shares representing in the aggregate 50% of the
voting shares of the corporation issuing cash securities in the
consolidation or merger (or of its ultimate parent corporation, if
any), (B) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by an
party as a single plan) of all or substantially all of the assets of
the Company or (C) any plan or proposal for the liquidation or
dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be
deemed to have occurred for purposes of the foregoing clause (i) solely as the
result of an acquisition of securities by the Company which, by reducing the
number of Shares or other Voting Securities outstanding, increases (x) the
proportionate number of Shares beneficially owned by any person to 40% or more
of the Shares then outstanding or (y) the proportionate voting power represented
by the Voting Securities beneficially owned by any person to 40% or more of the
combined voting power of all then outstanding Voting Securities; provided,
however, that if any person referred to in clause (x) or (y) of this sentence
shall thereafter become the beneficial owner of any additional Shares or other
Voting Securities (other than pursuant to a stock split, stock dividend, or
similar transaction), then a "CHANGE OF CONTROL" shall be deemed to have
occurred for purposes of the foregoing clause (i).
SECTION 14. GENERAL PROVISIONS
(a) No Distribution: Compliance with Legal Requirements. The Committee
may require each person acquiring Shares pursuant to an Award to represent to
and agree with the Company in writing that such person is acquiring the Shares
without a view to distribution thereof.
No Shares shall be issued pursuant to an Award until all applicable
securities laws and other legal and stock exchange requirements have been
satisfied. The Committee may require the placing of such stop-orders and
restrictive legends on certificates for Shares and Awards as it deems
appropriate.
(b) Delivery of Stock Certificates. Delivery of stock certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have delivered such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.
(c) Other Compensation Arrangements: No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, subject to shareholder approval if
such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan and
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the grant of Awards do not confer upon any employee any right to continued
employment with the Company or any Subsidiary.
SECTION 15. EFFECTIVE DATE OF PLAN
The Plan shall become effective upon the earlier of (a) approval by a
majority of the Board of Directors if no Shares have been issued when the Board
considers the Plan or (b) approval by the holders of a majority of the Shares of
the Company present or represented and entitled to vote at a meeting of
shareholders if Shares have been issued. Subject to such approval, and to the
requirement that no Shares may be issued hereunder prior to such approval, Stock
Options and other Awards may be granted hereunder on and after adoption of the
Plan by the Board.
SECTION 16. GOVERNING LAW
This Plan shall be governed by Georgia law except to the extent such
law is preempted by federal law.
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Exhibit 10.6
EXECUTIVE SUPPLEMENTAL EMPLOYMENT AGREEMENT
AGREEMENT by and between PEACH AUTO PAINTING AND COLLISION, INC.,
a Delaware corporation (the "Company"), and Lenward C. Wilbanks, Jr. (the
"Executive"), dated as of the day of , 1997.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined in Section 1) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS.
(a) The "Effective Date" shall mean the first date during the Change of Control
Period (as defined in Section 1(b)) on which a Change of Control occurs.
Anything in this Agreement to the contrary notwithstanding, if a Change of
Control occurs and if the Executive's employment with the Company is terminated
prior to the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (i) was at the
request of a third party who has taken steps reasonably calculated to effect the
Change of Control or (ii) otherwise arose in connection with or in anticipation
of the Change of Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such termination of
employment.
(b) The "Change of Control Period" shall mean the period commencing on the date
the Company completes an initial public offering of its common stock (the
"Commencement Date") and ending on the third anniversary of such date; provided,
however, that commencing on the date one year after the Commencement Date, and
on each annual anniversary of such date (such date and each annual anniversary
thereof shall be hereinafter referred to as the "Renewal Date"), the Change of
Control Period automatically shall be extended so as to terminate three years
from such Renewal Date, unless at least 60 days prior to the Renewal Date the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
(c) For purposes of this Agreement a "Change of Control" shall mean:
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(i) The acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (a) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (b) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change of Control: (I)
any acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), (II) any acquisition
by the Company, (III) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (IV) any acquisition by any
corporation pursuant to a reorganization, merger or consolidation, if,
following such reorganization, merger or consolidation, the conditions
described in clauses (I), (II) and (III) of subsection (i) of this
Section 1(c) are satisfied; or
(ii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board;
or
(iii) Approval by the shareholders of the Company of
a reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (a) more than
60% of, respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger or
consolidation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities
immediately prior to such reorganization, merger or consolidation in
substantially the same proportions, as their ownership, immediately
prior to such reorganization, merger or consolidation, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (b) no Person (excluding the Company,
any employee benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or consolidation
and any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 20% or
more of the Outstanding Company Common Stock or Outstanding Company
Voting Securities, as the
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case may be) beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
or the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors and (c) at least a majority of the members of the board of
directors of the corporation resulting from such reorganization, merger
or consolidation were members of the Incumbent Board at the time of the
execution of the initial agreement providing for such reorganization,
merger or consolidation; or
(iv) Approval by the shareholders of the Company of
(a) a complete liquidation or dissolution of the Company or (b) the
sale or other disposition of all or substantially all of the assets of
the Company, other than to a corporation, with respect to which
following such sale or other disposition, (I) more than 60% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Out standing
Company Common Stock and Outstanding Company Voting Securities
immediately prior to such sale or other disposition in substantially
the same proportion as their ownership, immediately prior to such sale
or other disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (II) no
Person (excluding the Company and any employee benefit plan (or related
trust) of the Company or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly
or indirectly, 20% or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors and
(III) at least a majority of the members of the board of directors of
such corporation were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board providing for
such sale or other disposition of assets of the Company.
2. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company, in accordance with the terms and provisions of this Agreement,
for the period commencing on the Effective Date and ending on the third
anniversary of such date (the "Employment Period").
3. TERMS OF EMPLOYMENT.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 90-day period
immediately preceding the Effective Date and (B) the Executive's
services shall be performed at the location where the Executive was
employed immediately preceding the
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Effective Date or any office which is the headquarters of the Company
and is less than 35 miles from such location.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled,
the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company and,
to the extent necessary to discharge the responsibilities assigned to
the Executive hereunder, to use the Executive's reasonable best efforts
to perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach
at educational institutions and (C) manage personal investments, so
long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement. It is expressly understood
and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the Effective Date shall not
hereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation.
(i) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"),
which shall be paid in equal installments on a monthly basis, at least
equal to twelve times the highest monthly base salary paid or payable
to the Executive by the Company and its affiliated companies in respect
of the twelve-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual Base
Salary shall be reviewed at least annually and shall be increased at
any time and from time to time as shall be substantially consistent
with increases in base salary generally awarded in the ordinary course
of business to other peer executives of the Company and its affiliated
companies. Any increase in Annual Base Salary shall not serve to limit
or reduce any other obligation to the Executive under this Agreement.
Annual Base Salary shall not be reduced after any such increase and the
term Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
(ii) ANNUAL BONUS. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at
least equal to the average annualized (for any fiscal year consist ing
of less than twelve full months or with respect to which the Executive
has been employed by the Company for less than twelve full months)
bonus paid or payable, including by reason of any deferral, to the
Executive by the Company and its affiliated companies in respect of the
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three fiscal years immediately preceding the fiscal year
in which the Effective Date occurs (the "Recent Average Bonus"). Each
such Annual Bonus shall be paid no later than the end of the third
month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus. If the Company has been in existence for
less than three complete fiscal years, "Recent Average Bonus" shall be
computed using the number of fiscal years the Company has been in
existence.
(iii) SPECIAL BONUS. In addition to Annual Base
Salary and Annual Bonus payable as hereinabove provided, if the
Executive remains employed with the Company and its affiliated
companies through the first anniversary of the Effective Date, the
Company shall pay to the Executive a special bonus (the "Special
Bonus") in recognition of the Executive's services during the crucial
one-year transition period following the Change of Control in cash
equal to the sum of (A) the Executive's Annual Base Salary and (B) the
greater of (1) the Annual Bonus paid or payable, including by reason of
any deferral, to the Executive (and annualized for any fiscal year
consisting of less than twelve full months or for which the Executive
has been employed for less than twelve full months) for the most
recently completed fiscal year during the Employment Period, if any,
and (2) the Recent Average Bonus (such greater amount shall be
hereinafter referred to as the "Highest Annual Bonus"). The Special
Bonus shall be paid no later than 30 days following the first
anniversary of the Effective Date.
(iv) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During
the Employment Period, the Executive shall be entitled to participate
in all incentive, savings and retirement plans, practices, policies and
programs applicable generally to other peer executives of the Company
and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction
is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its affiliated
companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the 90-day period immediately
preceding the Effective Date or if more favorable to the Executive,
those provided generally at any time after the Effective Date to other
peer executives of the Company and its affiliated companies.
(v) WELFARE BENEFIT PLANS. During the Employment
Period, the Executive and/or the Executive's family, as the case may
be, shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies (including,
without limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and
programs provide the Executive with benefits which are less favorable,
in the aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time during
the 90-day period immediately preceding the
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Effective Date or, if more favorable to the Executive, those provided
generally at any time after the Effective Date to other peer
executives of the Company and its affiliated companies.
(vi) EXPENSES. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all
reasonable employment expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive at any
time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company
and its affiliated companies.
(vii) FRINGE BENEFITS. During the Employment Period,
the Executive shall be entitled to fringe benefits in accordance with
the most favorable plans, practices, programs and policies of the
Company and its affiliated companies in effect for the Executive at any
time during the 90-day period immediately preceding the Effective Date,
or if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company
and its affiliated companies.
(viii) OFFICE AND SUPPORT STAFF. During the
Employment Period, the Executive shall be entitled to an office or
offices of a size and with furnishings and other appointments, and to
exclusive personal secretarial and other assistance, at least equal to
the most favorable of the foregoing provided to the Executive by the
Company and its affiliated companies at any time during the 90-day
period immediately preceding the Effective Date or, if more favorable
to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies.
(ix) VACATION. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the
most favorable plans, policies, programs and practices of the Company
and its affiliated companies as in effect for the Executive at any time
during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
4. TERMINATION OF EMPLOYMENT.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 10(b) of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate effective on
the 30th day after receipt of such notice by the Executive (the "Disability
Effective Date"), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the Executive's
duties. For purposes
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of this Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean (i) a material breach by the Executive of the
Executive's obligations under Section 3(a) (other than as a result of incapacity
due to physical or mental illness) which is demonstrably willful and deliberate
on the Executive's part, which is committed in bad faith or without reasonable
belief that such breach is in the best interests of the Company and which is not
remedied in a reasonable period of time after receipt of written notice from the
Company specifying such breach or (ii) the conviction of the Executive of a
felony involving moral turpitude.
(c) Good Reason; Window Period. The Executive's employment may
be terminated (i) during the Employment Period by the Executive for Good Reason
or (ii) during the Window Period by the Executive without any reason. For
purposes of this Agreement, the "Window Period" shall mean the 90-day period
immediately following the first anniversary of the Effective Date. For purposes
of this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirement), authority, duties
or responsibilities as contemplated by Section 3(a) or any other action
by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith
and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company to comply with any of
the provisions of Section 3(b), other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given
by the Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than that described in Section
3(a) (i) (B);
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 9(c), provided that such successor has received at
least ten days' prior written notice from the Company or the Executive
of the requirements of Section 9(c).
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For purposes of this Section 4(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive without any reason during the Window Period or for
Good Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 10(b). For purposes of this Agreement, a
"Notice of Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination date
of such notice. The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Executive or the Company
hereunder or preclude the Executive or the Company from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive during the Window Period or for Good Reason, the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be, (ii) if the Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Good Reason or during the Window Period; Other than for
Cause, Death or Disability. If, during the Employment Period, the Company shall
terminate the Executive's employment other than for Cause or Disability or the
Executive shall terminate employment either for Good Reason or without any
reason during the Window Period:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the aggregate
of the following amounts:
(A) the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the Highest Annual
Bonus and (y) a fraction, the numerator of which is the number
of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (3) the
Special Bonus, to the extent not theretofore paid, if not paid
due to the Executive pursuant to Section 3(b)(iii), and (4)
any compensation previously deferred by the Executive
(together with any accrued interest or earnings
thereon) and any accrued vacation pay, in each case to the
extent not theretofore paid
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(the sum of the amounts described in clauses (1), (2), (3)
and (4) shall be hereinafter referred to as the "Accrued
Obligations"); and
(B) the amount (such amount shall be
hereinafter referred to as the "Severance Amount") equal to
the product of (1) 2.99 and (2) the sum of (x) the Executive's
Annual Base Salary and (y) the Highest Annual Bonus; provided,
however, that if the Special Bonus has not been paid to the
Executive, such amount shall be increased by the amount of the
Special Bonus; and, provided further, that such amount shall
be reduced by the present value (determined as provided in
Section 280G(d)(4) of the Internal Revenue Code of 1986, as
amended (the "Code")) of any other amount of severance
relating to salary or bonus continuation to be received by the
Executive upon termination of employment of the Executive
under any severance plan, policy or arrangement of the
Company; and
(ii) for the remainder of the Employment Period, or
such longer period as any plan, program, practice or policy may
provide, the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and
policies described in Section 3(b)(v) if the Executive's employment had
not been terminated in accordance with the most favorable plans,
practices, programs or policies of the Company and its affiliated
companies as in effect and applicable generally to other peer
executives and their families during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as
in effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes re-employed
with another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the medical and
other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of
eligibility (such continuation of such benefits for the applicable
period herein set forth shall be hereinafter referred to as "Welfare
Benefit Continuation"). For purposes of determining eligibility of the
Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until the end of the Employment Period and to have
retired on the last day of such period; and
(iii) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Executive and/or the
Executive's family any other amounts or benefits required to be paid or
provided or which the Executive and/or the Executive's family is
eligible to receive pursuant to this Agreement and under any plan,
program, policy or practice or contract or agreement of the Company and
its affiliated companies as in effect and applicable generally to other
peer executives of the Company and its affiliated companies and their
families during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect generally
thereafter with respect to other peer executives of the Company and its
affiliated companies and their families (such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits").
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(iv) to the extent not otherwise provided for herein,
all options, warrants or other rights to acquire capital stock of the
Company held by or for the benefit of Executive shall become fully
vested and eligible for immediate exercise and all other rights of
Executive to receive cash compensation whether deferred or not
(including benefits under any Stock Appreciation Rights Plan or other
similar plan) shall becoming fully vested and Executive shall become
entitled to payment thereof by the Company in a lump sum in cash within
30 days after the Date of Termination.
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for (i) payment of Accrued
Obligations (which shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination) and
the timely payment or provision of the Welfare Benefit Continuation and Other
Benefits (excluding, in each case, Death Benefits (as defined below)) and (ii)
payment to the Executive's estate or beneficiary, as applicable, in a lump sum
in cash within 30 days of the Date of Termination of an amount equal to the
greater of (A) the Severance Amount or (B) the present value (determined as
provided in Section 280G(d)(4) of the Code) of any cash amount to be received by
the Executive or the Executive's family as a death benefit pursuant to the terms
of any plan, policy or arrangement of the Company and its affiliated companies,
but not including any proceeds of life insurance covering the Executive to the
extent paid for directly or on a contributory basis by the Executive (which
shall be paid in any event as an Other Benefit) (the benefits included in this
clause (B) shall be hereinafter referred to as the "Death Benefits").
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for (i) payment of Accrued Obligations (which shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination) and
the timely payment of provision of the Welfare Benefit Continuation and Other
Benefits (excluding, in each case, Disability Benefits, as defined below) and
(ii) payment to the Executive in a lump sum in cash within 30 days of the Date
of Termination of an amount equal to the greater of (A) the Severance Amount or
(B) the present value (determined as provided in Section 280G(d)(4) of the Code)
of any cash amount to be received by the Executive as a disability benefit
pursuant to the terms of any plan, policy or arrangement of the Company and its
affiliated companies, but not including any proceeds of disability insurance
covering the Executive to the extent paid for directly or on a contributory
basis by the Executive (which shall be paid in any event as an Other Benefit)
(the benefits included in this clause (B) shall be hereinafter referred to as
the "Disability Benefits").
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive Annual Base Salary through the Date
of Termination plus the amount of any compensation previously deferred by the
Executive, in each case to the extent theretofore unpaid. If the Executive
terminates employment during the Employment Period, excluding a termination
either for Good Reason or without any
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reason during the Window Period, this Agreement shall terminate without further
obligations to the Executive, other than for Accrued Obligations and the timely
payment or provision of Other Benefits. In such case, all Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination.
(e) Non-exclusivity of Rights. Except as provided in Sections
5(a)(ii), 5(b) and 5(c), nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice of, program of, or any contract or agreement with the Company
or any of its affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice, program,
contract, or agreement, except as explicitly modified by this Agreement.
6. FULL SETTLEMENT; RESOLUTION OF DISPUTES.
(a) The Company's obligation to make the payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
5(a)(ii), such amounts shall not be reduced whether or not the Executive obtains
other employment. The Company agrees to pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code.
(b) If there shall be any dispute between the Company and the
Executive (i) in the event of any termination of the Executive's employment by
the Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by the Executive, whether Good Reason existed, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that the
determination by the Executive of the existence of Good Reason was not made in
good faith, the Company shall pay all amounts, and provide all benefits, to the
Executive and/or the Executive's family or other beneficiaries, as the case may
be, that the Company would be required to pay or provide pursuant to Section
5(a) as though such termination were by the Company without Cause, or by the
Executive with Good Reason; provided, however, that the Company shall not be
required to pay any disputed amount pursuant to this paragraph except upon
receipt of an undertaking by or on behalf of the Executive to repay all such
amounts to which the Executive is ultimately adjudged by such court not to be
entitled.
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7. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 7) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), payment (a "Gross-Up Payment") shall be made by the Company to
the Executive in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determi nation, shall be made
by Ernst & Young, L.L.P. (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 7, shall be paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 7(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up
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Payment. Such notification shall be given as soon as practicable but no later
than ten business days after the Executive is informed in writing of such claim
and shall apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid. The Executive shall not pay such claim prior
to the expiration of the 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 7(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
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(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 7(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 7(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
8. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 8 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
9. SUCCESSORS.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
10. MISCELLANEOUS.
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(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: Mr. Lenward C. Wilbanks, Jr.
c/o Peach Auto Painting and Collision, Inc.
506 45th Street, Suite A-2
Columbus, Georgia 31904
If to the Company: Peach Auto Painting and Collision, Inc.
506 45th Street, Suite A-2
Columbus, Georgia 31904
Attention: Chairman of the Board of Directors
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c)(i)-(v), shall not
be deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.
(f) The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company is "at
will" and, prior to the Effective Date, may be terminated by either the
Executive or the Company at any time. Moreover, if prior to the Effective Date,
the Executive's employment with the Company terminates, then the Executive
shall have no further rights under this Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
_______________________
Lenward C. Wilbanks, Jr.
PEACH AUTO PAINTING AND COLLISION, INC.
By:________________________________
Title:_______________________________
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EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Summary Combined Financial Information" and to the use of our report dated June
4, 1996, in the Registration Statement, Amendment No. 1 (Form SB-2 No.
333-16109) and related Prospectus of Peach Auto Painting and Collision, Inc.
for the registration of 1,500,000 shares of its common stock.
(Signature appears here)
ERNST & YOUNG LLP
Raleigh, North Carolina
January 3, 1997
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