AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 10, 1997
REGISTRATION STATEMENT NO. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
FIRST TEAM AUTOMOTIVE CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5511 59-3440254
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
<TABLE>
<S> <C>
DONALD C. MEALEY, PRESIDENT
350 SOUTH LAKE DESTINY DRIVE 350 SOUTH LAKE DESTINY DRIVE
SUITE 200 SUITE 200
ORLANDO, FL 32810 ORLANDO, FL 32810
(407) 660-2224 (407) 660-2224
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
---------------
COPIES TO:
<TABLE>
<S> <C>
LUIS A. DE ARMAS, ESQ. DAVID J. BEVERIDGE, ESQ.
ALFRED G. SMITH, ESQ. SHEARMAN & STERLING
SHUTTS & BOWEN LLP 599 LEXINGTON AVENUE
1500 MIAMI CENTER NEW YORK, NY 10022
201 S. BISCAYNE BOULEVARD (212) 848-4000
MIAMI, FL 33131
(305) 358-6300
</TABLE>
---------------
APPROXIMATE DATE OF COMMENCEMENT 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. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(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. [ ]
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<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock (par value $.01 per share) $50,000,000 $15,151.52
====================================================================================
</TABLE>
(1) Includes shares that the Underwriters have the option to purchase to cover
over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933, as amended.
---------------
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 THAT 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>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 10, 1997
PROSPECTUS
SHARES
[GRAPHIC OMITTED] FIRST TEAM AUTOMOTIVE CORP.
COMMON STOCK
----------------
All of the shares of common stock, par value $.01 per share (the "Common
Stock"), offered hereby (the "Offering") are being offered by First Team
Automotive Corp. ("First Team" or the "Company").
Prior to the Offering, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
between $ and $ per share. For a discussion of the factors that will
be considered in determining the initial public offering price of the Common
Stock, see "Underwriting."
The Company intends to apply for listing of the Common Stock on the New
York Stock Exchange, under the symbol "FTA."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
============================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- ------------------------------------------------------------
<S> <C> <C> <C>
Per Share ...... $ $ $
- ------------------------------------------------------------
Total(3) ...... $ $ $
============================================================
</TABLE>
(1) The Company and certain selling stockholders of the Company (the "Selling
Stockholders") have agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Selling Stockholders have granted to the Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to an
additional shares of Common Stock solely to cover over-allotments,
if any. The Company will not receive any of the proceeds from the sale of
such shares by the Selling Stockholders. If all such additional shares are
purchased, the total Price to Public and Underwriting Discount will be
$ and $ , respectively, and Proceeds to the Selling
Stockholders will be $ . See "Principal Stockholders" and
"Underwriting."
----------------
The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made in New York, New York on or
about , 1997.
----------------
Merrill Lynch & Co. Wheat First Butcher Singer
----------------
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
[Photographs]
[LOGO]
----------------
The Company intends to furnish its stockholders annual reports containing
audited financial statements and will make available copies of quarterly reports
containing unaudited interim financial information for the first three fiscal
quarters of each fiscal year of the Company.
----------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON STOCK TO COVER
SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE"UNDERWRITING."
----------------
This Prospectus includes statistical data regarding the retail automotive
industry. Unless otherwise indicated herein, such data is taken or derived from
information published by the Industry Analysis Division of the National
Automobile Dealers Association ("NADA") in its "Industry Analysis and Outlook"
and "Automotive Executive Magazine" publications.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS,
INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. REFERENCES
IN THIS PROSPECTUS TO "FIRST TEAM" OR THE "COMPANY" ARE TO FIRST TEAM AUTOMOTIVE
CORP. AND, UNLESS THE CONTEXT INDICATES OTHERWISE, ITS CONSOLIDATED SUBSIDIARIES
AND THEIR RESPECTIVE PREDECESSORS, AND REFERENCES TO THE "OFFERING" MEAN THE
OFFERING OF COMMON STOCK MADE HEREBY. UNLESS OTHERWISE INDICATED, ALL
INFORMATION IN THIS PROSPECTUS ASSUMES THAT (I) THE UNDERWRITERS' OVER-ALLOTMENT
OPTION IS NOT EXERCISED, (II) THE REORGANIZATION (AS DEFINED BELOW) HAS BEEN
COMPLETED AND (III) THE COMPANY HAS CONSUMMATED THE ACQUISITION OF 100% OF THE
EQUITY INTERESTS IN THREE ADDITIONAL DEALERSHIPS IN ORLANDO, BRADENTON AND
PANAMA CITY, FLORIDA (THE "RECENT ACQUISITIONS"). SEE "CERTAIN
TRANSACTIONS--REORGANIZATION" AND "RECENT ACQUISITIONS." THE REORGANIZATION AND
THE RECENT ACQUISITIONS WILL BE CONSUMMATED ON OR BEFORE THE CLOSING OF THE
OFFERING AND ARE CONDITIONS PRECEDENT TO THE CLOSING OF THE OFFERING.
THE COMPANY
First Team Automotive Corp. ("First Team" or the "Company") is a leading
automotive retailer in the greater Orlando and Tallahassee, Florida markets. The
Company owns and operates seven automobile dealerships in Orlando and three
dealerships in Tallahassee and is acquiring three additional dealerships in
Orlando, Bradenton and Panama City, Florida (the "Recent Acquisitions"). The
Company sells new and used cars and trucks, offers related financing, insurance
and extended service contracts, performs automotive maintenance, warranty, paint
and repair services, and sells replacement parts. First Team, which had retail
sales of approximately 11,400 new and 9,300 used vehicles in 1996, offers
customers a broad range of new vehicle brands, including Ford, Chevrolet,
Chrysler, Plymouth, Jeep, Eagle, Cadillac, Oldsmobile, Infiniti, Mitsubishi and
Acura. In 1996, First Team ranked number one among new vehicle dealerships in
retail unit sales of vehicles in both the Orlando and Tallahassee markets. The
Company has also been awarded the exclusive Driver's Mart/trademark/ used
vehicle superstore franchise for the greater Orlando market, and expects to open
its first superstore in 1998.
The Company was founded in 1974 by Don Mealey, its principal shareholder
and chief executive officer. Mr. Mealey has over forty years of experience in
the automotive retailing industry, and the First Team dealership general
managers each have at least ten years of automotive retailing experience. Mr.
Mealey and his management team have been recognized by various regional and
national industry organizations for quality and performance and, in recognition
of their standing in the industry, have served in the past five years on
manufacturer dealer councils for Ford, Chevrolet, Infiniti, Mitsubishi and
Acura. First Team's management also has substantial experience in managing,
acquiring and integrating new vehicle dealerships and, during the last five
years, the Company has acquired four dealerships and has been granted five new
franchises by manufacturers. First Team has increased its sales over the past
five years from $210.9 million in 1992 to $449.4 million in 1996, primarily as a
result of acquisitions. After giving effect to the Reorganization and the Recent
Acquisitions, the Company would have had $657.6 million in revenues in 1996 and
retail unit sales of approximately 17,000 new vehicles and 13,000 used vehicles.
The Company believes that, based on pro forma revenues, First Team would have
ranked as one of the 25 largest dealership groups in the United States in 1996.
First Team has developed and implemented several operating and growth
strategies which it believes provide it significant competitive advantages,
enable it to realize economies of scale and enhance its name recognition and
reputation. First Team intends to continue to grow its operations by acquiring
dealerships within and outside its current markets. The Company also expects to
generate additional growth by opening Driver's Mart/trademark/ used vehicle
superstores and expanding its higher-margin sales of collision repair services
and wholesale parts. See "Risk Factors--Dependence on Acquisitions for Growth;
Risks of Acquisitions."
3
<PAGE>
GROWTH STRATEGY
/bullet/ ACQUIRE ADDITIONAL DEALERSHIPS. The Company plans to acquire additional
dealerships in markets where the Company has or can achieve a
significant market presence.
/bullet/ ACQUISITIONS IN NEW MARKETS. First Team plans to expand into new
geographic markets by acquiring dealerships that have an
established market presence, initially in markets with favorable
demographic trends in the Southeast and Mid-Atlantic states. The
Company does not intend to enter a geographic market unless it
believes it can achieve a significant market presence and realize
economies of scale, such as advertising cost savings and
improvements in marketing and inventory management. In addition,
the Company expects to realize economies of scale from being one
of the largest dealership groups in the country. Such benefits
include lower borrowing costs due to additional leverage with
lenders and cost savings from volume purchase contracts.
/bullet/ IN-MARKET ACQUISITIONS. First Team also intends to acquire
additional dealerships in the markets in which it operates when it
believes that such acquisitions will produce additional operating
efficiencies. In-market acquisitions will also increase the
Company's market share, promote increased name recognition and
provide the Company with better opportunities for repeat and
referral business.
/bullet/ DEVELOP DRIVER'S MART/trademark/ USED VEHICLE SUPERSTORES. First Team
recently acquired an exclusive franchise to establish and operate
Driver's Mart/trademark/ used vehicle superstores in the greater
Orlando market. Each Driver's Mart/trademark/ superstore will offer a
broad range of low-mileage, late-model used vehicles, in a
buyer-friendly environment designed to promote customer satisfaction
and loyalty. Driver's Mart/trademark/ features "no haggle" pricing, a
comprehensive quality inspection and a three-day, 300 mile money-back
guarantee on each vehicle sold. First Team intends to cross-market the
used vehicle inventories of its Driver's Mart/trademark/ superstores
and its Orlando dealerships in order to offer customers the widest
selection of used vehicles. The Company intends to open its first
Driver's Mart/trademark/ superstore in 1998 and, depending on the
success of the first store, two additional superstore facilities by
2001.
/bullet/ INCREASE SALES OF HIGHER-MARGIN PRODUCTS AND SERVICES. The Company
intends to increase its sales of higher-margin products and services by
expanding its collision repair and wholesale parts businesses, neither
of which are directly related to the new vehicle cycle.
/bullet/ COLLISION REPAIR CENTERS. In 1996, the Company began implementing
its strategy to expand its collision repair business by adding two
new collision repair facilities in Orlando. An additional facility
will be added in Tallahassee in the last quarter of 1997, and the
Recent Acquisitions will provide further capacity. The Company has
expanded its collision repair facilities from approximately 25,000
square feet at year-end 1995 to approximately 51,000 square feet
at year-end 1996. After the completion of the Recent Acquisitions
and the new Tallahassee facility, the Company expects to have a
total of approximately 139,000 square feet of collision repair
facilities in operation by year-end 1997. The Company intends to
use this increased capacity to generate additional revenues from
its collision repair business to provide for a more stable revenue
stream and higher operating margins.
/bullet/ WHOLESALE PARTS. The Company intends to capitalize on its
representation of numerous manufacturers in order to increase its
sales of factory authorized parts to wholesale buyers such as
independent mechanical and body repair garages and rental and
commercial fleet operators.
OPERATING STRATEGY
/bullet/ OFFER A DIVERSE RANGE OF AUTOMOTIVE PRODUCTS AND SERVICES. First Team
offers a broad range of automotive products and services, including a
wide selection of new and used vehicles, vehicle financing and
insurance programs, replacement parts and maintenance and repair
services.
4
<PAGE>
Management believes that its brand and product diversity not only appeals to a
wide variety of customers, but also minimizes the Company's dependence on any
one manufacturer and reduces the Company's exposure to potential manufacturer
supply problems and changes in consumer preferences. Moreover, the Company
believes that it can enhance customer loyalty and retention by selling across
dealerships as customer buying needs and preferences change over time. In 1996,
the Company's new vehicle sales were comprised of 46.9% trucks and 53.1% cars,
representing eleven domestic and foreign brands. After giving effect to the
Reorganization and the Recent Acquisitions, the Company's new vehicle sales in
1996 would have been 53.5% trucks and 46.5% cars.
/bullet/ ESTABLISH A SIGNIFICANT MARKET PRESENCE IN EACH MARKET. By establishing
a significant presence in each market, the Company expects to achieve
economies of scale in advertising, inventory management, management
information systems and corporate overhead. After giving effect to the
Reorganization and the Recent Acquisitions, First Team's 1996 market
share among new vehicle dealers would have been approximately 13.6% in
Orlando, 27.8% in Tallahassee, 21.8% in Panama City and 18.0% in
Bradenton, in each case based on retail unit sales of new and used
vehicles.
/bullet/ MAINTAIN HIGH LEVELS OF CUSTOMER LOYALTY AND SATISFACTION. The Company
emphasizes customer satisfaction throughout its organization and
continually seeks to improve its reputation for quality and fairness,
in order to secure long-term customer loyalty and ensure repeat and
referral business. The Company continually pursues initiatives which
enhance customer loyalty, such as linking incentive compensation
programs to customer satisfaction index ("CSI") scores.
/bullet/ EMPHASIZE SALES OF HIGHER-MARGIN USED VEHICLES. First Team has
commenced marketing used vehicles on a consolidated basis in both
Orlando and Tallahassee. Under the program, (i) each dealership has
on-line access to the entire used vehicle inventory of the Company's
other dealerships within the region, (ii) the used vehicle inventory in
each market is advertised and marketed together as "Don Mealey's Auto
Network" in Orlando and "CarTrust" in Tallahassee and (iii) the Company
periodically coordinates off-site used vehicle sales events. The
Company believes that this system increases used vehicle sales and
facilitates the potential customer's search for, and purchase of, a
vehicle since the customer needs only to visit one of the Company's
dealerships within the region, read one of the Company's local
advertisements or attend one of the Company's sales events to access
the entire First Team used vehicle inventory in that region. Retail
unit sales of used vehicles as a percent of total unit sales have
increased from approximately 40% in 1992 to 45% in 1996.
/bullet/ EMPLOY COMPUTER-BASED TECHNOLOGIES THROUGHOUT CORPORATE AND DEALERSHIP
OPERATIONS. The Company believes that it has achieved operating
efficiencies and cost savings by integrating computer-based systems
into nearly all aspects of its operations. Through First Team's
management information systems, senior management can access dealership
data in "real time" to monitor financial performance and identify areas
requiring management attention. The Company employs computer-based
technology to consolidate its used vehicle advertising and marketing in
each of its markets, and it plans to install software which will
provide selected dealerships on-line access to a comprehensive list of
available leases for various vehicles from lenders throughout the
United States.
/bullet/ ALIGN MANAGEMENT'S INTERESTS WITH STOCKHOLDERS THROUGH INCENTIVE-BASED
PROGRAMS. First Team has historically offered its general managers an
equity stake in the dealerships that they manage. After the Offering,
the general managers, who have primary responsibility for decisions
relating to inventory, advertising, pricing and personnel, will own an
aggregate of % of the Company's outstanding Common Stock, and will
hold options to purchase additional Common Stock. Each general manager
also participates in the Company's incentive plans, which reward
managers based on profitability of the managed dealership.
/bullet/ DEVELOP AND RETAIN QUALIFIED MANAGEMENT. The Company continually seeks
to develop and retain qualified personnel and promote talented
employees to assume more responsible positions in the First
5
<PAGE>
Team organization. Excluding the three Recent Acquisitions, the Company's
dealership managers have been employed by the Company for an average of
approximately ten years and all but one of the dealership managers were
promoted from within the First Team organization.
RECENT ACQUISITIONS
In April and June 1997, the Company signed definitive agreements to
purchase three dealerships for an aggregate purchase price of approximately
$32.0 million, including approximately $3.3 million to be paid in Common Stock.
These acquisitions, which consist of Cook-Whitehead Ford in Panama City, Florida
("Whitehead Ford"), Bill Graham Ford in Bradenton, Florida ("Graham Ford"), and
Royal Jeep-Eagle Chrysler-Plymouth in Orlando, Florida ("Royal"), had aggregate
total revenues of approximately $219.3 million in 1996 and significantly enhance
the Company's market presence in Florida.
INDUSTRY DYNAMICS
Automotive retailing, with approximately $640 billion in 1996 sales, is the
largest consumer retail market in the United States, representing nearly eight
percent of the domestic gross product. The industry today is highly fragmented,
with the largest 100 dealer groups generating less than 10% of total sales
revenues and controlling less than 5% of all new vehicle dealerships. The
Company believes that significant consolidation is likely to occur over the next
several years because of the current industry fragmentation, the increased
capital requirements of dealerships, the limited number of viable exit
strategies for dealership owners and the desire of certain automakers to
strengthen their brand identity by consolidating their franchised dealerships.
As a result, the Company believes that an opportunity exists for dealership
groups with significant equity capital, and experience in identifying, acquiring
and professionally managing dealerships, to acquire additional dealerships and
capitalize on the changes occurring in the industry.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company ...... shares(1)
Common Stock to be outstanding after
the Offering ........................... shares(2)
Use of proceeds ........................... The net proceeds of the Offering will be used to
fund the Recent Acquisitions, including repaying
indebtedness incurred by the Company in
connection with the Recent Acquisitions, and repay
a portion of the Company's floor plan indebtedness.
See "Recent Acquisitions" and "Use of Proceeds."
Listing ................................. The Company intends to apply for listing of the
Common Stock on the New York Stock Exchange,
under the symbol "FTA."
</TABLE>
- ----------------
(1) Up to an aggregate of additional shares may be sold by the Selling
Stockholders pursuant to the Underwriters' over-allotment option. See
"Principal Stockholders" and "Underwriting."
(2) Excludes shares of Common Stock reserved for future issuance under
the Company's stock option plan, including options to purchase
shares of Common Stock that will be granted immediately before the
completion of the Offering with an exercise price equal to the initial
public offering price. See "Management--Stock Option Plan."
6
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
The following summary historical and pro forma combined financial data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Combined Financial
Statements of the Company and the related notes, and "Pro Forma Combined
Financial Data" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
ACTUAL
-----------------------------------------------
1992 1993 1994(2) 1995
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AND VEHICLES SOLD DATA)
<S> <C> <C> <C> <C>
COMBINED STATEMENT OF OPERATIONS
DATA:
Revenues:
Vehicle sales ........................... $181,853 $230,428 $318,838 $325,452
Parts, service and collision repair . 25,072 27,678 35,058 40,904
Other ................................. 3,977 7,137 8,154 7,546
--------- --------- --------- ---------
Total ................................. 210,902 265,243 362,050 373,902
Cost of sales ........................... 183,606 230,794 316,642 324,753
--------- --------- --------- ---------
Gross profit(4) ........................ 27,296 34,449 45,408 49,149
Selling, general and administrative ...... 23,159 28,445 37,262 40,125
Depreciation and amortization ............ 1,045 1,069 1,313 1,714
--------- --------- --------- ---------
Operating income ........................ 3,092 4,935 6,833 7,310
Interest expense, net .................. 2,969 2,824 3,388 4,721
--------- --------- --------- ---------
Income before income taxes and
minority interest(4) .................. $ 123 $ 2,111 $ 3,445 $ 2,589
========= ========= ========= =========
Provision for income taxes(5) ..........................................................
Net income(5) .........................................................................
Net income per share(5) ................................................................
OTHER COMBINED OPERATING DATA:
New vehicle units sold ............... 7,427 9,242 10,778 9,664
Used vehicle units sold--retail ...... 4,916 6,228 8,902 8,437
New vehicle revenues .................. $ 120,401 $ 149,497 $ 193,099 $ 185,676
Used vehicle revenues--retail ......... 46,163 61,443 99,036 108,104
Parts revenues ........................ 12,468 14,144 18,057 20,967
Service revenues ..................... 9,767 10,587 14,059 17,083
Gross profit margin (FIFO)(4) ...... 13.4% 13.6% 13.1% 13.4%
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------- -------------------------------
PRO PRO
ACTUAL FORMA(1) ACTUAL FORMA(1)
----------- ----------- --------------------- ---------
1996(3) 1996 1996 1997 1997
----------- ----------- ---------- ---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND VEHICLES SOLD DATA)
<S> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF OPERATIONS
DATA:
Revenues:
Vehicle sales ........................... $390,260 $572,825 $ 90,335 $ 98,353 $139,357
Parts, service and collision repair . 50,001 72,195 10,838 13,181 18,952
Other ................................. 9,170 12,613 1,555 2,131 2,946
-------- -------- -------- -------- --------
Total ................................. 449,431 657,633 102,728 113,665 161,255
Cost of sales ........................... 389,337 567,798 88,411 97,103 137,700
-------- -------- -------- -------- --------
Gross profit(4) ........................ 60,094 89,835 14,317 16,562 23,555
Selling, general and administrative ...... 47,378 68,543 11,264 12,895 17,847
Depreciation and amortization ............ 2,097 3,266 455 508 787
--------- -------- -------- -------- --------
Operating income ........................ 10,619 18,026 2,598 3,159 4,921
Interest expense, net .................. 5,375 5,976 1,166 1,426 1,524
-------- -------- -------- -------- --------
Income before income taxes and
minority interest(4) .................. $ 5,244 $ 12,050 $ 1,432 $ 1,733 3,397
======== ======== ======== ======== ========
Provision for income taxes(5) ...................... 4,740 1,325
-------- --------
Net income(5) ..................................... $ 7,310 $ 2,072
======== ========
Net income per share(5) ............................ $ $
======== ========
OTHER COMBINED OPERATING DATA:
New vehicle units sold ............... 11,444 17,025 3,025 2,683 4,145
Used vehicle units sold--retail ...... 9,287 13,050 2,648 2,205 3,334
New vehicle revenues .................. $ 233,520 $ 348,520 $ 52,517 $ 58,771 $ 83,321
Used vehicle revenues--retail ......... 123,018 168,431 29,889 28,648 40,054
Parts revenues ........................ 25,550 38,015 5,535 6,865 10,201
Service revenues ..................... 20,710 27,641 4,510 5,269 7,111
Gross profit margin (FIFO)(4) ...... 13.3% 13.7% 14.0% 14.4% 14.6%
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1996 MARCH 31, 199PRO
-------------------- ------------ ----------
ACTUAL FORMA(1)
---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
COMBINED BALANCE SHEET DATA:
Total assets ............... $102,774 $99,358 $173,876
Long-term debt ............... 4,547 4,405 1,747
Total liabilities ............ 94,634 89,604 98,543
Minority interest ............ 3,651 4,148 --
Stockholders' equity(4) ...... 4,489 5,606 75,333
</TABLE>
- ----------------
(1) Adjusted to give pro forma effect to (i) the Reorganization, (ii) the
Company's conversion from the LIFO Method of inventory accounting to the
FIFO Method of inventory accounting (in each case, as defined below), (iii)
the Recent Acquisitions and (iv) the Offering. See "Pro Forma Combined
Financial Data."
(2) The results for the year ended December 31, 1994 include the results of Don
Mealey Cadillac-Oldsmobile from June 2, 1994, the date of its acquisition,
and the results of Tallahassee Chrysler-Plymouth from April 15, 1994, the
date of its acquisition.
7
<PAGE>
(3) The results for the year ended December 31, 1996 include the results of Don
Mealey's Seminole Ford from April 1, 1996, the date of its acquisition.
(4) The Company currently utilizes the LIFO Method of inventory accounting. See
Note 4 to the Company's Combined Financial Statements. The Company intends
to file an election with the IRS to convert, effective upon the closing of
the Offering, to the FIFO Method of inventory accounting for vehicles and
parts and report its earnings for tax purposes in its financial statements
on the industry standard FIFO Method. If the Company had previously utilized
the FIFO Method, gross profit and income before income taxes and minority
interest for the periods shown in the table, and stockholders' equity as of
December 31, 1996 and March 31, 1997, would have been as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Gross profit ............... $28,192 $35,935 $47,255 $50,104 $59,927 $14,317 $16,497
Income before income taxes and
minority interest ............ 1,019 3,597 5,291 3,544 5,077 1,432 1,668
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1996 MARCH 31, 1997
------------------ ----------------
(IN THOUSANDS)
<S> <C> <C>
Stockholders' equity ...... $13,884 $14,936
</TABLE>
(5) Historical amounts for provision for income taxes, net income and net income
per share are not presented since the Company's income tax provision,
minority interest and capital structure prior to the Reorganization and the
Offering are not comparable with those that will exist subsequent to these
events. Pro forma net income per share is based upon the assumption that
shares of Common Stock are outstanding for each period. This
amount represents the total number of shares to be issued in the Offering
( ), and the number of shares of Common Stock owned by the Company's
stockholders immediately following the Reorganization and Recent
Acquisitions ( ). See "Principal Stockholders" and Note 1 to the
Company's Combined Financial Statements.
THE REORGANIZATION
The Company was recently incorporated in order to acquire the businesses of
the automobile dealerships described herein (the "First Team Dealerships") which
have been under the common control of Don Mealey and his family members, with
certain minority interests. Prior to the closing of the Offering, the Company
will effect a reorganization (the "Reorganization") pursuant to which: (i) the
Company will acquire from the controlling and minority owners substantially all
of the assets of the First Team Dealerships (the "Dealership Assets"), excluding
the real property on which the dealerships' business is conducted (the "Real
Property"); (ii) the Company will issue Common Stock in exchange for the
Dealership Assets; (iii) the Real Property and related mortgage debt will be
retained by or distributed to certain stockholders of the Company or their
affiliates (the "Lessor Affiliates"); (iv) the Company will lease the Real
Property from the Lessor Affiliates; and (v) the Company will sell or close one
Infiniti dealership and two Kia dealerships, each of which have been
unprofitable. See "Certain Transactions--Reorganization." Effective upon the
closing of the Reorganization and the Offering, the Company will also convert
from the last-in-first-out method ("LIFO Method") of inventory accounting to the
industry standard first-in-first-out method ("FIFO Method") of inventory
accounting (the "FIFO Conversion"). As a result of the Reorganization and the
FIFO Conversion, the historical combined financial information included in this
Prospectus is not necessarily indicative of the results of operations, financial
position and cash flows of the Company in the future or that which would have
resulted had the Reorganization and FIFO Conversion occurred during the periods
presented in the Company's Consolidated Financial Statements. Upon the
completion of the Reorganization, the Company and its subsidiaries, which have
historically not been subject to income tax as a result of their status as "S"
corporations or partnerships, will terminate their status as such and will
thereafter be subject to federal and state income tax as "C" corporations. As a
result of the change in tax status, the Company will be required to establish a
deferred tax liability for the difference between the book and tax basis of its
assets and liabilities, and record a provision for income taxes. As of March 31,
1997, the amount of deferred tax liability and related provision for income
taxes that will result from the change in the entities' tax status and the
conversion to the FIFO Method is approximately $2.7 million. This provision will
be incurred as of the date of the closing of the Offering, which is anticipated
to occur in August 1997, and therefore will be reflected as a charge to the
Company's earnings for the third quarter of the 1997 fiscal year. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
8
<PAGE>
RISK FACTORS
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THESE FORWARD-LOOKING STATEMENTS
AS A RESULT OF CERTAIN OF THE RISK FACTORS SET FORTH BELOW AND ELSEWHERE IN THIS
PROSPECTUS. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER AND EVALUATE ALL OF
THE INFORMATION SET FORTH IN THIS PROSPECTUS, INCLUDING THE RISK FACTORS SET
FORTH BELOW.
COMPETITION
The retail automobile industry is highly competitive. The Company competes
with franchised automobile dealers, private market buyers and sellers of used
vehicles, independent used vehicle dealers, service center chains, and
independent service and repair shops. The Company also competes with regional
and national car rental companies, which sell their used rental cars, and used
automobile "superstores," such as AutoNation and CarMax. In the future, new
competitors may enter the automotive retailing market, including automobile
manufacturers that may decide to open additional retail outlets or acquire other
dealerships. Many of the Company's competitors are larger, and have greater
financial and marketing resources, than the Company. As a result of increased
competition, gross profit margins on sales of new vehicles have been declining
since 1986. While sales of used vehicles have traditionally had higher gross
profit margins than new vehicle sales, competition in the used vehicle market
has been increasing in recent years, particularly from new entrants such as
automobile "superstores." The used vehicle superstores generally offer a greater
and more varied selection of used vehicles than the Company's dealerships. In
the Orlando, Florida market, where the majority of the Company's current
operations are located, a CarMax superstore opened in November 1996 and an
AutoNation superstore is scheduled to open in the summer of 1997. There can be
no assurance that the Company's sales or gross profit margins in its current
used vehicle business or in its planned Driver's Mart/trademark/ superstores
will not be adversely affected by such increased competition. See
"Business--Competition."
DEPENDENCE ON AUTOMOBILE MANUFACTURERS
The Company's success depends on its relationships with the manufacturers
of the vehicles it is authorized to sell, and on the popularity and availability
of such vehicles. After giving effect to the Reorganization and the Recent
Acquisitions, vehicles manufactured by Ford Motor Company ("Ford"), General
Motors Corporation ("GM"), Chrysler Corporation ("Chrysler") and Mitsubishi
Motor Company ("Mitsubishi") would have accounted for approximately 49%, 22%,
14%, and 6%, respectively, of the Company's 1996 unit sales of new vehicles. No
other manufacturer accounted for more than 5% of the new vehicle sales of the
Company during 1996. See "Business--Dealership Operations," and "--Relationships
with Manufacturers."
Each of the Company's dealerships operates under a separate sales and
service agreement (the "Dealer Agreement") which governs the relationship
between the dealership and the manufacturer. Through the Dealer Agreements,
automobile manufacturers exercise significant control over dealerships, restrict
them to specified locations, and retain approval rights over changes in
management and ownership. The manufacturers have the right to terminate the
Company's Dealer Agreements for a variety of reasons. The Company believes that
it is in compliance, in all material respects, with all of its Dealer
Agreements. The Company's Dealer Agreements with its manufacturers permit the
manufacturer to terminate the relevant agreement or agreements if a controlling
interest in the Common Stock of the Company is acquired by a person or entity
which has not been approved by the relevant manufacturer. See "--Control by
Current Stockholders and Anti-Takeover Provisions." Any such acquisition of
shares of the Company's Common Stock may be outside the control of the Company
and could result in the termination or non-renewal of one or more of its Dealer
Agreements. The Company's Dealer Agreements generally expire at various times
between 1997 and 2000. In addition, some Dealer Agreements have no specific
expiration date but continue in effect unless terminated pursuant to certain
limited circumstances. The Company believes that it will be able to renew all of
its Dealer Agreements upon expiration, but there can be no assurance that all
such agreements will be
9
<PAGE>
renewed as expected. If a manufacturer terminates or declines to renew one or
more of the Company's significant Dealer Agreements, such action could have a
material adverse effect on the Company and its business. See
"Business--Relationships with Manufacturers."
The Company also depends on its manufacturers to provide it with a
desirable mix of new vehicles. The most popular vehicles generally produce the
highest profit margins and are frequently the most difficult to obtain from the
manufacturers. For example, the Company's inability to receive its desired
allocation of certain popular Chevrolet trucks has adversely affected sales of
its Chevrolet dealerships since 1995. In some instances, in order to obtain
additional allocations of these vehicles, the Company may elect to purchase a
larger number of less desirable models than it would otherwise purchase. Sales
of less desirable models may result in lower profit margins than sales of the
more popular vehicles. If the Company is unable to obtain sufficient quantities
of the most popular models, its profitability may be adversely affected.
The Company's dealerships depend on the manufacturers they represent for
certain sales incentives and other programs that are intended to promote
dealership sales or support dealership profitability. For example, manufacturers
may provide customer rebates or dealer incentives on new vehicles and special
financing or lease rates and warranties on new and used vehicles, and sponsor
special used vehicle auctions restricted to its authorized new vehicle dealers.
Although the Company believes that by representing numerous manufacturers it has
limited to some degree its exposure to the actions of any particular
manufacturer, a reduction or discontinuation of a manufacturer's incentive
programs may adversely affect the profitability of the Company.
The Company's Dealer Agreements do not give the Company the exclusive right
to sell a manufacturer's product within a given geographic area. Accordingly, a
manufacturer could grant another dealer a franchise to start a new dealership in
proximity to one or more of the Company's locations or an existing dealer could
move its dealership to a location which would compete directly with the Company,
although certain state laws provide a mechanism for challenging such action in
advance through administrative or legal proceedings. If the Company cannot
prevent a manufacturer from granting a new franchise near to one of the
Company's dealerships, this could have a material adverse effect on the Company
and its operations.
The success of each of the Company's dealerships depends to a great extent
on the success of the respective manufacturer. The success of the Company is
therefore linked to the financial condition, marketing, vehicle design,
production capabilities and management of the manufacturers which the Company
represents. Events such as strikes and other labor actions by unions, or
negative publicity concerning a particular manufacturer or vehicle model, may
materially and adversely affect the Company. The Company has attempted to lessen
its dependence on any one manufacturer by establishing dealer relationships with
a number of different domestic and foreign automobile manufacturers. See
"Business--Dealership Operations" and "--Relationship with Manufacturers."
DEPENDENCE ON ACQUISITIONS FOR GROWTH; RISKS OF ACQUISITIONS
The retail automobile industry generally is considered a mature industry,
in which minimal growth is expected in unit sales of new vehicles. Historically,
the Company's growth in revenues and net income has been primarily attributable
to the acquisition of automobile dealerships. In the future, the success of the
Company's growth strategy, and the market value of the Common Stock, will depend
in large part on the Company's ability to acquire and successfully integrate
additional dealerships. The success of the Company's acquisition strategy will
depend on a number of factors, including the Company's ability to find
acceptable acquisition candidates, negotiate the purchase of such dealerships on
acceptable terms, obtain satisfactory equity or debt financing and implement the
Company's business strategies and systems at the acquired dealerships. In
addition, acquisitions involve a number of special risks, including the
diversion of the Company's limited management resources, incurring higher
capital expenditures and operating expenses, failing to maintain uniform
standards, controls and policies, impairing relationships with employees and
customers as a result of changes in management and failing to attract
10
<PAGE>
or retain key management personnel to operate the acquired businesses. To manage
its expansion, the Company intends to evaluate on an ongoing basis the adequacy
of its existing systems and procedures including, among others, its financial
control and reporting systems, computer systems and management structure.
However, there can be no assurance that the Company will adequately anticipate
all of the demands its growth will impose on such systems and procedures.
The Company estimates that it takes approximately 12 to 24 months to
integrate an acquired dealership into the Company's operations and realize the
full benefit of the Company's strategies and systems. The Company may acquire
dealerships with profit margins which are materially lower than the Company's
historical net profit margins, and there can be no assurance that the Company
will be able to improve the profitability of such acquired dealerships.
Moreover, during the early part of the integration period, the operating results
of an acquired dealership may not match results attained prior to the
acquisition as the Company implements its strategies and systems. In addition,
acquisitions may result in significant goodwill and intangible assets, which are
likely to result in substantial amortization charges to the Company that would
reduce stated earnings. There can be no assurance that the Company will be
successful in completing any future acquisitions or in overcoming these risks or
any other problems encountered with its acquisitions, including the Recent
Acquisitions. For example, the Recent Acquisitions will result in significant
goodwill that will be amortized in future years and will reduce future stated
earnings. See "Recent Acquisitions," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and "Business--Growth Strategy".
The Company's ability to grow by acquiring other dealerships will also
depend upon obtaining the consent of manufacturers to the Company's acquisitions
of new dealerships. There can be no assurance that the Company will be able to
secure the manufacturer approvals required to complete future dealership
acquisitions. In addition, one or more manufacturers may attempt to impose
restrictions on the Company in connection with the approval of an acquisition.
If certain manufacturers decide in the future to enter the automotive retailing
market, the Company's ability to acquire dealerships or obtain the necessary
manufacturer consents for acquisitions may be adversely affected. See
"Business--Relationship with Manufacturers." In certain cases, the Company may
be required to file applications, and obtain clearance, under applicable Federal
antitrust laws before consummation of an acquisition. These regulatory
requirements may restrict or delay the Company's acquisitions, and may increase
the cost of completing such transactions.
DRIVER'S MART/trademark/ USED VEHICLE SUPERSTORES
The Company recently acquired a franchise to open and operate Driver's
Mart/trademark/ used vehicle superstores in the greater Orlando market. The
Company intends to open its first Driver's Mart/trademark/ superstore in 1998
and, depending on the success of its first store, two additional superstores by
2001. The success of the Company's growth strategy and the Company's future
operating results will depend, in part, on the Company's ability to successfully
open and operate its Driver's Mart/trademark/ superstores. The used vehicle
superstore concept is relatively new with only a few superstores in operation,
and the Company previously has not operated a used vehicle superstore. In
addition, there is only one Driver's Mart/trademark/ franchise currently open
for business and there can be no assurance as to whether the Driver's
Mart/trademark/ concept will appeal to customers in the Company's markets. The
Company has not yet identified the sites where its superstores will be located,
and there can be no assurance that the Company will open any Driver's
Mart/trademark/ locations as projected, or that it will be able to operate these
facilities profitably. See "Business--Driver's Mart/trademark/ Superstores."
NEED FOR CAPITAL; FINANCING OF ACQUISITIONS; POSSIBLE DILUTION THROUGH ISSUANCE
OF STOCK
The Company's vehicle sales operations require significant capital
resources. The Company's future growth and profitability will depend, in part,
on the availability and cost of its capital. Historically, the principal sources
of financing for the Company's business have been its floor plan credit
facilities and cash generated from operations. There can be no assurance that
the Company will be able to continue to obtain capital for its current or
expanded operations from these sources in sufficient amounts, or on terms and
conditions acceptable to the Company.
11
<PAGE>
The Company's strategy of growth through the acquisition of additional
dealerships will require substantial capital. The Company intends to finance
acquisitions with cash, including the proceeds of the Offering, and through the
issuance of stock or debt securities. The Company may require substantial
additional working capital in order to continue to acquire dealerships in the
future. Using cash to complete acquisitions could substantially limit the
Company's financial flexibility. Using stock to complete acquisitions may result
in significant dilution of shareholders' interest in the Company. In addition,
any decrease in the value of the Company's Common Stock may make the Common
Stock less attractive to potential sellers of dealerships, and could limit the
Company's ability to issue stock to complete acquisitions.
Using debt to complete acquisitions could result in financial covenants
that limit the Company's operating and financial flexibility. In addition,
substantially all of the assets of the Company's dealerships are pledged to
secure the Company's floor plan credit facilities, which had an outstanding
balance of $64.3 million as of March 31, 1997. This pledge may limit the
Company's ability to borrow from other sources. The Company does not have any
commitments from prospective lenders with respect to acquisition financing, and
there can be no assurance that sufficient financing will be available on
acceptable terms in the future. If the Company is unable to obtain additional
capital on acceptable terms, the Company may be required to reduce the scope of
its presently anticipated expansion, which could materially and adversely affect
the value of the Common Stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
and "Business--Growth Strategy."
The Company's Dealer Agreements with its manufacturers permit the
manufacturer to terminate the relevant agreement or agreements if a controlling
interest in the Common Stock of the Company is acquired by a person or entity
which has not been approved by the relevant manufacturer. The terms of the
above-referenced Dealer Agreements could limit the Company's ability to issue
additional shares of Common Stock to complete future acquisitions. See
"Business--Relationships with Manufacturers."
CONTROL BY CURRENT STOCKHOLDERS AND ANTI-TAKEOVER PROVISIONS
Upon completion of the Offering, the Company's current stockholders will
own approximately % of the outstanding Common Stock (approximately % if
the Underwriters' over-allotment option is exercised in full). The current
stockholders of the Company will, therefore, have the ability to continue to
elect all of the directors of the Company and to control the outcome of all
other issues submitted to a vote of the Company's stockholders. Voting control
by the current shareholders may, among other things, have the effect of delaying
or preventing a change in control of the Company or preventing stockholders from
realizing a premium on the sale of their shares upon an acquisition of the
Company.
The Company's Dealer Agreements with its manufacturers permit the
manufacturer to terminate the relevant agreement or agreements if a controlling
interest in the Common Stock of the Company is acquired by a person or entity
which has not been approved by the relevant manufacturer. See
"Business--Relationships with Manufacturers." Certain provisions of the
Company's Certificate of Incorporation and Bylaws, such as the Company's
staggered Board and the inability of shareholders to act by written consent,
make it more difficult for stockholders of the Company to effect certain
corporate actions. In addition, Section 203 of the Delaware General Corporation
Law restricts certain business combinations with any "interested stockholder" as
defined by such statute. See "Description of Capital Stock--Anti-Takeover
Effects of Provisions of the Certificate of Incorporation, Bylaws and Delaware
Law." Pursuant to the Company's employment agreements with its senior
executives, the Company would be required to pay such executives a lump sum
payment equal to three times the executive's average annual compensation if the
executive resigns following a change in control of the Company. Under the
Company's Stock Option Plan, options outstanding thereunder become immediately
exercisable upon a change in control of the Company. See "Management--Employment
Agreements" and "--Stock Option Plan." The agreements, corporate documents and
laws described
12
<PAGE>
above may have the effect of delaying or preventing a change in control of the
Company or preventing stockholders from realizing a premium on the sale of their
shares of Common Stock upon an acquisition of the Company.
The Company's Certificate of Incorporation authorizes the Board of
Directors of the Company to issue ten million shares of "blank check" preferred
stock with such designations, rights and preferences as may be determined from
time to time by the Board of Directors. Accordingly, the Board of Directors is
empowered, without shareholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights that could adversely affect the
voting power or other rights of the holders of the Company's Common Stock. In
the event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying, or preventing a change in
control of the Company. Although the Company has no present intention to issue
any shares of its preferred stock, there can be no assurance that the Company
will not do so in the future. The application of any such provisions or the
issuance of preferred stock could prevent shareholders from realizing a premium
upon the sale of their shares of Common Stock upon an acquisition of the
Company. See "Description of Capital Stock."
DEPENDENCE ON KEY PERSONNEL
The Company's success will depend in large part on the active participation
of its senior management, particularly Don Mealey, the Company's President and
Chief Executive Officer, and Warner Peacock, the Company's Executive Vice
President and Chief Financial Officer. The Company's success will also depend,
to a lesser extent, on the performance of each of its dealership general
managers, including managers who join the Company following the acquisition of
their dealerships. See "Recent Acquisitions" and "Management--Other Key
Personnel." The Company has employment agreements with its executive officers
and the general managers of its dealerships which restrict their ability to
terminate their employment and compete with the Company. The Company does not
maintain key man insurance on either Messrs. Mealey or Peacock, or any of the
general managers of its dealerships. See "Management--Employment Agreements" and
"--Other Key Employees." Further, Mr. Mealey, Richard Higginbotham, a director
and stockholder of the Company, and certain of the First Team dealership general
managers are identified in the Company's Dealer Agreements as the individuals
(the "Dealer Managers") who control the dealerships and upon whose financial
resources and management expertise the manufacturers have relied on when
awarding such agreements. The loss of Mr. Mealey, Mr. Higginbotham or any of the
other Dealer Managers could materially and adversely affect the Company's
on-going relationship with its vehicle manufacturers. See "Business--
Relationships with Automobile Manufacturers."
The Company places substantial responsibility on the general managers of
its dealerships for the profitability of such dealerships. As the Company
expands, it may need to hire additional general managers, particularly if it
acquires dealerships from owners/managers seeking to retire or dealerships that
are under-performing with their current management. The market for qualified
employees in the retail automotive industry, particularly for general managers,
is highly competitive. The loss of the services of key management personnel or
the inability to attract additional qualified managers could have a material
adverse effect on the Company's business and its growth strategy.
LACK OF INDEPENDENT DIRECTORS
Upon completion of the Offering, all of the members of the Company's Board
of Directors will be employees of the Company. Although the Company intends to
appoint at least two independent directors following completion of the Offering,
such directors will not constitute a majority of the Board, and the Company's
Board may not have a majority of independent directors in the future. In the
absence of a majority of independent directors, the Company's executive
officers, who also are principal stockholders and directors, could establish
policies and enter into transactions without independent review and approval
thereof. In addition, although the Company intends to establish audit and
compensation committees which will consist entirely of outside directors, until
those committees are
13
<PAGE>
established, transactions and compensation policies could be approved without
independent review. These and other transactions could present the potential for
a conflict of interest between the Company and its stockholders generally and
the controlling officers, stockholders or directors. See "Management."
POTENTIAL CONFLICTS OF INTEREST
As part of the Reorganization, the Real Property relating to the Company's
dealerships will be retained by or distributed to the Lessor Affiliates, the
Lessor Affiliates will lease the Real Property to the Company (the "Affiliate
Leases") and assume primary responsibility for certain indebtedness secured by
mortgages on the Real Property (the "Mortgage Debt"), and the Company will
guarantee the repayment of the Mortgage Debt. See "Certain Transactions."
The terms of the Affiliate Leases and the other Real Property transactions
entered into in connection with the Reorganization were determined by Mr. Mealey
and management of the Company, and are not the result of arm's-length
negotiations. Although the Company may have been able to obtain better terms in
arm's-length transactions, the Company believes that such Affiliate Leases and
transactions are on terms which are not less favorable to the Company than the
terms that would be available from third parties in the relevant markets.
Because of Mr. Mealey's position as chief executive officer of the Company
and principal owner of the Lessor Affiliates, Mr. Mealey was subject to
conflicts of interest in negotiating the Affiliate Leases and the Real Property
and Mortgage Debt transactions described above. In the future, Mr. Mealey will
encounter conflicts of interest in the interpretation and enforcement of the
terms of the Affiliate Leases and the Company's guarantees of the Mortgage Debt.
See "Business--Properties" and "Certain Transactions." Following the completion
of the Offering, the Company intends to submit any agreements and transactions
between the Company and its directors or principal stockholders and their
affiliates to a committee of disinterested members of the Company's Board of
Directors or to require approval of such transactions by a majority of the
disinterested members of the Board of Directors. See "Management."
CYCLICAL NATURE OF AUTOMOBILE SALES; GEOGRAPHIC CONCENTRATION OF OPERATIONS
The market for automobiles, particularly the new automobile market, is
subject to substantial cyclical variation. An increase in interest or tax rates,
or uncertainties regarding future economic conditions that affect consumer
spending habits, could adversely affect the Company's results of operations. For
the past few years, the industry has experienced growth that may not be
sustained in the future. See "Business--Industry Dynamics." A material decrease
in automobile sales, whether new or used, can be expected to adversely affect
the Company's results of operations.
All of the Company's current dealerships are located in Florida. Moreover,
although the Company owns three dealerships in Tallahassee, Florida, and is
acquiring dealerships in Panama City and Bradenton, Florida, most of the
Company's current operations are located in the Orlando, Florida market. While
the Company intends to pursue acquisitions outside the Orlando market, and
outside Florida, the Company expects that the majority of its operations will
continue to be concentrated in Florida for the foreseeable future. As a result,
the Company's results of operations will depend substantially on general
economic conditions and consumer spending habits and preferences in Florida,
particularly in Orlando and, to a lesser extent, Tallahassee, as well as various
other factors, such as tax rates and state and local regulation, specific to
Florida. There can be no assurance that the Company will be able to expand
geographically, or that any such expansion will adequately insulate it from the
adverse effects of local or regional economic conditions. See "Business--Growth
Strategy."
FOREIGN SUPPLIERS
In 1996, approximately 17.5% of the Company's new vehicle sales (10.8%
after giving effect to the Reorganization and the Recent Acquisitions), in terms
of revenues, consisted of vehicles manufactured
14
<PAGE>
by Japanese automakers. In addition, the Company sells certain vehicles supplied
by domestic manufacturers that are, or use parts that are, manufactured abroad.
Consequently, the Company's operations are subject to the risks commonly
encountered in importing vehicles and parts from abroad, including fluctuation
in currency exchange rates, import duties, restrictions on the transfer of
funds, work stoppages, and political instability. The United States or the
countries from which the Company's products are or may be imported may, from
time to time, impose new quotas, duties, tariffs or other restrictions, or
adjust presently prevailing quotas, duty or tariff levels, which could affect
the Company's operations and its ability to purchase imported automobiles at
current or increased levels. Imports into the United States are also affected by
the cost of transportation. See "Business--Dealership Operations" and
"--Government Regulation."
GOVERNMENT REGULATION; ENVIRONMENTAL MATTERS
The Company's operations are subject to extensive regulation under various
federal, state and local laws and regulations, including various licensing
requirements and laws governing consumer protection, truth-in-lending and
workers' health and safety. In addition, the Company's business involves the
use, handling and disposal of hazardous or toxic substances such as paint, motor
oil, waste motor oil and filters, transmission fluid, tires and gasoline and
diesel fuels. Accordingly, the Company is subject to regulation by federal,
state and local authorities establishing health and environmental quality
standards, and may be subject to liability or penalties for violations of those
standards. The Company is also subject to laws, ordinances and regulations
governing remediation of contamination at facilities it owns or operates or to
which it sends hazardous substances or wastes for treatment, recycling or
disposal.
The Company believes that it is in compliance, in all material respects,
with all laws affecting its business. However, there can be no assurance that
the Company will continue to comply with all such laws, or with amended, new or
more stringent laws and regulations which may be adopted in the future. Any such
violation of law may result in penalties, possible revocation of the Company's
licenses, and liability in private actions filed by injured parties. In
addition, the future discovery of any environmental contamination or liability
at any of the Company's facilities may cause the Company to incur significant
expenses as a result thereof. See "Business--Government Regulation."
DILUTION; LACK OF DIVIDENDS
Upon completion of the Offering, investors purchasing shares of Common
Stock in the Offering will incur immediate dilution of $ per share in the
net tangible book value of their Common Stock. See "Dilution." The Company has
no plans to pay any cash dividends in the foreseeable future. See "Dividend
Policy."
ABSENCE OF PUBLIC MARKET AND VOLATILITY
Prior to the Offering, there has been no public market for the Common
Stock. Although the Company intends to make application to list the Common Stock
on the New York Stock Exchange, there can be no assurance that any trading
market for the shares will develop, or, if any such market develops, that it
will be sustained. Accordingly, purchasers of the Common Stock may experience
difficulty selling or otherwise disposing of their shares. The initial public
offering price of the Common Stock offered hereby has been determined through
negotiations among the Company and the Underwriters and may not be indicative of
the market price for the Common Stock after the Offering. Moreover, the market
price for the Common Stock after the Offering may be volatile and will be
affected by, among other things, the Company's performance, industry related
factors and general market conditions. See "Underwriting" for information
relating to the method of determining the initial public offering price of the
Common Stock.
15
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have outstanding a
total of shares of Common Stock and approximately shares of
Common Stock subject to stock options granted under the Company's Stock Option
Plan. See "Management--Stock Option Plan." Of such shares, the shares
of Common Stock being sold in the Offering (together with any shares sold upon
exercise of the Underwriters' over-allotment option) and shares issued upon
exercise of stock options will be immediately eligible for sale in the public
market without restriction, except for shares purchased by or issued to any
"affiliate" of the Company (within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"). All of the currently outstanding shares of
Common Stock will be "restricted securities" as such term is defined under Rule
144 under the Securities Act ("Rule 144") in that such shares were issued in
private transactions not involving a public offering. See "Shares Eligible for
Future Sale." The Company and its current stockholders have agreed not to sell
or otherwise dispose of any shares of Common Stock without the consent of
Merrill Lynch, Pierce, Fenner & Smith Incorporated for a period of 180 days
after the date of this Prospectus. See "Underwriting."
No information is currently available and no prediction can be made as to
the timing or amount of future sales of such shares or the effect, if any, that
future sales of shares, or the availability of shares for future sale, will have
on the market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock (including shares issuable upon the exercise
of stock options), or the perception that such sales could occur, could
materially and adversely affect prevailing market prices for the Common Stock
and the ability of the Company to raise equity capital in the future. See
"Shares Eligible for Future Sale."
16
<PAGE>
RECENT ACQUISITIONS
In April and June 1997, the Company signed definitive agreements to
purchase three additional dealerships: Whitehead Ford, Graham Ford and Royal.
The aggregate purchase price for the Recent Acquisitions is $32.0 million,
subject to certain adjustments described below.
The closing of the Offering is contingent upon the Company acquiring 100%
of the partnership or other equity interests in Whitehead Ford, Graham Ford and
Royal. In June 1997, the Company purchased 100% of the equity interests in
Whitehead Ford, a 50% interest in Graham Ford and a 51% interest in Royal. The
purchase of the remaining interests in Graham Ford and Royal will be completed
simultaneously with the closing of the Offering. The Company intends to use a
portion of the proceeds from the Offering to pay the purchase price in the
Recent Acquisitions and to repay certain indebtedness incurred in connection
with such acquisitions. See "Use of Proceeds."
COOK-WHITEHEAD FORD, PANAMA CITY, FLORIDA. Whitehead Ford is located in
Panama City, approximately ninety miles east of Pensacola and eighty miles west
of Tallahassee. Established in 1930, Whitehead Ford is the largest new vehicle
dealership in the Panama City market, based on retail unit sales. Whitehead
Ford's 1996 market share among new vehicle dealerships in Panama City was 21.8%
of new and used vehicle retail unit sales. Whitehead Ford had retail sales of
approximately 1,800 new and 1,400 used vehicles in 1996, and had total revenues
of $56.7 million. This acquisition further implements the Company's growth
strategy by adding a well-managed, profitable dealership with significant
presence in its market. The dealership's owner, Charles Whitehead, has 37 years
of experience in automotive retailing in Northwest Florida and will join the
Company's management team. The Company believes that Mr. Whitehead and his
management team can assist the Company in completing additional acquisitions in
the Panama City market, and in neighboring markets such as Pensacola.
The Company purchased 100% of the capital stock of Cook-Whitehead Ford,
Inc. for a total purchase price of $10.4 million. At the closing of the
purchase, the Company paid $5.0 million of the purchase price in cash, and the
balance of the purchase price ($5.4 million) was paid pursuant to a promissory
note which will mature on the earlier of (i) one year after the closing of the
purchase, or (ii) the closing of the Offering. On the closing of the Offering,
the Company will pay approximately $1.0 million of the balance due under this
note by issuing shares of Common Stock to the seller, which stock will
be valued at the offering price to the public shown on the cover page of this
Prospectus. The remaining $4.4 million balance due under the promissory note
will be paid in cash upon the closing of the Offering. The total amount payable
is subject to adjustments, to be paid in cash, depending on the book value of
the dealership at the closing of the purchase and the price to the public of the
Common Stock in the Offering. Whitehead Ford owns the real property and
improvements where its main dealership facility is located, subject to a
$400,000 mortgage, and leases the balance of its dealership property. See
"Business--Properties" and "Certain Transactions."
BILL GRAHAM FORD, BRADENTON, FLORIDA. Graham Ford is located in Bradenton,
on Florida's Gulf coast, approximately fifteen miles north of Sarasota and forty
miles south of Tampa. Established in 1951, Graham Ford is the largest new
vehicle dealership in the Bradenton market based on retail unit sales. Graham
Ford's 1996 market share among new vehicle dealers in Bradenton was 18.0% for
new and used vehicle retail unit sales. In 1996, Graham Ford had retail sales of
approximately 2,200 new and 1,300 used vehicles and had total revenues of $85.6
million. Ed Graham, who has managed the dealership for the past twelve years,
will be employed by First Team as the general manager for Graham Ford. The
Company believes that the acquisition of Graham Ford will allow the Company to
expand its presence in central Florida through a Gulf coast location, and
facilitate the Company's entry into other Gulf coast markets such as Naples and
Sarasota.
The Company will pay an aggregate of $12.1 million for 100% of the
partnership interests in the limited partnership which owns Graham Ford,
including the dealership real estate and improvements. In June 1997, the Company
paid $7.5 million in cash to the sellers, approximately $2.9 million of which
was funded by mortgage debt secured by the dealership assets. The balance of the
purchase price, or
17
<PAGE>
approximately $4.6 million, will be paid upon the closing of the Offering, as
follows: approximately $2.2 million in cash and approximately $2.4 million by
the Company's issuance of shares of its Common Stock to the seller.
The total amount payable is subject to adjustments, to be made in cash,
depending on the book value of the dealership at the closing of the purchase and
the price to the public of the Common Stock in the Offering. Two stockholders of
the Company, John V. Verner, Sr. and Edward M. Verner, are partners in Graham
Ford and sold their partnership interests to the Company as part of this
transaction. See "Principal Stockholders" and "Certain Transactions."
ROYAL JEEP-EAGLE CHRYSLER-PLYMOUTH. Royal is located in central Orlando
and has been in business since 1975. For the fiscal year ended September 30,
1996, Royal had revenues of $77.0 million, and retail sales of approximately
1,900 new and 1,200 used vehicles. In terms of 1996 retail unit sales, Royal is
the largest of the five Chrysler dealerships in the Orlando market. Including
the sales of Royal, First Team's 1996 market share, among new vehicle
dealerships in Orlando, would have increased from 11.3% to 13.6% of retail
vehicle unit sales. The Company believes that, in addition to increasing its
Orlando market share, the acquisition of Royal will allow the Company to benefit
from economies of scale that will become available from an expanded presence in
the Orlando market. This acquisition will also provide the Company increased
product diversity in Orlando, by adding the Jeep, Eagle, Chrysler and Plymouth
brands.
The Company will pay an aggregate of $9.6 million in connection with its
purchase of Royal, which includes the sum of $2.0 million paid in cash in June
1997, when the Company acquired a 51% partnership interest in Royal, and $2.4
million payable in monthly installments of $20,000 over a ten year period
pursuant to a consulting agreement with the seller. The balance of the purchase
price, or approximately $5.2 million, is payable in cash upon the closing of the
Offering. The total amount payable is subject to adjustment depending on the
book value of the dealership at the closing of the purchase.
Historical financial statements for Whitehead Ford, Graham Ford and Royal
are included in this Prospectus beginning at page F-24.
18
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
shares of Common Stock offered hereby are estimated to be
approximately $ million after deducting the underwriting discounts and
commissions payable by the Company, assuming an initial public offering price of
$ per share. The Company will not receive any of the proceeds from the sale
of shares by the Selling Stockholders pursuant to any exercise of the
Underwriters' over-allotment option. See "Principal Stockholders."
The Company estimates that it will use approximately $23.4 million of the
net proceeds to finance the Recent Acquisitions, including $9.9 million to be
paid directly to the sellers at the closing of the Offering and approximately
$13.5 million to repay the following debt incurred in connection with the Recent
Acquisitions: approximately $5.8 million of indebtedness in favor of Comerica
Bank, $4.4 million payable to Charles Whitehead, the seller of Whitehead Ford,
and a $3.3 million acquisition loan advanced by Don Mealey. See "Recent
Acquisitions." The Company intends to use the remaining net proceeds of
approximately $ million to repay a portion of the Company's outstanding
indebtedness under its floor plan credit facilities. The Company intends to use
the increased borrowing capacity under its floor plan credit facilities
resulting from the repayment of indebtedness to fund future acquisitions,
start-up costs and working capital for its first Driver's Mart/trademark/ used
vehicle superstore and for working capital and general corporate purposes. The
indebtedness incurred in connection with the Recent Acquisitions, and payable to
Mr. Whitehead and to Mr. Mealey, bears interest at the prime rate (currently
8.5%) and matures on the earlier of June 1998 or the completion of the Offering.
The debt payable to Comerica Bank in connection with the Recent Acquisitions
bears interest at the prime rate plus twenty-five basis points, and matures in
July 2000. The Company's floor plan indebtedness is due on demand, accrues
interest at rates ranging from LIBOR plus 2% to prime plus 1.5%, and as of March
31, 1997 totaled $64.3 million. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
The Company is regularly engaged in discussions with various parties
regarding the acquisition of dealerships. However, except as described herein
under the caption "Recent Acquisitions," the Company has not entered into any
definitive agreements or letters of intent with respect to any such transaction
and is not engaged in any negotiations with respect to any agreements or
understandings regarding such transactions.
DIVIDEND POLICY
The Company currently intends to retain any earnings to finance the
development and expansion of the Company's business and does not anticipate
paying any cash dividends in the foreseeable future. The declaration and payment
of dividends by the Company are subject to the discretion of the Board of
Directors of the Company. Any future determination to pay dividends will depend
on the Company's results of operations, financial condition, capital
requirements, contractual restrictions and other factors deemed relevant at the
time by the Board of Directors.
19
<PAGE>
CAPITALIZATION
The following table sets forth, as of March 31, 1997, the capitalization of
the Company (a) on a historical basis, and (b) on a pro forma basis, as adjusted
to reflect the completion of the Reorganization, the FIFO Conversion, the Recent
Acquisitions and the sale by the Company of Common Stock in the Offering,
including the application of the estimated net proceeds to be received by the
Company. This table should be read in conjunction with the Combined Financial
Statements and related notes and "Pro Forma Combined Financial Data" included
elsewhere in this Prospectus. See also "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------
ACTUAL PRO FORMA(1)
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Notes payable--floor plan ............................................. $ 64,318 $65,535
Current maturities of long-term debt ................................. 2,010 1,747
------- -------
Current maturities of other long-term obligations ..................... 505 742
Total short-term debt ................................................ $ 66,833 $68,024
======= =======
Long-term debt ......................................................... $ 4,405 $ 4,225
------- -------
Other long-term obligations ............................................. 425 1,830
Minority interest ...................................................... 4,148 --
Stockholders' equity:
Preferred Stock, $.01 par value, 10,000,000 shares authorized; no shares
issued and outstanding ................................................. -- --
Common Stock, $.01 par value, 50,000,000 shares authorized;
shares issued and outstanding, actual; shares issued and
outstanding, as adjusted(2) ........................................... 4 75
Additional paid-in capital ............................................. 9,064 68,625
Retained earnings ...................................................... (3,094) 6,633
Treasury stock ......................................................... (368) --
------- -------
Total stockholders' equity .......................................... 5,606 75,333
------- -------
Total capitalization ................................................ $ 14,584 $81,388
======= =======
</TABLE>
- ----------------
(1) Adjusted to give pro forma effect to (i) the Reorganization, (ii) the
Company's conversion from the LIFO Method of inventory accounting to the
FIFO Method of inventory accounting, (iii) the Recent Acquisitions and (iv)
the Offering. See "Pro Forma Combined Financial Data."
(2) Excludes (a) shares of Common Stock reserved for future issuance
under the Company's stock option plan, including options to purchase
shares of Common Stock granted immediately before the completion
of the Offering with an exercise price equal to the initial public offering
price, and (b) shares of Common Stock issuable upon the exercise
of other options which have an exercise price equal to the initial public
offering price. See "Management--Stock Option Plan" and "Certain
Transactions."
20
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1997,
assuming completion of the Reorganization, was $ , or $ per share
of Common Stock. "Net tangible book value" per share represents the total of the
Company's net assets, reduced by its total liabilities and its intangible
assets, and divided by the number of shares of Common Stock outstanding at that
date. After giving effect to the sale by the Company of the shares of
Common Stock pursuant to the Offering (after deducting underwriting discounts
and estimated offering expenses), and the completion of the Reorganization and
the Recent Acquisitions, the Company's pro forma net tangible book value at
March 31, 1997 would have been $ , or $ per share. This represents
an immediate increase in the net tangible book value of $ per share to
existing stockholders and an immediate dilution of $ per share to new
investors purchasing Common Stock in the Offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share ..................... $
Net tangible book value per share before the Offering ............ $
Increase per share attributable to new investors .................. $
Pro forma net tangible book value per share after the Offering ...... (1)
------
Dilution per share to new investors(2) .............................. $
======
</TABLE>
- ----------------
(1) Includes the pro forma effect on net tangible book value of the
Reorganization and the Recent Acquisitions.
(2) Dilution is determined by subtracting the net tangible book value per share
of Common Stock after the Offering from the public offering price per share.
The following table summarizes on a pro forma basis as of March 31, 1997,
after giving effect to the sale by the Company of shares of Common
Stock in the Offering, the differences between existing shareholders and new
investors with respect to the number of shares of Common Stock purchased from
the Company and the total and average consideration paid per share (without
ascribing any discount to the shares purchased prior to the Offering to reflect
their relative illiquidity).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- ------------------------
AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ---------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1) ......
New investors(2) ...............
------ ------ ------ ------ ------
Totals ........................ 100.00% 100.00%
====== ====== ====== ====== ======
</TABLE>
- ----------------
(1) Does not reflect the possible exercise of options to purchase
shares of Common Stock reserved for issuance under the Company's Stock
Option Plan including options to purchase shares of Common Stock
that will be granted immediately before the completion of the Offering with
an exercise price equal to the initial public offering price. See
"Management--Stock Option Plan" and "Certain Transactions."
(2) Assumes that the Underwriters' over-allotment option is not exercised. Sales
pursuant to the exercise by the Underwriters of the over-allotment option
will cause the total number of shares held by new investors, total
consideration paid by new investors, percent of total consideration paid by
new investors and average price per share for all investors to increase
, $ , % and $ , respectively.
21
<PAGE>
SELECTED COMBINED FINANCIAL DATA
The selected combined statement of operations data for the years ended
December 31, 1994, 1995 and 1996 and the selected combined balance sheet data as
of December 31, 1995 and 1996 are derived from the Company's financial
statements, which have been audited by Deloitte & Touche LLP, independent
auditors, and are included elsewhere in this Prospectus. The selected combined
statement of operations data for the years ended December 31, 1992 and 1993 and
the selected combined balance sheet data as of December 31, 1992, 1993 and 1994
are derived from the Company's financial statements, which also have been
audited, but are not included elsewhere in this Prospectus. The selected
combined results of operations data for the three months ended March 31, 1996
and 1997, and the selected combined balance sheet data at March 31, 1997, are
derived from the unaudited financial statements of the Company and are included
elsewhere in this Prospectus. In the opinion of management, these unaudited
financial statements reflect all adjustments necessary for a fair presentation
of its results of operations and financial condition. All such adjustments are
of a normal recurring nature. The results of operations for an interim period
are not necessarily indicative of results that may be expected for a full year
or any other interim period. This selected combined financial data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Combined Financial Statements and
related notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------------- --------------------
1992 1993 1994(1) 1995 1996(2) 1996 1997
----------- ----------- ----------- ----------- ----------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF OPERATIONS DATA
PRIOR TO REORGANIZATION AND FIFO
CONVERSION:
Revenues:
Vehicle sales ........................... $ 181,853 $230,428 $318,838 $325,452 $390,260 $ 90,335 $ 98,353
Parts, service and collision repair ...... 25,072 27,678 35,058 40,904 50,001 10,838 13,181
Other .................................... 3,977 7,137 8,154 7,546 9,170 1,555 2,131
-------- -------- -------- -------- -------- -------- --------
Total .................................... 210,902 265,243 362,050 373,902 449,431 102,728 113,665
Cost of sales .............................. 183,606 230,794 316,642 324,753 389,337 88,411 97,103
-------- -------- -------- -------- -------- -------- --------
Gross profit(3) ........................... 27,296 34,449 45,408 49,149 60,094 14,317 16,562
Selling, general and administrative ...... 23,159 28,445 37,262 40,125 47,378 11,264 12,895
Depreciation and amortization ............ 1,045 1,069 1,313 1,714 2,097 455 508
-------- -------- -------- -------- -------- -------- --------
Operating income ........................... 3,092 4,935 6,833 7,310 10,619 2,598 3,159
Interest expense, net ..................... 2,969 2,824 3,388 4,721 5,375 1,166 1,426
-------- -------- -------- -------- -------- -------- --------
Income before income taxes and
minority interest(3) ..................... 123 2,111 3,445 2,589 5,244 1,432 1,733
Provision for income taxes(4) ............... 137 547 890 726 483 174 119
Minority interest in earnings(4) ......... 222 382 729 742 1,641 339 497
-------- -------- -------- -------- -------- -------- --------
Net income (loss)(5) ..................... $ (236) $ 1,182 $ 1,826 $ 1,121 $ 3,120 $ 919 $ 1,117
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, MARCH 31, 1997
------------------------------------------------------- --------------
1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
COMBINED BALANCE SHEET DATA PRIOR TO
REORGANIZATION AND FIFO CONVERSION:
Total assets ................................. $ 47,931 $ 55,478 $ 73,920 $81,172 $102,774 $99,358
Long-term debt .............................. 3,681 4,467 5,032 3,791 4,547 4,405
Total liabilities ........................... 50,285 56,164 72,847 77,245 94,634 89,604
Minority interest ........................... 488 1,020 2,096 1,967 3,651 4,148
Stockholders' equity (deficiency)(3)(6) ...... (2,842) (1,706) (1,023) 1,959 4,489 5,606
</TABLE>
22
<PAGE>
- ----------------
(1) The results for the year ended December 31, 1994 include the results of Don
Mealey Cadillac-Oldsmobile from June 2, 1994, the date of its acquisition,
and the results of Tallahassee Chrysler-Plymouth from April 15, 1994, the
date of its acquisition.
(2) The results for the year ended December 31, 1996 include the results of Don
Mealey's Seminole Ford from April 1, 1996, the date of its acquisition.
(3) The Company currently utilizes the LIFO Method of inventory accounting. See
Note 4 to the Company's Combined Financial Statements. The Company intends
to file an election with the IRS to convert, upon the closing of the
Offering, to the FIFO Method of inventory accounting and report its earnings
for tax purposes in its financial statements on the industry standard FIFO
Method. If the Company had previously utilized the FIFO Method, gross profit
and income before income taxes and minority interest for the periods shown
in the table, and stockholders' equity as of December 31, 1996 and March 31,
1997, would have been as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------ --------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Gross profit ........................ $28,192 $35,935 $47,255 $50,104 $59,927 $14,317 $16,497
Income before income taxes and minority
interest .............................. 1,019 3,597 5,291 3,544 5,077 1,432 1,668
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1996 MARCH 31, 1997
------------------ ----------------
(IN THOUSANDS)
<S> <C> <C>
Stockholders' equity ...... $13,884 $14,936
</TABLE>
(4) Prior to the Reorganization, certain of the entities included in the
Combined Financial Statements of the Company were "S" corporations or other
entities which were not subject to federal and state income taxes during the
periods indicated, and certain of such entities had minority interests.
Pursuant to the Reorganization, all of these entities will convert to "C"
corporation status for federal and state income tax purposes, and all of the
minority interests will be acquired by the Company. As a result of the
change in tax status, the Company will be required to establish a deferred
tax liability for the difference between the book and tax basis of its
assets and liabilities, and record a provision for income taxes. As of March
31, 1997, the amount of deferred tax liability and related provision for
income taxes that will result from the change in the entities' tax status
and the conversion to the FIFO Method is approximately $2.7 million. This
provision will be incurred as of the date of the closing of the Offering,
which is anticipated to occur in August 1997, and therefore will be
reflected as a charge to the Company's earnings for the third quarter of the
1997 fiscal year. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview."
(5) Historical net income per share is not presented, as the historical capital
structure of the Company prior to the Offering is not comparable with the
capital structure that will exist after the Offering.
(6) Prior to the Reorganization, certain of the entities included in the
Combined Financial Statements were treated for federal income tax purposes
as "S" corporations, and consequently made distributions to their
shareholders from current earnings.
23
<PAGE>
PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined statements of operations for the
year ended December 31, 1996 and for the three months ended March 31, 1997
reflect the historical accounts of the Company for those periods, adjusted to
give pro forma effect to the Reorganization, the FIFO Conversion, the Recent
Acquisitions and the Offering, as if these events had occurred at the beginning
of each period presented. The following unaudited pro forma combined balance
sheet as of March 31, 1997 reflects the historical accounts of the Company as of
that date adjusted to give pro forma effect to the Reorganization, the FIFO
Conversion, the Recent Acquisitions and the Offering as if they had occurred as
of March 31, 1997. The Reorganization and the Recent Acquisitions will be
consummated on or before the closing of the Offering and are conditions
precedent to the closing of the Offering. The Company intends to convert to the
FIFO Method of inventory accounting effective upon the closing of the Offering.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
The pro forma combined financial data and accompanying notes should be read
in conjunction with the Combined Financial Statements and the related notes of
the Company as well as the financial statements and related notes of Whitehead
Ford, Graham Ford and Royal, all of which are included elsewhere in this
Prospectus. The Company believes that the assumptions used in the following
statements provide a reasonable basis on which to present the pro forma
financial data. The pro forma combined financial data is provided for
informational purposes only and should not be construed to be indicative of the
Company's financial condition or results of operations had the transactions and
events described above been consummated on the dates assumed, and are not
intended to project the Company's financial condition on any future date or its
results of operation for any future period.
24
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMPANY RECENT ACQUISITIONS
------------------------------ ---------------------
PRO FORMA
ADJUSTMENTS FOR
REORGANIZATION
AND FIFO WHITEHEAD GRAHAM
ACTUAL CONVERSION(1) FORD FORD
----------- ------------------ ------------ --------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Vehicle sales ........................... $390,260 $ (10,352)(3) $48,876 $75,495
Parts, service and collision repair ...... 50,001 (600)(3) 6,016 8,993
Other .................................... 9,170 (195)(3) 1,822 1,159
--------- ----------- --------- -------
Total revenues ........................... 449,431 (11,147) 56,714 85,647
--------- ----------- --------- -------
Costs and expenses:
Cost of sales ........................... 389,337 (10,176)(3) 47,172 74,948
167 (4)
Selling, general and administrative ...... 47,378 (1,258)(3) 5,917 7,903
576 (5)
Depreciation and amortization ............ 2,097 (30)(3) 252 141
(154)(5)
344 (6)
--------- ----------- --------- -------
Total costs and expenses ............... 438,812 (10,531) 53,341 82,992
--------- ----------- --------- -------
Operating income ........................... 10,619 (616) 3,373 2,655
Interest expense--Net ..................... 5,375 (144)(3) 703 1,133
(320)(5)
--------- ----------- --------- -------
Income before income taxes and
minority interest ........................ 5,244 (152) 2,670 1,522
Provision for income taxes ............... 483 1,563 (7)
Minority interest in earnings ............ 1,641 (1,641)(6)
--------- ----------- --------- -------
Net income ................................. $ 3,120 $ (74) $ 2,670 $ 1,522
========= =========== ========= =======
Net income per share .....................
Weighted average shares outstanding ......
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA FOR
PRO FORMA REORGANIZATION,
ADJUSTMENTS PRO FORMA FIFO CONVERSION,
FOR ADJUSTMENTS RECENT
RECENT FOR ACQUISITIONS
ROYAL(2) ACQUISITIONS OFFERING AND OFFERING
-------- ------------ ------------ ----------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Vehicle sales ........................... $68,546 $ 572,825
Parts, service and collision repair ...... 7,785 72,195
Other .................................... 657 12,613
-------- ---------
Total revenues ........................... 76,988 657,633
-------- ---------
Costs and expenses:
Cost of sales ........................... 66,644 (294)(8) 567,798
Selling, general and administrative ...... 8,351 58 (9) 68,543
(1,190)(10) 808 (12)
Depreciation and amortization ............ 123 (13)(9) 3,266
506 (11)
Total costs and expenses ............... 75,118 (933) 808 639,607
-------- ---------- ---------- ---------
Operating income ........................... 1,870 933 (808) 18,026
Interest expense--Net ..................... 910 (1,681)(12) 5,976
Income before income taxes and
minority interest ........................ 960 933 873 12,050
Provision for income taxes ............... 367 1,998 (7) 329 (12) 4,740
Minority interest in earnings ............
Net income ................................. $ 593 $ (1,065) $ 544 $ 7,310
========= ========= ========== ==========
Net income per share ..................... $ (13)
==========
Weighted average shares outstanding ...... $ (13)
==========
</TABLE>
25
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
COMPANY RECENT ACQUISITIONS
----------------------------- ---------------------
PRO FORMA
ADJUSTMENTS FOR
REORGANIZATION
AND FIFO WHITEHEAD GRAHAM
ACTUAL CONVERSION(1) FORD FORD ROYAL
---------- ------------------ ------------ ---------- --------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Vehicle sales ..................... $ 98,353 $ (2,601)(3) $10,646 $18,572 $14,387
Parts, service and
collision repair .................. 13,181 (161)(3) 1,483 2,327 2,122
Other .............................. 2,131 (75)(3) 380 193 317
--------- ---------- -------- ------- -------
Total revenues ..................... 113,665 (2,837) 12,509 21,092 16,826
--------- ---------- -------- ------- -------
Costs and expenses:
Cost of sales ..................... 97,103 (2,623)(3) 10,286 18,465 14,534
(65)(4)
Selling, general and
administrative ..................... 12,895 (245)(3) 1,378 1,917 1,869
145 (5)
Depreciation and amortization ...... 508 (7)(3) 74 13 33
(44)(5)
86 (6)
----------
Total costs and expenses ......... 110,506 (2,753) 11,738 20,395 16,436
--------- ---------- -------- ------- -------
Operating income ..................... 3,159 (84) 771 697 390
Interest expense--Net ............... 1,426 (43)(3) 143 276 228
(86)(5)
----------
Income before income taxes and
minority interest .................. 1,733 (45) 628 421 162
Provision for income taxes ......... 119 582 (7) 62
Minority interest in earnings ...... 497 (497)(6)
--------- ----------
Net income ........................... $ 1,117 $ (40) $ 628 $ 421 $ 100
========= ========== ======== ======= =======
Net income per share ...............
Weighted average shares
outstanding ........................
<CAPTION>
PRO FORMA FOR
PRO FORMA REORGANIZATION,
ADJUSTMENTS PRO FORMA FIFO CONVERSION,
FOR ADJUSTMENTS RECENT
RECENT FOR ACQUISITIONS
ACQUISITIONS OFFERING AND OFFERING
--------------- ----------------- --------------
<S> <C> <C> <C>
Revenues:
Vehicle sales ..................... $ 139,357
Parts, service and
collision repair .................. 18,952
Other .............................. 2,946
---------
Total revenues ..................... 161,255
---------
Costs and expenses:
Cost of sales ..................... 137,700
Selling, general and
administrative ..................... (15)(9) 201 (12) 17,847
(298)(10)
Depreciation and amortization ...... (3)(9) 787
127 (11)
Total costs and expenses ......... (189) 201 156,334
-------- -------- ---------
Operating income ..................... 189 (201) 4,921
Interest expense--Net ............... (420)(12) 1,524
Income before income taxes and
minority interest .................. 189 219 3,397
Provision for income taxes ......... 480 (7) 82(12) 1,325
Minority interest in earnings ......
Net income ........................... $ (291) $ 137 $ 2,072
======= ======== =========
Net income per share ............... $ (13)
=========
Weighted average shares
outstanding ........................ (13)
=========
</TABLE>
26
<PAGE>
- ----------------
(1) Adjustments give pro forma effect to the Reorganization and the FIFO
Conversion. The adjustments for the Reorganization reflect (i) the
elimination of all minority interests and the issuance of Common Stock in
exchange therefor, as part of the acquisition of the Dealership Assets,
excluding Real Property, (ii) the entering into of lease agreements for the
dealership Real Property and the elimination of mortgage interest expense
and depreciation related to such Real Property, and (iii) the sale or
closure of one Infiniti dealership and two Kia dealerships. The
Reorganization will be consummated on or prior to the closing of the
Offering and is a condition precedent to the closing of the Offering. The
Company currently uses the LIFO Method of accounting for inventory but
intends to convert to the FIFO Method of accounting for inventory effective
upon the closing of the Offering.
(2) Reflects results of operations for the fiscal year ended September 30,
1996.
(3) Reflects adjustments to eliminate the operating results of the Tallahassee
Kia and Infiniti dealerships that the Company sold in June 1997 and the
results of the Orlando Kia dealership that the Company intends to sell or
close before the closing of the Offering. See "Business--Dealership
Operations."
(4) Reflects the conversion of the Company from the LIFO Method of inventory
accounting to the FIFO Method of inventory accounting. The Company intends
to convert to the FIFO Method effective upon the closing of the Offering.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview."
(5) Reflects the Company's estimate of the net increase in selling, general and
administrative expenses related to lease agreements entered into with
respect to Real Property retained by, or distributed to, the Lessor
Affiliates, the associated decrease in depreciation and amortization, and
the decrease in interest expense associated with the elimination of the
Mortgage Debt encumbering the Real Property. See "Certain Transactions."
(6) Reflects the elimination of minority interest in earnings as a result of
the acquisition of such interests in the Reorganization and the
amortization of $13.7 million in intangibles, which consists primarily of
goodwill, related to the acquisition of such minority interests.
(7) Certain of the entities included in the Company's combined financial
statements and certain of the entities acquired in the Recent Acquisitions
were not subject to federal and state income taxes during the period
indicated. This adjustment reflects federal and state income taxes as if
all the entities included in the Company's combined financial statements,
and each of the entities acquired in the Recent Acquisitions, had been
taxable based on the 37.63% effective tax rate which would have been
applicable during the period. Upon completion of the Reorganization, the
Company and its subsidiaries, which have historically not been subject to
income tax as a result of their status as "S" corporations or partnerships,
will terminate their status as such and will thereafter be subject to
federal and state income tax as "C" corporations. As a result of the change
in tax status, the Company will be required to establish a deferred tax
liability for the difference between the book and tax basis of its assets
and liabilities, and record a provision for income taxes. As of March 31,
1997, the amount of deferred tax liability and related provision for income
taxes that will result from the change in the entities' tax status and the
conversion to the FIFO Method is approximately $2.7 million. This provision
will be incurred as of the date of the closing of the Offering, which is
anticipated to occur in August 1997, and therefore will be reflected as a
charge to the Company's earnings for the third quarter of the 1997 fiscal
year. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview."
(8) Reflects the conversion of the entities acquired in the Recent Acquisitions
from the LIFO Method of inventory accounting to the FIFO Method of
inventory accounting. The Company intends to convert to the FIFO Method
effective upon the closing of the Offering. The impact of the conversion to
the FIFO Method for the three months ended March 31, 1997 is not
significant.
(9) Reflects the Company's estimate of the net change in selling, general and
administrative expenses related to a lease agreement entered into with the
seller of Royal for the dealership real property and decrease in
depreciation and amortization related to such real property.
(10) Reflects the Company's estimate of the net decrease in selling, general and
administrative expenses related to the termination of services agreements
that had been in place at Royal.
(11) Reflects the amortization of $20.2 million in intangible assets, which
consist primarily of goodwill, resulting from the Recent Acquisitions, as
if the Recent Acquisitions had been completed as of the beginning of the
period. See "Recent Acquisitions."
(12) Reflects the net reduction in interest expense, the Company's estimate of
additional selling, general and administrative expense as a result of
public ownership and increase in provision for income taxes resulting from
the use of a portion of the estimated Offering proceeds to repay a portion
of the Company's indebtedness under its floor plan credit facilities. The
net reduction in interest expense was calculated based on reduction in such
indebtedness and other debt of $19.1 million at the approximate interest
rate in effect during the corresponding period, which was 8.8%. See "Use of
Proceeds."
(13) Pro forma net income per share is based upon the assumption that
shares of Common Stock are outstanding. This amount represents the shares
to be issued in the Offering ( ) and the number of shares of Common
Stock owned by the Company's stockholders immediately following the
Reorganization and the Recent Acquisitions ( ). See "Principal
Stockholders" and Note 1 to the Company's Combined Financial Statements.
27
<PAGE>
PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA FOR
ADJUSTMENTS FOR PRO FORMA REORGANIZATION,
REORGANIZATION ADJUSTMENTS FOR FIFO CONVERSION,
AND FIFO RECENT ACQUISITIONS RECENT ACQUISITIONS
ACTUAL CONVERSION(1) AND OFFERING AND OFFERING
----------- ------------------ ---------------------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents .................. $ 10,946 $ 200 (2) $ 2,899 (8) $ 14,045
Receivables--net ........................... 10,971 236 (2) 2,890 (8) 14,097
Inventories ................................. 63,668 (2,274)(2) 25,524 (8) 96,251
9,333 (3)
Prepaid expenses and other assets ............ 732 (6)(2) 692 (8) 1,418
--------- --------- ---------- --------
Total current assets ........................ 86,317 7,489 32,005 125,811
Fixed assets--Net ........................... 9,739 (180)(2) 5,741 (8) 10,782
(3,885)(4) (633) (9)
Investments ................................. 870 870
Notes receivable .............................. 317 317
Other assets ................................. 288 (2)(2) 69 (8) 355
Intangible assets--Net ........................ 1,827 13,673 (5) 20,241 (8) 35,741
--------- --------- ---------- --------
Total ....................................... $ 99,358 $ 17,095 $ 57,423 $173,876
========= ========= ========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Temporary bank overdrafts .................. $ 4,930 $ 4,930
Notes payable--floorplan ..................... 64,318 $ (2,039)(2) $ 22,033 (8) 65,535
(18,777)(10)
Current maturities:
Long-term debt .............................. 2,010 (350)(4) 87 (8) 1,747
Obligation under noncompete agreements ...... 330 330
Obligation under consulting agreement ...... 200 (8) 200
Capital lease obligations .................. 175 37 (8) 212
Other notes payable ........................ 23,700 (8)
(23,700)(10)
Accounts payable ........................... 4,032 (106)(2) 1,975 (8) 5,901
Accrued liabilities ........................ 8,846 (110)(2) 2,064 (8) 10,800
Deferred income taxes ........................ 67 1,500 (6) 1,567
---------- --------- --------
Total current liabilities .................. 84,708 (1,105) 7,619 91,222
Long-term debt .............................. 4,405 (3,385)(4) 3,205 (8) 4,225
Obligation under noncompete agreements ...... 96 96
Obligation under consulting agreement ......... 1,300 (8) 1,300
Capital lease obligations ..................... 329 105 (8) 434
Deferred income taxes ........................ 66 1,200 (6) 1,266
Commitments and contingencies
Minority interest ........................... 4,148 (4,148)(5)
Stockholders' equity:
Common stock ................................. 4 71 (10) 75
Additional paid-in capital .................. 9,064 (1,056)(2) 3,350 (8) 68,625
(150)(4) (633)(9)
17,821 (5) 42,406 (10)
(2,177)(7)
Retained earnings (deficit) .................. (3,094) 1,285 (2) 6,633
9,333 (3)
(2,700)(6)
1,809 (7)
Treasury Stock .............................. (368) 368 (7)
---------- ---------
Total stockholders' equity .................. 5,606 24,533 45,194 75,333
---------- --------- ---------- --------
Total ....................................... $ 99,358 $ 17,095 $ 57,423 $173,876
---------- --------- ---------- --------
</TABLE>
28
<PAGE>
- ----------------
(1) Adjustments give pro forma effect to the Reorganization and the FIFO
Conversion. The adjustments for the Reorganization reflect (i) the
elimination of all minority interests and the issuance of Common Stock in
exchange therefor, as part of the acquisition of the Dealership Assets,
excluding Real Property, (ii) the entering into of lease agreements for the
dealership Real Property and the elimination of mortgage interest expense
and depreciation related to such Real Property and (iii) the sale or
closure of one Infiniti dealership and two Kia dealerships. The
Reorganization will be consummated on or prior to the closing of the
Offering and is a condition precedent to the closing of the Offering. The
Company currently uses the LIFO Method of accounting for inventory but
intends to convert to the FIFO Method of accounting for inventory effective
upon the closing of the Offering.
(2) Reflects the sale of the Tallahassee Kia and Infiniti dealerships that the
Company sold in June 1997 for $675,000 in the form of a note receivable in
the amount of $475,000 and cash of $200,000, that resulted in a gain of
$500,000, and the discontinuation of the Orlando Kia dealership that the
Company intends to sell or close before the closing of the Offering. See
"Business--Dealership Operations."
(3) Reflects the conversion of the Company from the LIFO Method of inventory
accounting to the FIFO Method of inventory accounting. The Company intends
to convert to the FIFO Method of inventory accounting effective upon the
closing of the Offering. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."
(4) Reflects the distribution to or retention by the Lessor Affiliates of Real
Property related to certain dealerships with a net depreciated cost basis
in the amount of approximately $3.9 million, subject to the related
Mortgage Debt in the amount of approximately $3.7 million. See "Certain
Transactions--Reorganization."
(5) Reflects the acquisition of the minority interests of the various entities
included in the Reorganization in exchange for Common Stock of First Team
with an assumed value of approximately $17.8 million.
(6) Reflects the establishment of a current deferred tax liability and a
non-current deferred tax liability to effect the conversion of certain of
the entities included in the Combined Financial Statements from "S"
corporation or partnership status to "C" corporation status. As a result of
the change in tax status, the Company will be required to establish a
deferred tax liability for the difference between the book and tax basis of
its assets and liabilities, and record a provision for income taxes. As of
March 31, 1997, the amount of deferred tax liability and related provision
for income taxes that will result from the change in the entities' tax
status and the conversion to the FIFO Method is approximately $2.7 million.
This provision will be incurred as of the date of the closing of the
Offering, which is anticipated to occur in August 1997, and therefore will
be reflected as a charge to the Company's earnings for the third quarter of
the 1997 fiscal year. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."
(7) Reflects the transfer of the remaining accumulated deficit to additional
paid in capital and the retirement of treasury stock.
(8) Reflects the preliminary allocation of the aggregate purchase price of the
Recent Acquisitions based on the estimated fair value of the assets
acquired. The purchase price consists of the following:
<TABLE>
<CAPTION>
WHITEHEAD FORD GRAHAM FORD ROYAL TOTAL
----------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Estimated total consideration
Cash ................................................ $ 9,400,000 $ 9,700,000 $7,160,000 $26,260,000
Obligation under consulting agreement ............... 1,500,000 1,500,000
Common stock ....................................... 1,000,000 2,350,000 3,350,000
----------- ----------- -----------
Total 10,400,000 12,050,000 8,660,000 31,110,000
Less estimated fair value of net assets acquired ...... 2,400,000 6,137,000 2,332,000 10,869,000
----------- ----------- ---------- -----------
Excess of purchase price over fair value of net tangible
assets acquired ....................................... $ 8,000,000 $ 5,913,000 $6,328,000 $20,241,000
=========== =========== ========== ===========
</TABLE>
<PAGE>
The difference between the purchase price and the fair market value of the
net tangible assets acquired will be allocated to intangible assets,
primarily goodwill. Graham Ford consideration includes the acquisition of
the real estate for $3.0 million which had a historical book basis of $1.4
million and was subject to debt totalling $1.6 million. The acquisition was
funded using $150,000 in cash and a $2.9 million mortgage note.
(9) Reflects the decrease in fixed assets related to the distribution of real
property of Royal with a net depreciated cost basis in the amount of
approximately $633,000 that is not being acquired and the related decrease
in paid-in capital.
(10) Reflects the issuance of Common Stock in the Offering and the application
of a portion of the estimated net proceeds of the Offering to repay a
portion of the Company's indebtedness under its floor plan credit
facilities. See "Use of Proceeds."
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Selected Combined Financial Data and the Combined Financial Statements of
the Company and the notes thereto included elsewhere in this Prospectus. The
discussion and analysis includes a discussion of certain significant business
trends and uncertainties as well as other forward-looking statements. For a
discussion of important factors that could cause actual results to differ
materially from the forward-looking statements, see "Risk Factors."
OVERVIEW
The Company owns and operates seven automobile dealerships in Orlando and
three dealerships in Tallahassee, and is acquiring three additional dealerships,
in Orlando, Bradenton and Panama City, Florida, on or before the closing of the
Offering. First Team, which had retail sales of approximately 11,400 new and
9,300 used vehicles in 1996, offers customers a broad range of new vehicle
brands, including Ford, Chevrolet, Chrysler, Plymouth, Jeep, Eagle, Cadillac,
Oldsmobile, Infiniti, Mitsubishi and Acura. In 1996, First Team ranked number
one among new vehicle dealerships in retail unit sales of vehicles in both the
Orlando and Tallahassee markets.
The Company was founded in 1974 with the acquisition of a single
dealership, and its revenues over the past five years have increased from
approximately $210.9 million in 1992 to $449.4 million in 1996, primarily
through the acquisition and integration of new vehicle dealerships. The
Company's acquisitions have significantly affected the operating results of the
Company discussed in this analysis. In 1994, the Company acquired Don Mealey
Cadillac-Oldsmobile, in Orlando, and Tallahassee Chrysler-Plymouth. In April
1996, the Company acquired Seminole Ford in Orlando. The Company has accounted
for the purchase of each of its dealerships using the purchase method of
accounting and, as a result, does not include in its financial statements the
results of operations of these dealerships prior to the date they were acquired
by the Company.
The Company's revenues are produced by (1) sales of new vehicles; (2) sales
of used vehicles; (3) sales of parts and maintenance, warranty and repair
services and (4) fees and commissions for arranging financing, insurance and
extended service contracts (collectively, "F&I") associated with vehicle sales.
Sales of new vehicles are generally made to retail purchasers while sales of
used vehicles may be to either wholesale or retail customers.
The Company assigns its vehicle financing contracts and leases to other
parties, instead of directly financing sales, which reduces the Company's
exposure to loss from financing activities. The Company receives either a fee or
a spread from the lender for originating and assigning the loan or lease but is
assessed a chargeback fee by the lender if a loan is cancelled, in most cases,
within 120 days of making the loan. Early cancellation can result from early
repayment because of refinancing of the loan, the sale or trade-in of the
vehicle, or default on the loan. First Team establishes an allowance to absorb
estimated chargebacks and refunds. A portion of the Company's vehicle loans and
leases are assigned to Premier Finance, Ltd. ("Premier"), a limited partnership
in which the Company owns a minority limited partnership interest. On finance
contracts assigned to Premier, the Company has the opportunity to earn a
residual profit in addition to the customary commission earned upon assignment
of the finance contract to a third-party lender. The Company also earns
commissions on the sale of life and disability insurance and extended warranty
contracts issued by third-party insurance companies. See "Business--Vehicle
Financing and Insurance."
In addition to cost of sales, the Company's principal expenses are selling,
general and administrative ("SG&A") expenses and interest expense. The Company's
SG&A expenses consist primarily of compensation for sales, administrative,
finance and management personnel, including commissions and related bonuses,
rent, marketing, insurance and utilities. Interest expense consists of interest
charges on all of the Company's interest bearing debt, which consists primarily
of floor plan inventory financing.
30
<PAGE>
The Company's net income declined in 1995 from 1994 because of (i) lower
new vehicle unit sales at the Company's Chevrolet dealerships due in part to
adverse inventory allocation, and (ii) the difficulties experienced in turning
around the operations of Don Mealey Cadillac/Oldsmobile which was acquired in
the last quarter of 1994. In future acquisitions, the Company intends to target
profitable, well-managed dealerships; however, the Company may also acquire
dealerships which do not meet these criteria if the Company believes that it can
improve the performance and operating results of the acquired dealership. See
"Risk Factors--Dependence on Acquisitions for Growth; Risks of Acquisitions."
While the automotive retailing business is cyclical, First Team provides a
number of services and products that are not closely tied to the sale of new and
used vehicles. For example, First Team's parts and service and collision repair
businesses are not dependent upon sales volumes of vehicles over the short-term.
One method typically used in the automotive retailing business to measure a
dealership's exposure to cyclicality is to calculate the degree to which its
fixed costs are covered by gross profit that is independent of vehicle sales.
According to this measurement of "fixed coverage," a higher percentage of
non-vehicle sales revenue to fixed costs indicates a lower exposure to
cyclicality. Each manufacturer requires its dealerships to report fixed coverage
according to a specific method, and the methods used vary widely among
manufacturers and are not comparable. However, on an aggregate basis, the
Company believes its exposure to cyclicality may be measured by dividing the sum
of the gross profit for parts, service and collision repair by the sum of all
operating expenses with the exception of advertising and selling expenses
("Fixed Coverage"). Under this definition, the Company has experienced a trend
of declining exposure to cyclicality since its Fixed Coverage has increased from
53.2% in 1992 to 56.2% in 1996. For the first quarter ended March 31, 1997, the
Company's Fixed Coverage was 55.4% compared to 56.1% in the first quarter of
1996.
The new vehicle brands represented by the First Team dealerships are
subject to sales fluctuations from period to period, due to a number of factors
including product cycles, consumer preferences, product availability and sales
incentives related to specific models. In addition to sales fluctuations by
brand, dealership management, advertising and other expenses, and local economic
conditions, may affect sales at the Company's individual dealerships. The
Company believes that its diversity of vehicle brands minimizes the Company's
dependence on any one manufacturer and reduces the Company's overall exposure to
brand and dealership sales fluctuations. See "Risk Factors--Dependence on
Automobile Manufacturers."
The Combined Financial Statements of the Company included as a part of this
Prospectus present the combined results of entities that have been under the
common control of Don Mealey and his family members. See Note 1 to the Combined
Financial Statements included elsewhere in this Prospectus. The interests of
other equity holders in these entities are presented as minority interests. In
the Reorganization, which will occur immediately prior to the closing of the
Offering, all such other equity holders will exchange their interests in such
entities for Common Stock of the Company. Because the Company will acquire these
interests at a price in excess of their book value in a purchase transaction,
the excess of $13.7 million will be capitalized as goodwill. This goodwill will
be amortized over forty years and will reduce the Company's future stated
earnings. In addition, following the Reorganization, certain assets and
liabilities which have been included in the historical financial statements of
the Company will no longer be owned by the Company. These include one Infiniti
dealership and two Kia dealerships (each of which have been unprofitable) and
certain real property and the related mortgage indebtedness. See
"Business--Dealership Operations" and "Certain Transactions." Most of the
entities included in the Combined Financial Statements of the Company have been
treated for federal income tax purposes as "S corporations" or partnerships that
have not been subject to federal or state income taxes, but following the
Reorganization all such entities will become subject to such taxes. As a result
of the foregoing effects of the Reorganization, as well as the effects of the
Recent Acquisitions and the Offering, the historical combined financial
information included in this Prospectus is not necessarily indicative of the
results of operations, financial position and cash flows of the Company in the
future or the results of operations, financial position and cash flows which
would have resulted had the Reorganization occurred during the periods presented
in the Combined Financial Statements.
31
<PAGE>
The Company currently utilizes the LIFO Method of accounting for inventory
but intends to convert to the FIFO Method of accounting, effective upon the
closing of the Offering. If the FIFO Method of inventory accounting had been
used by the Company in prior periods, income before taxes and minority interest
would have been higher (lower) by $1,847,000, $955,000, and $(167,000) for the
years ended December 31, 1994, 1995 and 1996, respectively, and $0 and $65,000
for the three months ended March 31, 1995 and 1996, respectively, from the
reported results under the LIFO Method. Upon election of the FIFO Method, the
Company will be required under generally accepted accounting principles to
restate its historical financial statements.
Upon the completion of the Reorganization, the Company and its affiliates
which have historically been S corporations or partnerships will terminate their
status as such and will thereafter be subject to federal and state income tax.
As a result of the change in tax status, the Company will be required to
establish a deferred tax liability for the difference between the book and tax
basis of its assets and liabilities, and record a provision for income taxes. As
of March 31, 1997, the amount of deferred tax liability and related provision
for income taxes that will result from the change in the entities' tax status
and the conversion to the FIFO Method is approximately $2.7 million. This
provision will be incurred as of the date of the closing of the Offering, which
is anticipated to occur in August 1997, and therefore will be reflected as a
charge to the Company's earnings for the third quarter of the 1997 fiscal year.
See Note 1 to the Company's Combined Financial Statements included elsewhere in
this Prospectus.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and the
disclosure of contingent assets and liabilities, at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates. Estimates
are used for, among other things, allowances for finance, insurance and service
contract chargebacks, allowances for uncollectible receivables, asset
depreciation, amortization, income taxes and loss contingencies.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, a summary of
selected financial data presented in the Company's historical statements of
operations, expressed as a percentage of total revenues.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
-------------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------ ----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
New vehicle sales .................................... 53.3% 49.7% 52.0% 51.1% 51.7%
Used vehicle sales--retail ........................... 27.4 28.8 27.4 29.1 25.2
Used vehicle sales--wholesale ........................ 7.4 8.4 7.5 7.7 9.6
Parts, service and collision repair .................. 9.7 11.1 11.0 10.6 11.6
Other operating revenues ........................... 2.2 2.0 2.1 1.5 1.9
------- ------- ------- ------- -------
Total revenues ....................................... 100.0 100.0 100.0 100.0 100.0
Cost of sales ....................................... 87.5 86.9 86.6 86.1 85.4
------- ------- ------- ------- -------
Gross profit .......................................... 12.5 13.1 13.4 13.9 14.6
Selling, general, and administrative .................. 10.3 10.7 10.5 11.0 11.3
Depreciation and amortization ........................ 0.3 0.4 0.5 0.4 0.5
------- ------- ------- ------- -------
Operating income ....................................... 1.9 2.0 2.4 2.5 2.8
Interest expense, net ................................. 0.9 1.3 1.2 1.1 1.3
------- ------- ------- ------- -------
Income before income taxes and minority interest ...... 1.0 0.7 1.2 1.4 1.5
======= ======= ======= ======= =======
</TABLE>
32
<PAGE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
REVENUES
Total revenues increased 10.6% to $113.7 million for the three months ended
March 31, 1997 from $102.7 million for the first three months of 1996, an
increase of $11.0 million. For the first quarter of 1997 the Company realized
increased revenues in each area of operations as compared to the first quarter
of 1996. Revenues from new vehicle sales increased 12.0% to $58.8 million for
the three months ended March 31, 1997 from $52.5 million for the comparable 1996
period, an increase of $6.3 million. The increase was primarily attributable to
revenues from new vehicle sales generated by Seminole Ford, which was acquired
by the Company in April 1996, partially offset by a decrease of $5.9 million in
new vehicle sales at existing dealerships.
Revenues from used vehicle sales increased 4.7% to $39.6 million for the
three months ended March 31, 1997 from $37.8 million for the first three months
of 1996, an increase of $1.8 million. This increase was due to sales of used
vehicles by Seminole Ford and higher sales at wholesale, offset by a decrease of
$4.9 million in retail used vehicle sales at other dealerships.
Parts, service and collision repair revenues increased 21.6% to $13.2
million for the first three months of 1997 from $10.8 million for the first
three months of 1996, an increase of $2.4 million. This increase was due
primarily to the revenue generated by the parts and service business of Seminole
Ford, which was acquired in April 1996, as well as internal growth of
approximately $1.0 million generated by the Company's focus on expanding its
wholesale parts and collision repair businesses.
Other revenue, which consists primarily of finance and insurance revenue,
increased 37.1% to $2.1 million for the first quarter of 1997 from $1.6 million
for the first quarter of 1996, an increase of $0.5 million. This increase was
due primarily to other revenue of Seminole Ford.
GROSS PROFIT
Gross profit increased 15.7% to $16.5 million for the three months ended
March 31, 1997 from $14.3 million for the first three months of 1996, an
increase of $2.2 million, due primarily to the acquisition of Seminole Ford.
Gross profit as a percentage of sales ("gross margin") increased to 14.6% for
the three months ended March 31, 1997 as compared to 13.9% for the first three
months of 1996. This increase was due to increases in the margin of used vehicle
sales at retail and increased sales of higher-margin products and services, such
as collision repair services, offset partially by increased sales of used
vehicles at wholesale. Gross margin on sales of new vehicles remained relatively
constant at 9.7% compared to 9.4% in the first quarter of 1996. Gross margin on
retail sales of used vehicles increased from 12.0% in the first quarter of 1996
to 13.0% in the first quarter of 1997, which the Company believes is a result of
improvements in inventory management and marketing.
SELLING, GENERAL AND ADMINISTRATIVE
SG&A costs and expenses increased 14.5% to $12.9 million for the first
three months of 1997 from $11.3 million for the first three months of 1996, an
increase of $1.6 million, primarily due to the operations of Seminole Ford. As a
percentage of sales, SG&A costs and expenses increased marginally to 11.3% from
11.0% as advertising and certain other costs remained relatively stable while
revenues of certain dealerships included in both periods declined moderately.
INTEREST EXPENSE--NET
Interest expense--net increased 22.3% to $1.4 million for the first three
months of 1997 from $1.2 million for the first three months of 1996 due
primarily to higher average loan balances resulting from the floor plan debt of
Seminole Ford.
MINORITY INTEREST IN EARNINGS
Minority interest in earnings increased 46.7% to $497,000 for the first
three months of 1997 from $339,000, which is attributable to the minority's
equity interest in the earnings of Seminole Ford.
33
<PAGE>
NET INCOME
Net income before minority interest increased 22.1% to $1.6 million for the
first three months of 1997, as compared to $1.3 million for the corresponding
period in 1996. The increase was due primarily to the acquisition of Seminole
Ford. For the same reasons, net income increased 21.5% to $1.1 million for the
first three months of 1997 from $0.9 million for the first three months of 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
REVENUES
Total revenues increased 20.2% to $449.4 million for the year ended
December 31, 1996 from $373.9 million for the year ended December 31, 1995, an
increase of $75.5 million. Revenue from new vehicle sales increased 25.8% to
$233.5 million for 1996 from $185.7 million for 1995, an increase of $47.8
million, due primarily to revenues from new vehicle sales generated by the
acquisition of Seminole Ford. The increase in new vehicle sales in 1996 was also
attributable in part to an increase in new vehicle sales prices, partially
offset by a slight decrease in the number of units sold at the existing
dealerships.
Revenues from used vehicle sales increased 12.1% to $156.7 million for 1996
from $139.8 million for 1995, an increase of $16.9 million. Sales of used
vehicles at Seminole Ford accounted for most of the increase in used vehicle
sales. The remainder of the increase in used vehicle sales in 1996 was
attributable to an increase in the average retail selling price at the Company's
other dealerships, offset in part by a slight decrease in the number of used
vehicles sold.
Parts, service and collision repair revenues increased 22.2% to $50.0
million for 1996 from $40.9 million for 1995, an increase of $9.1 million.
Approximately $5.1 million of the increase was due to internal growth generated
by the Company's focus on expanding its parts, mechanical repair and collision
repair businesses, with the remainder due to revenue generated by Seminole Ford.
Other revenues increased 21.5% to $9.2 million for 1996 from $7.5 million
for 1995, an increase of $1.7 million, largely as a result of the addition of
Seminole Ford. The addition of the Ford dealership accounted for $0.7 million or
41.0% of the increase. The remainder of the increase was attributable to
internal growth at existing dealerships as well as, to a lesser extent, the
Company's earnings on its investment in Premier, which was purchased in July
1996. See "Business--Vehicle Financing and Insurance."
GROSS PROFIT
Gross profit increased 22.3% to $60.1 million for 1996 from $49.1 million
for 1995, an increase of $11.0 million due primarily to the acquisition of
Seminole Ford and, to a lesser extent, higher service revenue. Gross margin
increased to 13.4% in 1996 from 13.1% in 1995 primarily due to higher gross
margins on used vehicle retail sales, which increased to 10.5% for 1996 from
9.5% for 1995, and growth in higher-margin revenues.
SELLING, GENERAL AND ADMINISTRATIVE
SG&A costs and expenses increased 18.1% to $47.4 million for 1996 from
$40.1 million for 1995, an increase of $7.3 million, due largely to the
acquisition of Seminole Ford. As a percentage of revenue, SG&A costs and
expenses remained relatively constant, decreasing from 10.7% in 1995 to 10.5% in
1996.
INTEREST EXPENSE--NET
Interest expense--net increased 13.9% to $5.4 million for 1996 from $4.7
million for 1995, an increase of $0.7 million, due primarily to acquisition debt
and increases in floor plan financing resulting from the acquisition of Seminole
Ford.
34
<PAGE>
MINORITY INTEREST IN EARNINGS
Minority interest in earnings increased 121.5% to $1.6 million for 1996
from $0.7 million for 1995, an increase of $0.9 million, due primarily to the
minority interest in Seminole Ford and higher earnings.
NET INCOME
Net income before minority interest increased 102.5% to $5.2 million for
1996, as compared to $2.6 million for 1995, due primarily to increased sales
volumes at the Company's dealerships included in both periods, as well as the
acquisition of Seminole Ford. Net income increased 178.3% to $3.1 million for
1996 from $1.1 million for 1995, for the reasons described above.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
REVENUES
Total revenues increased 3.3% to $373.9 million for the year ended December
31, 1995 from $362.0 million for the year ended December 31, 1994, an increase
of $11.9 million. Revenue from new vehicle sales decreased 3.8% to $185.7
million for 1995 from $193.1 million for 1994, a decrease of $7.4 million. The
decline in new vehicle sales was attributable primarily to unfavorable vehicle
supply and allocation from two manufacturers, offset in part by incremental new
vehicle sales of $8.1 million at two new dealerships which were owned by the
Company for only a portion of 1994.
Revenues from used vehicle sales increased 11.1% to $139.8 million for 1995
from $125.7 million for 1994, an increase of $14.1 million. The increase was
primarily attributable to used vehicle sales at the two dealerships acquired in
1994, a focused effort to increase used vehicle sales at two of the existing
Orlando dealerships, and an increase in the volume of used vehicle inventory
sold at wholesale, offset by decreases in used vehicle sales at various other
dealerships.
Parts, service and collision repair revenues increased 16.7% to $40.9
million for 1995 from $35.1 million for 1994, an increase of $5.8 million. This
increase was due primarily to increased parts, service and collision repair
revenue at the Company's two Chevrolet dealerships and as a result of the
acquisitions.
Other revenues decreased 7.4% to $7.5 million for 1995 from $8.2 million
for 1994, a decrease of $0.7 million. The decrease was primarily due to lower
finance and insurance revenue resulting from lower unit sales.
GROSS PROFIT
Gross profit increased 8.2% to $49.1 million for 1995 from $45.4 million
for 1994, an increase of $3.7 million. This increase was due primarily to an
increase in gross margin to 13.1% for 1995 from 12.5% for 1994, as well as the
increase in total revenues. The gross margin on new vehicle sales increased to
8.5% for 1995 from 7.2% for 1994 primarily as a result of a 7.2% increase in the
sale price of new vehicles due to a change in mix of new vehicles sold and
general increase in new vehicle prices. The gross margin on retail used vehicle
sales remained relatively constant at 9.5% for 1995 as compared to 9.6% for
1994.
SELLING, GENERAL AND ADMINISTRATIVE
SG&A costs and expenses increased 7.7% to $40.1 million for 1995 from $37.3
million for 1994, an increase of $2.8 million. As a percentage of revenue, SG&A
expenses increased marginally to 10.7% in 1995 from 10.3% in 1994. This increase
in SG&A expenses was primarily attributable to higher professional fees.
INTEREST EXPENSE--NET
Interest expense--net increased 39.3% to $4.7 million for 1995 from $3.4
million for 1994, an increase of $1.3 million, due primarily to higher levels of
floor plan financing caused by increased levels
35
<PAGE>
of inventory from lower than expected unit sales of new vehicles. Also
contributing to the increase in interest expense were the two dealership
acquisitions completed in 1994, and a general increase in interest rates.
MINORITY INTEREST IN EARNINGS
Minority interest in earnings for 1995 remained at consistent levels when
compared to 1994 despite a decrease in operating income in 1994 because certain
minority interests were repurchased in 1995.
NET INCOME
Net income decreased 38.6% to $1.1 million for 1995 from $1.8 million for
1994 due primarily to the decline in new vehicle sales caused by lower demand
due in part to an increase in interest rates, partially offset by increased
parts and service activities.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal needs for capital resources are to finance
acquisitions, capital expenditures, including start-up costs associated with
opening its first Driver'sMart/trademark/ used vehicle superstore, debt service
and increased working capital requirements, including inventory. Historically,
the Company has relied primarily upon internally generated cash flows from
operations, borrowings under its various credit facilities and borrowings and
capital contributions from its shareholders to finance its operations and
expansion.
The Company has historically maintained separate revolving floor plan
credit facilities for each dealership which have been used to finance vehicle
inventory. The Company currently has floor plan credit facilities with Comerica
Bank, SunTrust Bank and General Motors Acceptance Corporation ("GMAC") (the "New
Vehicle Floor Plan Lines") which permit the Company to borrow up to an aggregate
of $79.4 million on a secured basis to purchase new vehicle inventory, as of
March 31, 1997, including an aggregate of $2.5 million which may be used to
purchase used vehicle inventory. At March 31, 1997, $18.6 million of unused
financing was available under the New Vehicle Floor Plan Lines. The Company also
has lines of credit with the same three lenders to finance the purchase of used
vehicle inventory (the "Used Vehicle Floor Plan Lines" and, together with the
New Vehicle Floor Plan Lines, the "Floor Plan Lines"). The Used Vehicle Floor
Plan Lines permit the Company to borrow, as of March 31, 1997, up to fifty
percent of the value of the Company's used vehicle inventory, up to a maximum
outstanding balance of $6.0 million. At March 31, 1997, $2.5 million of unused
financing was available under the Used Vehicle Floor Plan Lines. The Floor Plan
Lines bear interest at variable rates ranging from LIBOR plus 2% to prime plus
1.5%. The Company makes monthly interest payments on the amount financed under
the Floor Plan Lines but is not required to make loan principal repayments prior
to the sale of the vehicles. The underlying notes are due when the related
vehicles are sold and are collateralized by vehicle inventories and other assets
of the Company. The Floor Plan Lines contain a number of covenants, including
among others, covenants restricting the Company with respect to incurrence of
indebtedness, limitations on liens and changes in ownership, officers and key
management personnel. The Company is also required to comply with certain
financial tests.
Following the consummation of the Offering, the Company intends to
consolidate its New Vehicle Floor Plan Lines. First Team believes that, as a
public company, it will be able to secure lines of credit to finance all or a
significant portion of its inventory at a lower cost than it has historically
paid under separate Floor Plan Lines at each dealership. In addition, the
Company intends to seek an additional line of credit as a potential source of
financing for future acquisitions.
In connection with the Reorganization, which will occur immediately prior
to the closing of the Offering, certain Real Property used by the Company's
dealerships will be retained by or distributed to the Lessor Affiliates. See
"Certain Transactions--Reorganization." As part of the Reorganization, the
Lessor Affiliates will assume primary responsibility for the Mortgage Debt
secured by the Real
36
<PAGE>
Property, which is included in the Company's historical financial statements.
Accordingly, the Company expects that upon consummation of the Reorganization
and the Offering, the Company's outstanding indebtedness will consist of its
Floor Plan Lines, approximately $8.6 million of other debt, and a deferred
obligation of $2.4 million incurred in connection with the Recent Acquisitions
and payable over ten years, and the Company will be responsible as a guarantor
of the Mortgage Debt which totals approximately $5.8 million. See
"Capitalization" and "Recent Acquisitions." On a pro forma basis, after giving
effect to the Offering and the application of the Offering proceeds, the Company
estimates that it will have outstanding indebtedness of $65.5 million, and
aggregate borrowing capacity of approximately $_________, under its existing
Floor Plan Lines.
In connection with the conversion by the Company from the LIFO Method of
inventory accounting to the FIFO Method of inventory accounting, which will
occur effective upon the closing of the Offering, the Company will incur an
expense for deferred taxes, $1.5 million of which will become due in 1998.
Net cash provided (used) by operating activities over the last three fiscal
years, as detailed in the combined statements of cash flows, was $1.2 million,
($3.4) million and ($6.2) million in fiscal 1996, 1995 and 1994, respectively.
Cash provided by operations resulted primarily from net income, depreciation and
amortization, as well as increases in accounts payable and other current
liabilities, offset by increases in inventory. For the three months ended March
31, 1997 and 1996, cash provided by operating activities was $3.6 million, and
$7.8 million, respectively. In both quarters the Company experienced large
decreases in inventories and receivables due to relatively modest sales in the
fourth quarter of each year combined with increased sales activity in the first
quarter. Receivables decreased as a result of increased efficiencies in the
assignment of finance contracts.
Net cash used in investing activities totaled $3.8 million, $0.8 million
and $2.4 million in fiscal 1996, 1995 and 1994, respectively, and was primarily
comprised of the purchase of dealerships and other fixed assets. In the first
quarter of 1997, net cash used in investing activities was $0.2 million compared
to $0.5 million in the first quarter of 1996, in each case attributable to
purchases of fixed assets.
Capital expenditures, excluding amounts paid in acquisitions, were $1.8
million, $0.8 million and $1.6 million in 1996, 1995 and 1994, respectively. The
principal capital expenditures included the acquisition of new dealerships,
building improvements and computer equipment for use in the Company's
dealerships. Excluding the purchase price for the Recent Acquisitions and future
acquisitions, the Company is anticipating total capital expenditures in the last
half of 1997 to be approximately $5.0 million to, among other uses, fund land
acquisition and start-up costs for its first Driver'sMart/trademark/ superstore,
construct a new collision repair facility in Tallahassee and construct a new
dealership facility for Whitehead Ford. The Company expects to increase its
capital expenditures over the next few years as part of its acquisition and
growth strategy.
Net cash provided by financing activities totalled $6.2 million, $6.2
million and $9.6 million in fiscal 1996, 1995 and 1994, respectively, and
consisted primarily of net borrowing under the Floor Plan Lines and temporary
bank overdrafts. The Company used cash of $3.9 million in financing activities
in the first quarter of 1997 compared to $7.6 million in the comparable period
in 1996, mainly due to reductions of debt under the Floor Plan Lines as
inventories decreased.
The Company believes that cash flow generated from future operations, the
availability of borrowings under the Floor Plan Lines (or any replacements
thereof) and its other credit arrangements, and the proceeds from the Offering
will be sufficient to fund its debt service and working capital requirements,
capital expenditures and seasonal operating requirements, including its
currently anticipated internal growth for the foreseeable future. The Company
expects to fund any future acquisitions from its future cash flow, additional
bank financing, or common stock issuances. There can be no assurance that
additional financing can be obtained on terms favorable to the Company, or that
the Company will be able to use its common stock to fund any future
acquisitions. See "Risk Factors--
Need for Capital; Financing of Acquisitions; Possible Dilution Through Issuance
of Stock."
37
<PAGE>
BUSINESS
OVERVIEW
First Team is a leading automotive retailer in the greater Orlando and
Tallahassee, Florida markets. The Company owns and operates seven automobile
dealerships in Orlando and three dealerships in Tallahassee and is acquiring
three additional dealerships in Orlando, Bradenton and Panama City, Florida. The
Company sells new and used cars and trucks, offers related financing, insurance
and extended service contracts, performs automotive maintenance, warranty, paint
and repair services, and sells replacement parts. First Team, which had retail
sales of approximately 11,400 new and 9,300 used vehicles in 1996, offers
customers in its markets a broad range of new vehicle brands, including Ford,
Chevrolet, Chrysler, Plymouth, Jeep, Eagle, Cadillac, Oldsmobile, Infiniti,
Mitsubishi and Acura. In 1996, First Team ranked number one among new vehicle
dealerships in retail unit sales of vehicles in both the Orlando and Tallahassee
markets. After giving effect to the Reorganization and the Recent Acquisitions,
the Company's 1996 market share among new vehicle dealers would have been 13.6%
in Orlando, 27.8% in Tallahassee, 21.8% in Panama City, and 18.0% in Bradenton,
in each case based on retail unit sales of new and used vehicles. The Company
has also been awarded the exclusive Driver's Mart/trademark/ used vehicle
superstore franchise for the greater Orlando market, and expects to open its
first superstore in 1998.
The Company was founded in 1974 by Don Mealey, its principal shareholder
and chief executive officer. Mr. Mealey has over forty years of experience in
the automotive retailing industry, and the First Team dealership general
managers each have at least ten years of automotive retailing experience. Mr.
Mealey and his management team have been recognized by various regional and
national industry organizations for quality and performance and, in recognition
of their standing in the industry, have served in the past five years on
manufacturer dealer councils for Ford, Chevrolet, Infiniti, Mitsubishi, and
Acura. First Team's management also has substantial experience in managing,
acquiring and integrating new vehicle dealerships and, during the last five
years, the Company has acquired four dealerships and has been granted five new
franchises by manufacturers.
First Team has increased its sales over the past five years from $210.9
million in 1992 to $449.4 million in 1996, primarily as a result of
acquisitions. After giving effect to the Reorganization and the Recent
Acquisitions, the Company would have had $657.6 million in revenues in 1996, and
retail unit sales of approximately 17,000 new vehicles and 13,000 used vehicles.
The Company believes that, based on pro forma revenues, First Team would have
ranked as one of the 25 largest dealership groups in the United States in 1996.
First Team intends to continue to expand its operations by acquiring
additional dealerships within and outside its current markets. In the current
industry environment, the Company believes that an opportunity exists for
companies with significant equity capital to acquire additional dealerships on
favorable terms. See "--Industry Dynamics." The Company also expects to generate
additional growth by developing Driver's Mart/trademark/ used vehicle
superstores and expanding its higher-margin sales of collision repair services
and wholesale parts.
First Team has developed and implemented several operating strategies which
it believes provide significant competitive advantages. The Company offers
numerous brands of new vehicles in order to appeal to consumers in a wide range
of income levels, while also emphasizing sales of used vehicles which typically
provide higher margins. By maintaining a significant presence in each of its
markets, the Company benefits from economies of scale and enhances its name
recognition and reputation among customers. First Team also uses computer-based
systems in all of its operations in order to improve customer service and
enhance dealership performance, and compensates its dealership general managers
and sales and service personnel through programs that reward profitability and
customer satisfaction.
38
<PAGE>
GROWTH STRATEGY
The Company's objective is to expand its business by acquiring additional
dealerships, developing Driver's Mart/trademark/ used vehicle superstores, and
capitalizing on the Company's size to increase sales of higher-margin products
and services that are not directly related to the new vehicle cycle.
/bullet/ ACQUIRE ADDITIONAL DEALERSHIPS. The Company plans to acquire additional
dealerships in markets where the Company has or can achieve a
significant market presence.
/bullet/ ACQUISITIONS IN NEW MARKETS. First Team plans to expand into new
geographic markets by acquiring dealerships with an established
market presence. The Company expects that these acquisitions will
initially be in markets with favorable demographic trends in the
Southeast and Mid-Atlantic states, but the Company may consider
other attractive opportunities outside these areas. Generally, the
Company will seek to retain the acquired dealership's operational
management, and thereby benefit from their market knowledge, name
recognition and local reputation. Moreover, the Company
anticipates that the management team at the acquired dealerships
will enable the Company to identify more effectively additional
acquisition opportunities and grow more rapidly in new markets.
The Company does not intend to enter a geographic market unless it
believes it can achieve a significant market presence and realize
economies of scale. These operating efficiencies are expected to
include advertising cost savings, improvements in marketing and
inventory management (particularly with respect to used vehicles)
and lower employee benefit costs as a result of administering a
single employee benefits plan. Certain dealership functions can be
consolidated on a regional basis to realize efficiencies in areas
such as accounting and management information systems, as well as
personnel administration. In Orlando and Tallahassee, for example,
the Company has consolidated many of its accounting and
manufacturers' financial reporting responsibilities, eliminating
duplicative functions at the individual dealership level. In
addition, the Company expects to realize economies of scale from
being one of the largest dealership groups in the country. Such
benefits include lower borrowing costs due to additional leverage
with lenders and cost savings from volume purchase contracts.
/bullet/ IN-MARKET ACQUISITIONS. First Team also intends to acquire
additional dealerships in the markets in which it operates when it
believes that such acquisitions will produce additional operating
efficiencies. In-market acquisitions will also increase the
Company's market share, promote increased name recognition and
provide the Company with better opportunities for repeat and
referral business.
The Company believes that there will also be opportunities to
improve certain areas of the acquired dealerships' operations.
First Team has experience in acquiring dealerships and
implementing its operating strategies to improve the performance
and profitability of dealerships following their acquisition. For
each acquisition, management will conduct a comprehensive analysis
of the acquired dealership and will focus on any under-performing
departments that it believes will yield operating and
profitability improvements. The Company believes that the
discipline it maintains in the acquisition process, the excellent
relationships it has with manufacturers and its management's
contacts and reputation in the dealership community have been
critical elements in its successful history of acquisition-driven
growth. Although the Company plans to evaluate acquisitions on a
case-by-case basis, its criteria for judging potential acquisition
candidates include the dealership's profitability, the strength of
the dealership's current management, the dealership's location,
the reputation of the dealership with customers, the type and make
of vehicles sold by the dealership, and the opportunities for the
Company to implement its operating strategies at the dealership.
See "Risk Factors--Dependence on Acquisitions for Growth; Risks of
Acquisitions."
/bullet/ DEVELOP DRIVER'S MART/trademark/ USED VEHICLE SUPERSTORES. First Team
recently acquired an exclusive franchise to establish and operate
Driver's Mart/trademark/ used vehicle superstores in the greater
Orlando market. The Company intends to open its first Driver's
Mart/trademark/ superstore in 1998 and, depending on
39
<PAGE>
the success of its first store, two additional superstore facilities by 2001.
Each Driver's Mart/trademark/ superstore will offer a broad range of
low-mileage, late-model used vehicles, in a buyer-friendly environment designed
to promote customer satisfaction and loyalty.
Driver's Mart/trademark/ features "no haggle" pricing and vehicle quality
policies which include a comprehensive quality inspection of each vehicle and
any reconditioning necessary to bring the vehicle up to Driver's
Mart/trademark/ retail standards. Each superstore also provides a free one-year
complete warranty, a 30-day exchange policy, and a three-day, 300 mile
money-back guarantee on each vehicle sold. Driver's Mart/trademark/ offers a
proprietary computer kiosk system which enables the customer to electronically
search the entire vehicle inventory at the superstore, and provides a complete
description of each vehicle's features, price and display location. In
addition, the computer kiosk will allow the customer to access various finance
and lease programs offered by different lenders, and submit a financing
application electronically and receive a prompt response. First Team intends to
cross-market the used vehicle inventories of its Driver's Mart/trademark/
superstores and its Orlando dealerships in order to offer customers the widest
selection of used vehicles. See "Risk Factors--
Driver's Mart/trademark/ Used Vehicle Superstores."
/bullet/ INCREASE SALES OF HIGHER-MARGIN PRODUCTS AND SERVICES. The Company
intends to increase its sales of higher-margin products and services by
expanding its collision repair and wholesale parts businesses.
/bullet/ COLLISION REPAIR CENTERS. In 1996, the Company began implementing
its strategy to expand its collision repair business by adding two
new collision repair facilities in Orlando. An additional facility
will be added in Tallahassee in the last quarter of 1997, and the
Recent Acquisitions will provide further capacity. The Company has
expanded its collision repair facilities from approximately 25,000
square feet at year-end 1995 to approximately 51,000 square feet
at year-end 1996. After the completion of the Recent Acquisitions
and the new Tallahassee facility, the Company expects to have a
total of approximately 139,000 square feet of collision repair
facilities in operation by year-end 1997. The Company intends to
use this increased capacity to generate additional revenues from
its collision repair business to provide for a more stable revenue
stream and higher operating margins. In the Orlando area, First
Team's body shops will be marketed under the name "Don Mealey
Collision Repair Center."
/bullet/ WHOLESALE PARTS. The Company's Dealer Agreements authorize the
Company to distribute original equipment parts for all of the
brands it represents. The Company plans to capitalize on its
representation of numerous manufacturers by implementing a new
strategy which it believes will increase sales of parts to
wholesale customers in its existing markets and in new markets. As
part of this strategy, the Company is considering the adoption of
uniform policies at all of its dealerships with respect to
pricing, returns and order processing, in order to improve service
and delivery to its wholesale customers. In addition, First Team
is evaluating a new program which is intended to achieve operating
efficiencies and improve customer service by coordinating parts
pickup and delivery by use of a fleet of radio equipped trucks.
The Company also intends to introduce discount and incentive
programs for its wholesale customers based upon the overall volume
of parts purchased from all stores.
OPERATING STRATEGY
The Company's operating goals are to establish and maintain customer
loyalty in order to generate repeat and referral business and to achieve
operating efficiencies which will enhance its financial performance. The Company
seeks to realize these goals by implementing the following operating strategies.
/bullet/ OFFER A DIVERSE RANGE OF AUTOMOTIVE PRODUCTS AND SERVICES. First Team
offers a broad range of automotive products and services, including a
wide selection of new and used vehicles, vehicle financing and
insurance programs, replacement parts and maintenance and repair
services. First Team sells a diverse variety of new vehicles, including
Ford, Chevrolet, Chrysler, Plymouth, Jeep, Eagle, Cadillac, Oldsmobile,
Infiniti, Mitsubishi and Acura. The Company also offers used vehicles
40
<PAGE>
appropriate for customers with varying preferences within a broad range
of income levels. Management believes that its brand and product
diversity not only appeals to a wide variety of customers, but also
minimizes the Company's dependence on any one manufacturer and reduces
the Company's exposure to potential manufacturer supply problems and
changes in consumer preferences. Moreover, the Company believes that it
can enhance customer loyalty and retention by selling across
dealerships as customer buying needs and preferences change over time.
In 1996, the Company's new vehicle sales were comprised of 46.9% trucks
and 53.1% cars, representing eleven domestic and foreign brands. After
giving effect to the Reorganization and the Recent Acquisitions, the
Company's new vehicle sales in 1996 would have been 53.5% trucks and
46.5% cars.
/bullet/ ESTABLISH A SIGNIFICANT MARKET PRESENCE IN EACH MARKET. The Company
owns multiple dealerships in both the Orlando and Tallahassee markets,
and will seek to acquire more than one dealership in each new market it
enters in order to achieve a significant market share. After giving
effect to the Reorganization and the Recent Acquisitions, First Team's
1996 market share among new vehicle dealers would have been
approximately 13.6% in Orlando, 27.8% in Tallahassee, 21.8% in Panama
City, and 18.0% in Bradenton, in each case based on retail unit sales
of new and used vehicles.
/bullet/ MAINTAIN HIGH LEVELS OF CUSTOMER LOYALTY AND SATISFACTION. The Company
emphasizes customer satisfaction throughout its organization and
continually seeks to improve its reputation for quality and fairness,
in order to secure long-term customer loyalty and ensure repeat and
referral business. The Company's incentive compensation programs for
its sales and service personnel are linked to customer satisfaction
index ("CSI") scores maintained by manufacturers based on the results
of customer surveys regarding a dealership's quality of service.
/bullet/ EMPHASIZE SALES OF HIGHER-MARGIN USED VEHICLES. In order to increase
used vehicle sales, First Team has commenced marketing used vehicles on
a consolidated basis in each geographic market, as "Don Mealey's Auto
Network" in Orlando and under the "CarTrust" brand in Tallahassee. This
program offers several convenient dealership locations in each market
and access to First Team's entire inventory of used vehicles in the
region from any one location through First Team's computerized
inventory management system. In addition, a uniform warranty and
customer benefits package applies to vehicles delivered at any location
in each market. Under the program, (i) each dealership has on-line
access to the entire used vehicle inventory of the Company's other
dealerships within the region, (ii) the used vehicle inventory in each
market is advertized and marketed together under a single, regional
brand name, and (iii) the Company periodically coordinates off-site
used vehicle sales events. First Team believes that this system
facilitates the potential customer's search for, and purchase of, a
vehicle since the customer needs only to visit one of the Company's
dealerships within the region, read one of the Company's local
advertisements or attend one of the Company's sales events to gain
access to the entire First Team inventory in that market. The Company
believes that its used vehicle marketing strategies increase sales
within the Company's markets, and intends to implement these strategies
as appropriate in new markets.
/bullet/ EMPLOY COMPUTER-BASED TECHNOLOGIES THROUGHOUT CORPORATE AND DEALERSHIP
OPERATIONS. The Company believes that it has achieved operating
efficiencies and cost savings by integrating computer- based systems
into nearly all aspects of its operations. Through First Team's
management information systems, senior management can access dealership
data in "real time" to monitor financial performance and identify areas
requiring management attention. Currently, the Company employs
computer-based technology to consolidate its used vehicle advertising
and marketing in each of its geographic markets. In the future, First
Team will use its computer-based inventory management system to
coordinate the marketing of its used vehicle inventory among its
Orlando dealerships and the planned Driver's Mart/trademark/
superstore. The Company also plans to install software which will
provide selected dealerships on-line access to a comprehensive list of
available leases for various vehicles from lenders throughout the
United States. Using such system, the dealership will be able to
provide a customer with a broad array of lease payment alternatives
and, consequently, appeal to a term buyer who is trying to purchase a
vehicle of choice at or below a specific monthly payment.
41
<PAGE>
/bullet/ ALIGN MANAGEMENT'S INTERESTS WITH STOCKHOLDERS THROUGH INCENTIVE BASED
PROGRAMS. First Team has historically offered its general managers an
equity stake in the dealerships that they manage. After the Offering,
the general managers, who have primary responsibility for decisions
relating to inventory, advertising, pricing and personnel, will own an
aggregate of % of the Company's outstanding Common Stock and will
hold options to purchase additional Common Stock. See "Management."
Each general manager is also eligible for an annual bonus based on the
profitability of the managed dealership. The Company believes that its
incentive based programs encourage coordinated efforts among its
dealerships and that the Company as a whole benefits from this system
through the sharing of "best practices." For example, the First Team
general managers in Orlando meet on a regular basis to exchange ideas
on sales, service and other strategies, and assist each other in
implementing the successful strategies at other dealerships. Management
intends to offer stock-based incentives throughout the organization in
an effort to enhance the Company's overall profitability.
/bullet/ DEVELOP AND RETAIN QUALIFIED MANAGEMENT. The Company continually seeks
to develop and retain qualified personnel and promote talented
employees to assume more responsible positions in the First Team
organization. Excluding the three Recent Acquisitions, the Company's
dealership managers have been employed by the Company for an average of
approximately ten years and all but one of the dealership managers were
promoted from within the First Team organization. See
"Management--Other Key Personnel." The Company also increases employee
dedication and motivation through its incentive compensation programs.
The Company believes that its compensation and development programs
provide competitive advantages by increasing employee loyalty,
motivation and performance.
INDUSTRY DYNAMICS
Automotive retailing, with approximately $640 billion in 1996 retail sales,
is the largest consumer retail market in the United States, representing
approximately eight percent of the domestic gross product based on data
collected by NADA and the U.S. Department of Commerce. Retail sales of new
vehicles, which are sold exclusively through new vehicle dealers, were
approximately $328 billion. In addition, used vehicle retail sales in 1996 were
estimated at $311 billion, with approximately $260 billion in sales by
franchised and independent dealers and the balance in privately negotiated
transactions. From 1992 to 1996, new vehicle sales have grown at an annual
compound rate of 10.5%, while used vehicle sales have grown at a rate of 15.8%
for retail used vehicle sales and 6.7% for wholesale used vehicle sales. This
significant increase in sales revenue is primarily because the average price of
a new vehicle has risen at a compound average rate of 6.2% from 1992 to 1996 and
newer, higher-quality used vehicles now comprise a larger part of the used
vehicle market. During this period, unit sales grew at rates of only 4.0% for
new vehicles, 6.4% for retail used vehicles and 1.4% for wholesale used
vehicles.
The following table sets forth information regarding vehicle sales by new
vehicle dealerships for the periods indicated.
<TABLE>
<CAPTION>
UNITED STATES NEW VEHICLE DEALERS' VEHICLE SALES(1)
-----------------------------------------------------------------
1992 1993 1994 1995 1996
-------------- ---------- ---------- ---------- ---------
(UNITS IN MILLIONS; DOLLARS IN BILLIONS)
<S> <C> <C> <C> <C> <C>
New vehicle unit sales ..................... 12.9 13.9 15.1 14.7 15.1
New vehicle sales(2) ..................... $ 220.3 $ 253.3 $ 289.1 $ 301.2 $ 328.4
Used vehicle unit sales--retail ............ 9.3 9.9 10.9 11.5 11.9
Used vehicle sales--retail(2) ............ $ 77.1 $ 90.7 $ 110.6 $ 126.9 $ 137.9
Used vehicle unit sales--wholesale ......... 6.9 6.4 6.9 7.0 7.3
Used vehicle sales--wholesale(2) ............ $ 26.2(3) $ 24.3 $ 27.9 $ 30.4 $ 33.9
Total vehicle sales ........................ $ 323.6 $ 368.3 $ 427.6 $ 458.5 $ 500.2
Annual growth in total vehicle sales ...... -- 13.8% 16.1% 7.2% 9.1%
</TABLE>
- ----------------
(1) Reflects new vehicle dealership sales at retail and wholesale. In addition,
sales by independent retail used vehicle dealers were approximately $81,
$100, $134, $130 and $122 billion, respectively, and casual used car sales
were estimated at approximately $36, $33, $40, $52 and $51 billion,
respectively, for each of the five years ended December 31, 1996.
42
<PAGE>
(2) Sales figures are calculated by multiplying unit sales by the average sales
price for the year.
(3) The NADA did not report the average sales price for wholesale transactions
prior to 1993. As a result, the 1992 wholesale used vehicle sales was
calculated using the 1993 average wholesale price for used vehicles.
Sources: NADA, CNW Market Research.
In addition to new and used vehicles, dealerships offer a wide range of
other products and services, including repair and warranty work, replacement
parts, extended warranty coverage, financing and credit insurance. In 1996, the
average dealership's revenue consisted of 57.7% new vehicle sales, 30.4% used
vehicle sales, and 11.9% other products and services. As a result of intense
competition for new vehicle sales, the average dealership generates the majority
of its profits from the sale of used vehicles and other products and services,
including finance and insurance, mechanical and collision repair, and parts and
service. In 1996, for example, a used vehicle earned an average gross margin of
11.0% as compared to a new vehicle's average gross margin of 6.4%, in each case
for sales by new vehicle dealerships. As is typical in the retailing industry,
dealership profitability varies widely across different stores and, ultimately,
profitability depends on effective management of inventory, competition,
marketing, quality control and, most importantly, responsiveness to the
customer.
NEW VEHICLE SALES. Franchised dealership networks were originally
established by automobile manufacturers for the distribution of their new
vehicles. In return for exclusive distribution rights within specified
territories, manufacturers exerted significant influence over their dealers by
limiting the transferability of ownership in dealerships, designating the
dealership's location, and managing the supply and composition of the
dealership's inventory. These arrangements resulted in the proliferation of
small, single-owner operations that, at their peak in the late 1940's, totaled
almost 50,000. As a result of competitive, economic and political pressures of
the 1970's and 1980's, significant changes and consolidation occurred in the
automotive retail industry. One of the most significant changes was the
increased penetration by foreign manufacturers and the resulting loss of market
share by domestic car makers, which forced many dealerships to close or sell to
better-capitalized dealership groups. According to industry data, the number of
franchised dealerships has declined from approximately 25,000 dealerships in
1990 to approximately 22,000 in 1996. Although significant consolidation has
taken place since the automotive retailing industry's inception, the industry
today remains highly fragmented, with the largest 100 dealer groups generating
less than 10% of total sales revenues and controlling less than 5% of all
franchised dealerships.
USED VEHICLE SALES. Sales of used vehicles have increased over the past
five years, primarily as a result of the substantial increase in new vehicle
prices and the greater availability of newer used vehicles due to the increased
popularity of short-term leases. Like the new vehicle market, the used vehicle
market is highly fragmented, with approximately 22,000 new vehicle dealers
accounting for approximately $172 billion in 1996 sales. In addition, an even
greater number of independent used car dealers accounted for approximately $122
billion in 1996 sales. Privately negotiated transactions accounted for the
remaining 1996 sales, estimated at $51 billion. In addition, an increasing
number of used vehicles are being sold by "superstore" outlets, which market
only used vehicles and offer a wide selection of low mileage, popular models. In
1996, the top 100 new vehicle dealer groups accounted for less than 2% of used
vehicle sales.
INDUSTRY CONSOLIDATION. The Company believes that further consolidation is
likely due to increased capital requirements of dealerships, the limited number
of viable exit strategies for dealership owners, and the desire of certain
manufacturers to strengthen their brand identity by consolidating their
franchised dealerships. The Company also believes that an opportunity exists for
dealership groups with significant equity capital, and experience in
identifying, acquiring and professionally managing dealerships, to acquire
additional dealerships for cash, stock, debt or a combination thereof. Publicly
owned dealer groups, such as the Company, are able to offer prospective sellers
tax advantaged transactions through the use of publicly traded stock which may,
in certain circumstances, make them more attractive to prospective sellers.
43
<PAGE>
DEALERSHIP OPERATIONS
First Team has grown significantly during the past five years, primarily as
a result of the successful acquisition and integration of new vehicle
dealerships. Upon completion of the Reorganization and the Recent Acquisitions,
the Company will own eight dealerships in the Orlando market, three in the
Tallahassee market, one in Panama City and one in Bradenton. See "Recent
Acquisitions." The following table sets forth the name, brands, year of
acquisition, and location of each of the thirteen dealerships which will be
owned by the Company after giving effect to the Reorganization and the Recent
Acquisitions.
<TABLE>
<CAPTION>
DEALERSHIP AND BRANDS YEAR
CURRENTLY REPRESENTED ACQUIRED LOCATION(1)
- --------------------------------------- ----------- --------------------------------------
<S> <C> <C>
Don Mealey 1974(2) West Colonial Drive
Chevrolet-Geo and Oldsmobile Orlando
Don Mealey Mitsubishi(3) 1984 West Colonial Drive
Orlando
Tallahassee Ford 1988 Magnolia Drive and
(two locations) West Tennessee Street
Tallahassee
Don Mealey Infiniti(3) 1989 Interstate 4 and Lake Destiny Drive
North Orlando
World Chevrolet-Geo(3) 1991 Highway 436
Orlando
Don Mealey Acura 1992 Highway 17-92
Longwood
Tallahassee Mitsubishi(3) 1992 Tennessee Street
Tallahassee
Tallahassee Chrysler-Plymouth 1994 Tennessee Street
Tallahassee
Don Mealey 1994 Highway 17-92
Cadillac-Oldsmobile Sanford
Don Mealey's Seminole Ford 1996 Highway 17-92
Sanford
Cook-Whitehead Ford(4) 1997 West 15th Street
Panama City
Bill Graham Ford(4) 1997 14th Street West
Bradenton
Royal Jeep-Eagle Chrysler-Plymouth(4) 1997 Highway 436
Casselbery
</TABLE>
- ----------------
(1) Sanford, Longwood and Casselbery are suburbs of Orlando.
(2) Don Mealey Chevrolet was acquired in 1974 and the Oldsmobile dealership was
established in 1995 pursuant to a new Dealer Agreement granted by GM.
(3) These dealerships were established by the Company pursuant to new Dealer
Agreements granted by the relevant manufacturer.
(4) The Company will acquire Whitehead Ford, Graham Ford and Royal on or before
the closing of the Offering.
The Company believes that it has a successful record in integrating the
dealerships it has acquired. As discussed above, it is the Company's policy to
carefully review the acquired dealership's operations and to make changes that
management expects to result in improved operating performance and
44
<PAGE>
profitability. Two of the Company's recent acquisitions serve as good examples
of First Team's expertise at integrating and improving the operations of an
acquired dealership.
In the case of Seminole Ford, management determined that the dealership had
been underperforming because it had been capital constrained and because it
needed improved management. The Company replaced the general manager with one
from another of its dealerships, who set up sales targets and hired additional
salespeople to hit those targets. More technicians were also hired in order to
increase vehicle service operations. In addition, the Company increased the
dealership's inventory in order to have a greater selection of vehicles and to
increase its sales. The Company also achieved significant savings by closing the
dealership's small body shop and combining its operations with a body shop the
Company had built at another nearby dealership. Overall, these changes had the
effect of increasing the dealership's sales and profitability within the first
six months of the Company's acquisition of the dealership.
The Company was also able to make similar improvements at Tallahassee
Chrysler-Plymouth. The Company's management team replaced every department
manager and the general manager in order to improve the dealership's management
practices and morale. The Company also invested in the refurbishment of the
physical plant. In addition, the Company implemented a program to increase
higher margin finance, insurance and other non-vehicle sales. As a result of
these measures, the Company was able to significantly improve sales and
profitability within the first six months of acquiring the dealership.
The following table sets forth, for each of the Company's market areas,
selected financial information for 1996 and for the quarter ended March 31,
1997. Amounts are shown on a pro forma basis, assuming the Reorganization and
the Recent Acquisitions had been completed on January 1, 1996.
<TABLE>
<CAPTION>
FIRST TEAM DEALERSHIPS
--------------------------------------------------------------------------------
GREATER ORLANDO TALLAHASSEE PANAMA CITY BRADENTON
MARKET(1) MARKET MARKET MARKET TOTAL
------------------ -------------- -------------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1996
New vehicle sales ............... $ 211,071 $ 57,987 $ 32,998 $ 46,464 $ 348,520
Used vehicle sales ............... 147,545 31,851 15,878 29,031 224,305
Other operating revenue (2) ...... 54,042 12,776 7,838 10,152 84,808
--------- ------- -------- -------- --------
Total: ........................... 412,658 102,614 56,714 85,647 657,633
Gross profit ..................... 54,644 14,950 9,542 10,699 89,835
Gross profit margin ............... 13.2% 14.6% 16.8% 12.5% 13.7%
FIRST QUARTER 1997
New vehicle sales ............... $ 52,323 $ 13,267 $ 6,397 $ 11,334 $ 83,321
Used vehicle sales ............... 35,332 9,217 4,249 7,238 56,036
Other operating revenue(2) ...... 14,434 3,081 1,863 2,520 21,898
--------- ------- -------- -------- --------
Total: ........................... 102,089 25,565 12,509 21,092 161,255
Gross profit ..................... 14,585 4,120 2,223 2,627 23,555
Gross profit margin ............... 14.3% 16.1% 17.8% 12.5% 14.6%
</TABLE>
- ----------------
(1) The greater Orlando market consists of Seminole, Orange and Osceola
Counties.
(2) Consists primarily of parts, service, collision repair and F&I revenues.
Each of the Company's dealerships is managed by a general manager who
oversees all of the operations of that dealership. In addition, each
dealership's new vehicle, used vehicle, parts and service, and finance and
insurance ("F&I") departments have managers who supervise the employees in their
departments and report to that dealership's general manager. All general
managers report to the Company's senior management on a regular basis. The
Company's senior management tracks the sales of each dealership on a weekly
basis, and conducts a comprehensive financial and operational review of
45
<PAGE>
each dealership on a monthly basis. In addition to reporting directly to the
general manager, the department managers of each dealership also work with the
Company's central management staff, which includes specialists in parts and
service operations and finance and insurance.
NEW VEHICLE SALES
The Company's dealerships represent a wide selection of new vehicle brands,
and sell the complete product line of cars, vans, trucks and sport utility
vehicles offered by each such brand. Management believes that offering this
brand and product diversity not only appeals to a wide range of customers, but
also minimizes the Company's dependence on any one manufacturer and reduces the
Company's exposure to potential manufacturer supply problems and changes in
consumer preferences. In 1996, the Company sold approximately 11,400 new
vehicles, generating revenues of $233.5 million, or 52% of the Company's total
revenues. After giving effect to the Reorganization and the Recent Acquisitions,
the Company would have sold approximately 17,000 new vehicles in 1996 and
generated revenues of $357.4 million, or 53.3% of the Company's total pro forma
revenues.
The following table sets forth, by vehicle brand (and manufacturer),
information relating to the Company's new vehicle sales during 1996, and on a
pro forma basis, as if the Reorganization and the Recent Acquisitions had been
completed January 1, 1996.
<TABLE>
<CAPTION>
1996 NEW VEHICLE SALES
------------------------------------------------------------------
ACTUAL PRO FORMA
--------------------------------- ------------------------------
PERCENTAGE OF PERCENTAGE OF
NEW VEHICLE NEW VEHICLE NEW VEHICLE NEW VEHICLE
UNITS SOLD UNITS SOLD UNITS SOLD UNITS SOLD
-------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C>
VEHICLE BRAND/MANUFACTURER(1)
Ford .............................. 4,320 38.5% 8,366 49.1%
Chevrolet-Geo (GM) ............... 3,784 33.7% 3,784 22.2%
Chrysler-Plymouth (Chrysler) ...... 480 4.3% 2,375 14.0%
Mitsubishi ........................ 971 8.7% 971 5.7%
Infiniti (Nissan)(2) ............... 595 5.3% 469 2.8%
Oldsmobile (GM) .................. 390 3.5% 390 2.3%
Acura (Honda) ..................... 392 3.5% 392 2.3%
Cadillac (GM) ..................... 278 2.5% 278 1.6%
</TABLE>
- ----------------
(1) Does not include Kia brand vehicles sold at two dealerships in 1996. Kia
accounted for 234 unit sales, or 2.0% of the Company's new vehicle sales in
1996. The Company is selling its Kia dealerships which were unprofitable.
See "-- Dealership Operations."
(2) Actual sales include Infiniti brand new vehicles sold in both the Orlando
and Tallahassee markets. The Company is selling its Tallahassee Infiniti
dealership which was unprofitable, but will retain Don Mealey Infiniti in
Orlando. The Tallahassee Infiniti dealership sold 126 new vehicles in 1996.
See "--Dealership Operations."
The following table sets forth, for the periods shown, information with
respect to the Company's new vehicle sales.
<TABLE>
<CAPTION>
NEW VEHICLE SALES(1)
----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
------------------------------------------------------------------------
1992 1993 1994 1995 1996 MARCH 31, 1997
------------ ------------ ------------ ------------ ------------ -------------------
(DOLLARS IN THOUSANDS EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Unit sales .................. 7,427 9,242 10,778 9,664 11,444 2,683
Sales revenue ............... $ 120,401 $ 149,497 $ 193,099 $ 185,676 $ 233,520 $ 58,771
Gross profit ............... $ 8,852 $ 10,390 $ 13,928 $ 15,801 $ 18,713 $ 5,697
Gross profit margin ......... 7.4% 6.9% 7.2% 8.5% 8.0% 9.7%
Gross profit per unit ...... $ 1,192 $ 1,124 $ 1,292 $ 1,635 $ 1,635 $ 2,123
</TABLE>
- ----------------
(1) Amounts shown do not give effect to the Reorganization or the Recent
Acquisitions.
46
<PAGE>
The Company purchases most of its new vehicles from the manufacturers it
represents. Manufacturers generally allocate new vehicles to dealerships based
on the amount of vehicles sold by the dealership and sold in the dealership's
markets. At certain times, the Company's total sales of new vehicles may be
adversely affected by a manufacturer's inability or unwillingness to furnish one
or more dealerships with an adequate supply of models popular in the Company's
markets. For example, the Company's inability to receive its desired allocation
of certain popular Chevrolet trucks has adversely affected sales of its
Chevrolet dealerships since 1995. In certain cases the Company trades vehicles
with other dealerships in order to obtain new vehicle models which are not
available from the manufacturer or to meet specific customer preferences. See
"Risk Factors--Dependence on Manufacturers."
USED VEHICLE SALES
The Company sells a variety of makes and models of used cars, vans, trucks
and sport utility vehicles at its dealerships. The Company emphasizes retail
sales of used vehicles in order to offer a wider variety of vehicles and to
benefit from the higher margins associated with used vehicle sales. The
Company's used vehicle sales have grown from $61.4 million, or 29.1% of the
Company's total revenues in 1992, to $156.7 million, or 34.9% of the Company's
total revenues in 1996. After giving effect to the Reorganization and the Recent
Acquisitions, First Team's 1996 revenues from used vehicle sales would have been
$227.5 million, or 34.6% of total revenues.
The Company sells used vehicles to retail customers and, in the case of
vehicles in poor condition or vehicles which have not sold within a specified
period of time, to other dealers and to wholesalers. As the table below
reflects, sales to dealers and wholesalers are frequently close to or below cost
and therefore affect the Company's overall gross profit margin on used vehicle
sales. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The following table sets forth, for the periods
indicated, information regarding the Company's used vehicle sales.
<TABLE>
<CAPTION>
USED VEHICLE SALES
------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
-----------------------------------------------------------------------
1992 1993 1994 1995 1996 MARCH 31, 1997
------------- ------------- ------------- -------------- -------------- ------------------
(DOLLARS IN THOUSANDS EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Retail units sold .................. 4,916 6,228 8,902 8,437 9,287 2,205
Retail sales ..................... $46,163 $61,443 $ 99,036 $108,104 $123,018 $28,648
Retail gross profit ............... $ 4,915 $ 5,646 $ 9,525 $ 10,274 $ 12,916 $ 3,717
Retail gross margin ............... 10.6% 9.2% 9.6% 9.5% 10.5% 13.0%
Retail gross profit per unit ...... $ 999 $ 907 $ 1,070 $ 1,218 $ 1,391 $ 1,686
Wholesale units sold ............... 4,631 5,756 6,993 7,094 7,332 2,384
Wholesale sales .................. $15,289 $19,488 $ 26,703 $ 31,671 $ 33,722 $10,934
Wholesale gross profit ............ $ (297) $ (310) $ (559) $ (889) $ (904) $ (198)
Wholesale gross margin ............ (1.9%) (1.6%) (2.1%) (2.8%) (2.7%) (1.8%)
Wholesale loss per unit ............ $ (64) $ (54) $ (80) $ (125) $ (123) $ (83)
Total units sold .................. 9,547 11,984 15,895 15,531 16,619 4,589
Total sales ........................ $61,452 $80,931 $125,739 $139,775 $156,740 $39,582
Total gross profit ............... $ 4,618 $ 5,336 $ 8,966 $ 9,385 $ 12,012 $ 3,519
Total gross margin ............... 7.5% 6.6% 7.1% 6.7% 7.7% 8.9%
Total gross profit per unit ...... $ 484 $ 445 $ 564 $ 604 $ 723 $ 767
</TABLE>
The Company acquires its used vehicles through customer trade-ins, at
"closed" auctions which may be attended only by new vehicle dealers and which
offer off-lease, rental and fleet vehicles, and at "open" auctions which offer
repossessed vehicles and vehicles being sold by other dealers. The Company sold
approximately 55.9% of its used vehicles to retail purchasers in 1996.
Each dealership's used vehicle manager is responsible for the purchasing
and pricing of the used vehicle inventory. By monitoring prior sales and market
trends, each of the Company's dealerships
47
<PAGE>
seeks to develop a "profile" of the used vehicle which is most likely to be sold
quickly and profitably by such dealership. Generally, vehicles meeting the
dealership's profile are marketed by the dealership to retail customers, while
vehicles which do not meet the profile are sold at wholesale to other
dealerships or through the auto auctions. Vehicles which are not sold after 60
days are first offered to other dealerships owned by the Company and then are
sold at wholesale to unaffiliated dealerships or through auto auctions.
In 1996, in order to increase used vehicle sales, First Team commenced
marketing used vehicles on a consolidated basis in each geographic market, as
"Don Mealey's Auto Network" in Orlando, and under the "CarTrust" brand in
Tallahassee. This program offers several convenient dealership locations in each
market, and access to First Team's entire inventory in the region from any one
location through First Team's computerized inventory management system. In
addition, a uniform warranty and package of customer benefits also applies to
cars and trucks delivered at any location in each market. Under this program,
each dealership has on-line access to the entire used vehicle inventory of the
Company's other dealerships within the region, and the aggregate used vehicle
inventory is advertised and marketed together under a single regional brand
name. In addition, the Company combines its inventory in each region regularly
in order to conduct special sales, away from its dealership locations, where the
Company presents a large selection for its customers.
First Team believes that its marketing system facilitates the potential
customer's search for, and purchase of, a vehicle since the customer needs only
to visit one of the Company's dealerships within the region, read one of the
Company's local advertisements, or attend one of the Company's sales events to
gain access to the entire First Team inventory in that market. The Company
believes that its consolidated used vehicle marketing strategies increase used
vehicle sales within the Company's markets, and intends to implement these
strategies in appropriate new markets.
DRIVER'S MART/trademark/ SUPERSTORES
First Team recently acquired an exclusive franchise to establish and
operate Driver's Mart/trademark/ used vehicle superstores in the greater Orlando
market. Each Driver's Mart/trademark/ superstore will offer a broad range of
low-mileage, late-model used vehicles, in a buyer-friendly environment which is
designed to promote customer satisfaction and loyalty. The Company intends to
open its first Driver's Mart/trademark/ superstore in 1998 and, depending on the
success of the first store, two additional superstore facilities by 2001.
Driver's Mart/trademark/ features "no haggle" pricing, and vehicle quality
policies which include a comprehensive quality inspection of each vehicle and
any reconditioning necessary to bring the vehicle up to Driver's Mart/trademark/
retail standards. Each superstore also provides a free 30-day exchange policy, a
one-year complete warranty and a three-day, 300 mile money-back guarantee on
each vehicle sold. Driver's Mart/trademark/ offers a proprietary computer kiosk
system which enables the customer to electronically search the entire vehicle
inventory at the superstore, providing a complete description of each vehicle's
features, price and display location. The computer kiosk will allow the customer
to access various finance and lease programs offered by different lenders, and
to submit a financing application electronically and receive a prompt response.
Each Driver's Mart/trademark/ superstore features showroom and service
facilities, as well as a large open vehicle display area. The Company expects
that its Driver's Mart/trademark/ facilities will generally cover about eight to
fifteen acres, and carry an inventory of 300 to 600 used vehicles which are
typically two to five years old. The Company believes that its Driver's
Mart/trademark/ facilities will be somewhat smaller than the facilities operated
by its vehicle superstore competitors. See "--Competition."
The Company intends to coordinate the operation of its Driver's
Mart/trademark/ superstore and its new vehicle dealerships in order to offer
customers in each of its market areas the widest selection of used vehicles.
First Team's Orlando dealerships will employ the Company's computer system to
access the inventory at the Driver's Mart/trademark/ superstores and cross
market this inventory to dealership customers.
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<PAGE>
The Company anticipates that trade-ins from its new vehicle dealerships will
serve as a source of additional inventory for the superstore, at a cost which
should be lower than the average cost paid by other superstores for their
inventory at auto auctions. In addition, the Company can acquire used vehicles
through Driver's Mart's/trademark/ inventory sourcing services, and these
vehicles can be sold at the Company's dealerships or at its superstores.
The Driver's Mart/trademark/ concept was developed in 1996 by its
franchisor, Driver's Mart/trademark/ Worldwide, Inc. ("Driver's Mart
Worldwide"). The franchisor's strategy is to establish a national chain of
independently owned used vehicle superstores which adhere to standard operating
procedures. To that end, the franchisor has allocated franchise territories
across the nation by awarding franchises to large dealerships or dealership
groups such as the Company.
In order to acquire its Driver's Mart/trademark/ franchise, First Team
invested $50,000 to purchase 20,000 shares of Driver's Mart Worldwide common
stock, or approximately 1.5% of the total currently outstanding. Pursuant to the
Driver's Mart/trademark/ franchise agreement, the Company is required to pay the
franchisor a sales fee of $200 for each vehicle sold through First Team's
Driver's Mart/trademark/ superstores. Commencing May 1, 1997 and until the
Company opens its first superstore, the Company must complete a minimum of 100
monthly transactions with Driver's Mart/trademark/ which may consist of (i)
vehicles purchased through Driver's Mart Worldwide for resale through the
Company's new vehicle dealerships, (ii) finance contracts assigned to a Driver's
Mart/trademark/ source, or (iii) payment in cash of any shortfall amount
calculated at the rate of $200 per transaction.
First Team is currently evaluating potential sites for its first
superstore. The Company estimates that it will incur approximately $7.5 million
in land acquisition, construction and start-up costs for its first Driver's
Mart/trademark/ superstore, including the cost of inventory, advertising,
working capital, and other organizational costs. There can be no assurance that
the Company will open any Driver's Mart/trademark/ locations as projected, or
that it will be able to operate these facilities profitably. See "Risk Factors--
Driver's Mart/trademark/ Used Vehicle Superstores."
VEHICLE FINANCING AND INSURANCE
The Company offers its customers a wide range of financing and leasing
alternatives for the purchase of vehicles. In addition, as part of each sale,
the Company offers customers life and disability insurance to cover the financed
cost of the vehicle, as well as warranty or extended service contracts. During
the past five years, the Company's revenue from financing, insurance and
extended warranty (collectively, "F&I") transactions has grown from $4.0 million
in 1992 to $9.2 million in 1996.
The Company believes that its customers' ability to obtain financing at its
dealerships significantly enhances the Company's ability to sell new and used
vehicles. The Company provides a variety of financing and leasing alternatives
in order to meet the specific needs of each potential customer. The Company
believes its ability to obtain customer-tailored financing on a "same day" basis
provides it with an advantage over many of its competitors, particularly smaller
competitors which do not generate sufficient volume to attract the diversity of
financing sources that are available to the Company. The Company plans to
install software which will provide selected dealerships on-line access to a
comprehensive list of available leases for various vehicles from lenders
throughout the United States. The dealership will then be able to provide a
customer with a broader array of lease payment alternatives and, consequently,
appeal to a term buyer who is trying to purchase a vehicle of choice at or below
a specific monthly payment. During 1996, the Company arranged for financing for
approximately 72% of its new vehicle sales and 70% of its used vehicle sales.
The Company assigns its vehicle financing contracts and leases to other
parties, instead of directly financing sales, which reduces the Company's
exposure to loss from financing activities. The Company receives a commission
from the lender for originating and assigning the loan or lease but is assessed
a chargeback fee by the lender if a loan is canceled, in most cases, within 120
days of making the loan. Early cancellation can result from early repayment
because of refinancing of the loan, the sale or
49
<PAGE>
trade-in of the vehicle, or default on the loan. First Team establishes an
allowance to absorb estimated chargebacks and refunds. The Company believes that
its high volume of business makes the Company's retail contracts more attractive
to lenders, which enables the Company to negotiate higher commission rates in
contrast to lower volume dealerships.
In order to increase the profitability of its finance activities, the
Company participates as a limited partner in Premier Finance, Ltd., a limited
partnership which finances consumer vehicle purchases. The Company commenced
assigning finance contracts to Premier in July 1996. On vehicle loans and leases
assigned to Premier, the Company has the opportunity to earn a residual profit
in addition to the customary commission earned upon assignment of the finance
contract to a third-party lender. However, the Company's exposure to loan losses
is limited to its original $100,000 investment in Premier and the Company's
share of any undistributed partnership profits. The Company believes that,
through its investment in Premier, the Company can share in the profitability of
its finance products with the assumption of a quantifiable risk. Moreover, such
additional profit opportunities are available without increasing the cost paid
by First Team's customer.
In addition to its financing activities, the Company offers extended
service contracts in connection with the sale of new and used vehicles. Extended
service contracts on new vehicles supplement the warranties offered by the
vehicle manufacturer, and on used vehicles, such contracts supplement any
remaining manufacturer warranty or serve as the primary service contract on the
vehicle. The extended service contracts sold by the Company are issued by
third-party insurers that pay the Company a commission upon sale of the
contract. In 1996, the Company sold extended service contracts on 34% and 44%,
respectively, of its new and used retail vehicle sales. The Company also offers
its customers credit life, health and accident insurance when they finance an
automobile purchase, and receives a commission on each policy sold. Prior to the
Reorganization, the Company owned a minority interest in a Bermuda insurance
company which participated in the reinsurance of the life and disability
insurance, and the extended service contracts, sold by the Company's
dealerships. As part of the Reorganization, the Company disposed of its interest
in this insurance company.
PARTS AND SERVICE
PARTS. Each of the Company's dealerships sells factory-approved parts for
the vehicle makes and models sold by that dealership. The Company sells parts:
(i) to its retail customers, as part of warranty, mechanical and collision
repair services provided at the dealerships; and (ii) to wholesale accounts,
which include independent mechanical and body repair garages, rental and
commercial fleet operators, used unit auctions and various other users. The
Company's revenues from sales of parts have increased from $12.5 million in 1992
to $25.5 million in 1996.
Currently, each of the Company's dealerships employs its own parts manager
and independently controls its parts inventory and sales. The Company uses a
computerized tracking system to manage its inventory of vehicle parts. This
system allows each dealership to monitor customer requests for parts not in
stock, as well as the length of time each part has remained in inventory. First
Team dealerships that sell the same new vehicle makes have access to each
other's computerized inventories and frequently obtain unstocked parts from each
other.
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<PAGE>
The following table sets forth, for the periods shown, information
regarding the Company's sales of parts.
<TABLE>
<CAPTION>
PARTS SALES
---------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
-----------------------------------------------------------
1992 1993 1994 1995 1996 MARCH 31, 1997
----------- ----------- ----------- ----------- ----------- --------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Retail sales ........................ $ 8,263 $ 9,440 $ 12,098 $ 14,466 $ 17,558 $ 4,769
Retail gross profit ............... $ 2,777 $ 3,094 $ 4,022 $ 4,902 $ 5,935 $ 1,510
Retail gross profit margin ......... 33.6% 32.8% 33.2% 33.9% 33.8% 31.2%
Wholesale sales ..................... $ 4,205 $ 4,704 $ 5,959 $ 6,501 $ 7,992 $ 2,096
Wholesale gross profit ............ $ 880 $ 993 $ 1,204 $ 1,350 $ 1,712 $ 446
Wholesale gross profit margin ...... 20.9% 21.1% 20.2% 20.8% 21.4% 21.3%
Total sales ........................ $ 12,468 $ 14,144 $ 18,057 $ 20,967 $ 25,550 $ 6,866
Total gross profit .................. $ 3,657 $ 4,087 $ 5,226 $ 6,252 $ 7,647 $ 1,956
Total gross profit margin ......... 29.3% 28.9% 28.9% 29.8% 30.0% 28.5%
</TABLE>
The Company plans to capitalize on its representation of numerous
manufacturers in order to increase sales of factory authorized equipment and
parts to wholesale customers in its existing markets and new markets. The
Company is considering the adoption of uniform policies at all of its
dealerships with respect to pricing, returns and order processing in order to
improve service and delivery to its wholesale customers. In addition, First Team
is evaluating a new program which is intended to achieve operating efficiencies
and improve customer service by coordinating parts pickup and delivery by use of
a fleet of radio equipped trucks. The Company also intends to introduce discount
and incentive programs for its wholesale customers based upon the overall volume
of parts purchased from all stores.
SERVICE. The Company provides maintenance, warranty and mechanical repair
services primarily for the vehicle makes sold by its dealerships but also
repairs other makes of vehicles. The Company's mechanical repair service revenue
(excluding collision repair) has grown from $9.8 million in 1992 to $20.7
million in 1996.
The following table sets forth, for the periods indicated, information
regarding the Company's vehicle maintenance, warranty and mechanical repair
service operations, excluding collision repair services.
<TABLE>
<CAPTION>
SERVICE OPERATIONS
------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
-------------------------------------------------------------
1992 1993 1994 1995 1996 MARCH 31, 1997
--------- ---------- ---------- ---------- ---------- --------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Sales ..................... $ 9,767 $10,587 $14,059 $17,083 $ 20,710 $ 5,269
Gross profit ............ $ 5,443 $ 6,028 $ 7,953 $ 8,980 $ 10,894 $ 2,812
Gross profit margin ...... 55.7% 56.9% 56.6% 52.6% 52.6% 53.4%
</TABLE>
In an effort to enhance the efficiency of its service operations and to
promote customer satisfaction, the Company employs varying service policies and
procedures at each dealership, depending on the facilities and customer needs at
that location. For example, at Don Mealey Chevrolet, the Company uses a team
concept in servicing vehicles, and trains each team of service technicians to
specialize in diagnosing and solving problems in particular models. At Don
Mealey Infiniti, in order to enhance customer communications, customers deal
directly with the technician assigned to the customer's vehicle. The Company
continually reviews and adjusts its service operations to emphasize customer
satisfaction and develop repeat and referral business.
The Company regularly notifies customers, through direct mail and
telephone, when their vehicles are due for periodic service, thereby encouraging
preventive maintenance rather than repairing cars
51
<PAGE>
only after breakdowns. The Company regards its maintenance and service
activities as an integral part of its overall approach to customer service,
providing an opportunity to strengthen relationships with customers and deepen
customer loyalty.
COLLISION REPAIR OPERATIONS
In addition to vehicle maintenance, warranty and mechanical repair service
operations, the Company operates collision repair facilities, or body shops, at
certain of its dealerships and at one independent location. Since September
1996, the Company has built a 15,000 square foot collision repair facility at
one of its Orlando dealerships, and acquired a 25,000 square foot collision
repair facility on a five acre site in Orlando. First Team also expects to add a
new collision repair facility in Tallahassee in the last quarter of 1997, and
the Recent Acquisitions and will provide further body shop capacity. The Company
has expanded its collision repair facilities from approximately 25,000 square
feet at year-end 1995 to approximately 51,000 square feet at year-end 1996.
After the completion of the Recent Acquisitions and the new Tallahassee
facility, the Company expects to have a total of approximately 139,000 square
feet of collision repair facilities in operation by year-end 1997. In 1996,
collision repair revenue accounted for approximately 0.8% of the Company's
revenue and 2.8% of the Company's gross profit.
The following table sets forth, for the periods indicated, information
regarding the Company's collision repair operations.
<TABLE>
<CAPTION>
COLLISION REPAIR OPERATIONS
--------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED
---------------------------------------------------------
1992 1993 1994 1995 1996 MARCH 31, 1997
--------- --------- --------- --------- --------- --------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Sales ..................... $ 2,837 $ 2,948 $ 2,942 $ 2,855 $ 3,741 $1,046
Gross profit ............ $ 1,058 $ 1,205 $ 1,181 $ 1,184 $ 1,658 $ 447
Gross profit margin ...... 37.3% 40.9% 40.1% 41.5% 44.3% 42.7%
</TABLE>
First Team initiated its strategy of substantial growth in its collision
repair business as a result of what it believes to be a significant market
opportunity. The Company's collision repair business provides favorable margins
and, unlike vehicle sales, is not significantly affected by economic cycles or
consumer spending habits. In addition, because of the higher cost of new
vehicles, insurance adjusters are more hesitant to declare a vehicle a total
loss, resulting in more significant, and higher cost, repair jobs. The Company
believes that, because of the high capital investment required for collision
repair shops, and the cost of complying with environmental and worker safety
regulations, only large volume body shops will be successful in the future. See
"--Government Regulation." Many dealerships in Florida have closed their body
shops and are outsourcing this business to other dealerships and independent
operators. The Company believes that this consolidation will continue and that
it will be able to capitalize on this trend by expanding its collision repair
business.
The Company believes that its ability to offer customers a "one-stop shop"
for repair services, as well as its strong dealer brand identity, will
contribute to its growth in the collision repair business. First Team is able to
offer customers a complete package of factory authorized parts and complete
repair, painting and finishing services. As a result, the Company believes that
its collision repair facilities will be an attractive alternative to insurance
adjusters, other dealerships, rental car and other fleet operators, and
consumers who seek to repair collision damage quickly and efficiently. The
Company will capitalize on its dealer brand identity in each market to increase
the name recognition and customer acceptance of its collision repair operations.
For example, First Team's body shops in Orlando are marketed under the name "Don
Mealey Collision Repair Center(s)."
SALES AND MARKETING
The Company's marketing and advertising activities vary among its
dealerships and among its markets. Generally, the Company advertises primarily
through newspapers, radio and direct mail and
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<PAGE>
regularly conducts special promotions designed to focus vehicle buyers on its
product offerings. The Company also uses regional television advertising when
deemed appropriate on a cost-benefit basis. The Company intends to continue
tailoring its marketing efforts to the relevant marketplace in order to reach
the Company's targeted customer base. Under arrangements with manufacturers, the
Company receives a subsidy for a portion of its advertising expenses incurred in
connection with a manufacturer's vehicles. Because of First Team's leading
market presence in the Orlando and Tallahassee markets, First Team believes it
has been able to realize significant cost savings on its advertising expenses
due to volume discounts and other concessions from media. The Company also
believes its consolidated marketing campaigns within particular markets result
in enhanced name recognition and sales volume when compared with smaller
competitors in the same market. First Team will seek to obtain such benefits in
new markets by acquiring multiple dealerships and establishing a significant
market presence.
The Company is developing a computer-based program, known as "MVP", in
order to more effectively serve the Company's substantial customer base. The
program uses a database of information provided by customers that will enable
the Company to offer each customer products, services and financing programs
which are designed to meet the customer's specific needs and preferences. The
MVP Program is being introduced at one of the Company's dealerships in Orlando,
and if successful the program may be used in other dealerships.
RELATIONSHIPS WITH MANUFACTURERS
Each of the Company's dealerships operates under a separate dealer
agreement which governs the relationship between the dealership and the
manufacturer. In general, each Dealer Agreement specifies the location of the
dealership for the sale of vehicles and for the performance of certain approved
services in a specified market area. The designation of such areas generally
does not guarantee exclusivity within a specified territory. In addition, most
manufacturers allocate vehicles on a "turn and earn" basis which rewards high
volume. A Dealer Agreement requires the dealer to meet specified standards
regarding showrooms, the facilities and equipment for servicing vehicles,
inventories, minimum net working capital, personnel training, and other aspects
of the business. The Dealer Agreement with each dealership also gives each
manufacturer the right to approve the dealership's general manager and any
material change in management or ownership of the dealership. Each manufacturer
may terminate a Dealer Agreement under certain circumstances, such as a change
in control of the dealership without manufacturer approval, the impairment of
the reputation or financial condition of the dealership, the death, removal or
withdrawal of the dealership's general manager, the conviction of the dealership
or the dealership's owner or general manager of certain crimes, a failure to
adequately operate the dealership or maintain wholesale financing arrangements,
insolvency or bankruptcy of the dealership or a material breach of other
provisions of the Dealer Agreement. In connection with the Offering, the Company
is amending its Dealer Agreements to revise those provisions which would have
prohibited the Company from selling its Common Stock to the public. See
"Description of Capital Stock--Anti-Takeover Effect of Provisions in Dealer
Agreements."
The Company's Dealer Agreements with GM impose additional obligations on
the Company. If following the Offering any person or entity acquires a
controlling interest in the Company's Common Stock with the intention of
acquiring additional shares or effecting a material change in the Company's
business or corporate structure, and GM reasonably determines that such person
or entity has interests which are incompatible with GM's interests or is not
qualified to own a GM dealership, GM may require the Company to (a) transfer the
assets of the Company's GM dealerships (Chevrolet, Geo, Cadillac and Oldsmobile)
to a third party reasonably acceptable to GM, or (b) voluntarily terminate its
Dealer Agreements with GM. The GM Dealer Agreements also prohibit the Company's
GM dealerships from selling new vehicles of other manufacturers, and require
that all of the officers of the Company, and of any Company subsidiaries which
own GM dealerships, be approved by GM.
Under its agreements with GM, the Company also agreed to comply with GM's
Network 2000 Channel Strategy ("Project 2000"). Project 2000 includes a plan to
eliminate 1,500 GM dealerships by the year 2000, primarily through dealership
buy-backs and approval by GM of inter-dealership
53
<PAGE>
acquisitions, and encourages dealers to align GM divisions' brands as may be
requested by GM. The agreements require that the Company's facilities meet
certain standards set forth in the Project 2000 guidelines. The Company must
bring any GM dealership acquired after the Offering into compliance with the
Project 2000 plan within one year of the acquisition. Failure to achieve such
compliance will result in termination of the Dealer Agreement and a buy-back of
the related dealership assets by GM at net book value. The Company believes that
this aspect of the agreements does not present a significant risk to its
business, acquisition strategy or future operating results. The Company believes
that all of its GM dealerships currently comply, in all material respects, with
GM's guidelines.
Under the Chrysler Dealer Agreements, Chrysler will be entitled to
terminate the Company's Chrysler-Plymouth and Jeep-Eagle franchises if there is
any change in the ownership of a controlling number of shares in the Company not
approved by Chrysler. In addition, except for the acquisition of Royal, the
Company cannot acquire any additional Chrysler dealership in the Company's
markets without Chrysler's approval.
First Team's Acura Dealer Agreement imposes additional restrictions on the
Company. Pursuant to this agreement, a controlling interest in the Company
cannot be transferred without the prior consent of the manufacturer, American
Honda Motor Co. Inc. ("Honda"). Further, in no event may the percentage of
Common Stock owned by the public exceed the aggregate percentage owned by
persons who have been approved by Honda (i.e., First Team's management and
stockholders prior to the completion of the Offering). If a person or entity not
approved by Honda acquires a controlling interest in the Company, Honda will
have the right to terminate the Dealer Agreement and/or purchase the Acura
dealership from the Company at its fair market value. Honda will not approve the
transfer of control of the Company to an entity which is not engaged
predominately in the sale and service of new vehicles, or which has significant
investments in companies that compete with Honda. Honda will also prohibit the
Company from acquiring: (i) more than one Acura dealership in any metropolitan
market area having two or more Acura dealerships; (ii) two Acura dealerships in
any one of the six national Acura regions; (iii) three Acura dealerships
nationally; or (iv) any Acura dealerships with contiguous territories. Similar
restrictions apply to the ownership of multiple Honda dealerships. Acura and
Honda dealerships may offer only new vehicles manufactured by Honda, and may not
offer new vehicles manufactured by other automakers.
Many automobile manufacturers are still developing or revising their
policies regarding public ownership of dealerships. The Company believes that
these policies will continue to change as more dealership groups sell their
stock to the public, and as the established, publicly-owned dealership groups
acquire more franchises. To the extent that new or amended manufacturer policies
restrict the number of dealerships which may be owned by a dealership group, or
the transferability of the Company's Common Stock, such policies could have a
material adverse effect on the Company. See "Risk Factors--Control by Current
Stockholders and Anti-Takeover Provisions" and "--Dependence on Manufacturers."
Certain state statutes in Florida and other states limit manufacturers'
control over dealerships. Under Florida law, notwithstanding any contrary terms
in a dealer agreement, manufacturers may not unreasonably withhold approval for
the sale of a dealership. Acceptable grounds for disapproval include material
shortcomings in the character, financial condition or business experience of the
proposed transferee. In addition, dealerships may challenge manufacturers'
attempts to establish new dealerships in the dealer's markets, and state
regulators may deny applications to establish new dealerships for a number of
reasons, including a determination that the manufacturer is adequately
represented in the area. Manufacturers must have "good cause" for any
termination or failure to renew a dealer agreement, and an automaker's license
to distribute vehicles in Florida may be revoked if, among other things, the
automaker has forced or attempted to force an automobile dealer to accept
delivery of motor vehicles not ordered by that dealer.
54
<PAGE>
COMPETITION
The retail automobile industry is highly competitive. The Company competes
with franchised automobile dealers, private market buyers and sellers of used
vehicles, independent used vehicle dealers, service center chains and
independent service and repair shops. The Company also competes with regional
and national car rental companies, which sell their used rental cars, and new
used automobile "superstores," such as AutoNation and CarMax. In the future, new
competitors may enter the automotive retailing market, including automobile
manufacturers that may decide to open additional retail outlets or acquire other
dealerships. Many of the Company's competitors are larger, and have greater
financial and marketing resources, than the Company. In addition, the used
vehicle superstores generally offer a greater and more varied selection of
vehicles than the Company's dealerships. As the Company seeks to acquire
dealerships in new markets, it may face significant competition (including
competition from other publicly-owned dealer groups) as it strives to gain
market share. See "--Industry Dynamics" and "--Dealership Operations."
In the Orlando market, the Company competes with approximately fifty-six
new vehicle dealerships and numerous other independent used car dealers. The
Company also competes with a CarMax used vehicle superstore, located in close
proximity to one of the Company's dealerships in Orlando, and will compete with
an AutoNation superstore which is under construction in Orlando. In the
Tallahassee market, the Company competes with approximately fifteen new vehicle
dealerships and numerous other independent used car dealers. In the Panama City
and Bradenton markets, the Company will compete with approximately nine and
thirteen new vehicle dealerships, respectively, and numerous other independent
used car dealers.
Competition among new vehicle dealerships is primarily based on the
marketing campaigns conducted by manufacturers, the ability of dealerships to
offer a wide selection of the most popular vehicles, the location of
dealerships, and the quality of customer service. Other competitive factors
include customer preference for makes of automobiles, pricing (including
manufacturer rebates and other special offers) and warranties. The Company
believes that its dealerships are competitive in all of these areas.
In addition to competition for vehicle sales, the Company also competes
with other auto dealers, service stores, auto parts retailers and independent
mechanics in providing parts and service. Competition in the parts and service
business is primarily based on price, the use of factory-approved replacement
parts, the familiarity with a dealer's makes and models, and the quality of
customer service. A number of regional or national chains offer selected parts
and service at prices that may be lower than the Company's prices.
In arranging financing for its customers' vehicle purchases, the Company
competes with a broad range of financial institutions. The Company believes that
the principal competitive factors in offering financing are convenience,
interest rates and contract terms.
The Company's business will be affected by national and local auto-buying
trends, and national and local economic factors. Currently, the Company sells
its vehicles in the Orlando and Tallahassee, Florida markets and is acquiring
dealerships in Panama City and Bradenton, Florida. Economic conditions and
competitive pressures affecting these markets, or in any new markets the Company
enters, could adversely affect the Company, although the retail automobile
industry as a whole might not be affected. See "Risk Factors--Competition."
GOVERNMENT REGULATION
The Company's operations are subject to extensive regulation under various
federal, state and local laws and regulations, including various licensing
requirements, and laws governing consumer protection, truth-in-lending, and
workers' health and safety. Automobile dealers and manufacturers are also
subject to so-called "Lemon Laws" which require a manufacturer or the dealer to
replace a new vehicle or
55
<PAGE>
accept it for a full refund within one year after initial purchase if the
vehicle does not conform to the manufacturer's express warranties and the dealer
or manufacturer, after a reasonable number of attempts, is unable to correct or
repair the defect. Federal laws require certain written disclosures to be
provided on new vehicles, including mileage and pricing information. In
addition, the financing and insurance activities of the Company are subject to
certain statutes governing credit reporting, debt collection, and insurance
industry regulation.
The imported automobiles purchased by the Company are subject to United
States customs duties and, in the ordinary course of its business, the Company
may, from time to time, be subject to claims for duties, penalties, liquidated
damages, or other charges. Currently, United States customs duties are generally
assessed at 2.5% of the customs value of the automobiles imported, as classified
pursuant to the Harmonized Tariff Schedule of the United States.
The Company's business involves the use, handling and disposal of
environmentally hazardous or toxic substances such as paint, motor oil, waste
motor oil and filters, transmission fluid, tires and gasoline and diesel fuels.
Accordingly, the Company is subject to regulation by federal, state and local
authorities establishing health and environmental quality standards, and may be
subject to liability or penalties for violations of those standards. The Company
is also subject to laws, ordinances and regulations governing remediation of
contamination at facilities it owns or operates or to which it sends hazardous
substances or wastes for treatment, recycling or disposal. See "Risk
Factors--Government Regulation; Environmental Matters."
The Company believes that it is in compliance, in all material respects,
with all laws affecting its business. However, there can be no assurance that
the Company will continue to comply with all such laws, or with amended, new or
more stringent laws and regulations which may be adopted in the future. Any such
violation of law may result in penalties, possible revocation of the Company's
licenses, and liability in private actions filed by injured parties. In
addition, the future discovery of any environmental contamination or liability
at any of the Company's facilities may cause the Company to incur significant
expenses as a result thereof.
PROPERTIES
The Company's principal executive offices are located at 350 S. Lake
Destiny Drive, Suite 200, Orlando, FL 32810, and its telephone number is (407)
660-2224. The Company has seven dealerships in the Orlando area, three
dealerships in the Tallahassee area, and is acquiring three dealerships in
Orlando, Panama City and Bradenton, Florida. See "Recent Acquisitions." In
addition, the Company operates one stand-alone collision repair facility in
Orlando. All of the Company's dealerships are located along interstate highways
or principal thoroughfares, which can be easily visited by prospective
customers.
Upon completion of the Reorganization and the Recent Acquisitions, the
Company will own Whitehead Ford's main dealership facility and the Graham Ford
dealership facilities, and will lease the other dealership facilities and its
corporate offices. The following table sets forth, for each of the Company's
facilities, the location, the owner/lessor, and the term and rental rate of the
Company's lease for such facility. The Company believes that its facilities are
adequate for its current needs.
56
<PAGE>
<TABLE>
<CAPTION>
1997
MONTHLY EXPIRATION
FACILITY AND LOCATION LESSOR RENT(2) DATE
- ------------------------------------- ------------------------------------ --------- -----------
<S> <C> <C> <C>
Don Mealey Chevrolet-Oldsmobile Donald C. Mealey(1) $71,500 2007(3)
West Colonial Drive, Orlando
World Chevrolet(4) World Chevrolet, Ltd.(1) $25,000 2007(3)
Highway 436, Orlando (improvements lease)
World Chevrolet(4) Argonaut Holdings, Inc. $19,583 2000
(land lease)
Don Mealey Infiniti(5) First Team Infiniti, Ltd.(1) $25,000 2007(3)
Interstate 4 and Lake Destiny Drive
North Orlando
Don Mealey Infiniti(5) X-way, Inc. $ 9,551 1996
Don Mealey Mitsubishi Colonial Imports, Ltd.(1) $23,285 2007(3)
West Colonial Drive, Orlando
Don Mealey Acura First Team Imports, Ltd.(1) $25,500 2007(3)
Highway 17-92, Longwood
Don Mealey Cadillac-Oldsmobile First Team Cadillac-Olds, Ltd.(1) $39,375 2007(3)
Highway 17-92, Sanford
Don Mealey's Seminole Ford Plant Fruit Company $25,000 2001
Highway 17-92, Sanford
Tallahassee Ford(6) Capital Circle Team Partners(1) $17,500 2007(3)
Tennessee Street, Tallahassee
Tallahassee Ford(6) E.W. Richardson, F. Shaw $24,000 1998
Magnolia Drive, Tallahassee and S.C. Shaw
Tallahassee Mitsubishi Capital Circle Team Partners(1) $ 7,500 2007(3)
Tennessee Street, Tallahassee
Tallahassee Chrysler-Plymouth Capital Circle Team Partners(1) $ 7,104 2007(3)
Tennessee Street, Tallahassee
Whitehead Ford(7) Cook Family Enterprises, Ltd. $ 3,000 1999
Cook Family Enterprises, Ltd. $ 7,000 2002
Scotty's Inc. $ 750 2001
Dees Estate $ 2,580 2001
Royal Jeep-Eagle Chrysler-Plymouth Ray Tatum $40,000 2012
Highway 436, Casselbery
Don Mealey Collision Center World Chevrolet, Ltd.(1) $11,375 2007(3)
Hoffner Avenue, Orlando
First Team Corporate Offices First Team Infiniti Ltd.(1) $ 8,000 2007(3)
Interstate 4 and Lake Destiny Drive
North Orlando
</TABLE>
- ----------------
(1) These lessors (the "Lessor Affiliates") are stockholders of the Company or
partnerships beneficially owned by stockholders of the Company. See
"Management" and "Principal Stockholders." The terms of the Affiliate Leases
were determined by Don Mealey and management of the Company, and are not the
result of arm's-length negotiations. Prior to the Reorganization, the Lessor
Affiliates (other than Don Mealey) owned both the operating assets and the
land and improvements of their respective dealerships. As part of the
Reorganization, the operating assets of each such dealership were
transferred to the Company and the Lessor Affiliates retained the dealership
land and improvements. See "Certain Transactions" and "Risk
Factors--Potential Conflicts of Interest."
(2) All of the Company's leases are "triple net" leases and require the Company
to pay all real estate taxes, maintenance, and insurance costs for the
property.
(3) Each of these leases provides for two renewal terms of five years each, at
the option of the Company.
(4) The Company leases the land where World Chevrolet is located from Argonaut
Holdings, Inc., a subsidiary of General Motors Corporation, and leases the
dealership improvements from World Chevrolet, Ltd.
(5) The Company leases the main dealership facility for Don Mealey Infiniti from
First Team Infiniti, Ltd., and leases an adjoining lot from X-way, Inc. on a
month-to-month basis.
(6) Tallahassee Ford has two stores in Tallahassee, one at North Magnolia Drive
and one at West Tennessee Street.
(7) Whitehead Ford owns its main dealership facility, leases a building and two
lots from Cook Family Enterprises, Ltd., an affiliate of Charles Whitehead,
and leases two vehicle display lots from Scotty's Inc. and The Dees Estate.
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<PAGE>
Under the terms of its Dealer Agreements, the Company must maintain an
appropriate appearance and design of its facilities and is restricted in its
ability to relocate its dealerships. See "--Relationship with Manufacturers."
EMPLOYEES
As of March 31, 1997, the Company employed 775 people, of whom
approximately 120 were employed in managerial positions, 203 were employed in
non-managerial sales positions, 329 were employed in non-managerial parts and
service positions, and 109 were employed in administrative support positions.
The Company is not a party to any labor agreements and none of its employees is
represented by a labor union. The Company considers its relationship with its
employees to be good and has not experienced any interruption of its operations
due to labor disputes.
LITIGATION
The Company is, from time to time, a party to litigation arising in the
ordinary course of business. The Company is not presently subject to any legal
proceedings which, in the opinion of management, could be expected to have a
material adverse effect on the business, financial condition or results of
operations of the Company.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Board of Directors of the Company is divided into three classes, each
of which, after a transitional period, will serve for three years, with one
class being elected each year. Each director holds office until his or her
successor is duly elected and qualified or until his or her resignation or
removal, if earlier. Executive officers are appointed by, and serve at the
discretion of, the Board of Directors. The following table sets forth certain
information regarding the executive officers and directors of the Company. A
summary of the background and experience of each executive officer and director
is set forth in the paragraphs following the table.
<TABLE>
<CAPTION>
YEAR ELECTED
OR APPOINTED
DIRECTOR/EXECUTIVE
NAME AGE POSITION OFFICER
- ------------------------- ------ ------------------------------------------ --------------------
<S> <C> <C> <C>
Donald C. Mealey 61 Chairman, President and Chief Executive 1974
Officer
W. Warner Peacock 42 Executive Vice President, Chief 1984
Financial Officer and Director
Richard L. Higginbotham 58 Senior Vice President and Director 1988
Ezra P. Mager 55 Vice Chairman and 1997
Director of Corporate Strategy
Robert M. Kisselback 41 Vice President 1989
</TABLE>
DON MEALEY has been employed as Chief Executive Officer of the Company
since he founded the Company in 1974. He has owned or managed automobile
dealerships for the past twenty-nine years. During the past five years, Mr.
Mealey served on various Manufacturer Advisory Boards for Infiniti, Acura,
Mitsubishi and Cadillac. Mr. Mealey's initial term as a director of the Company
will expire at the annual meeting of stockholders to be held in 2000. Don Mealey
is the father of Kevin C. Mealey, the General Manager of Don Mealey
Chevrolet-Oldsmobile. See "--Other Key Personnel."
W. WARNER PEACOCK has been employed by the Company since 1984. Mr. Peacock
has served as dealership controller and general manager, has been Chief
Financial Officer since 1986, and has served as Executive Manager of certain
First Team dealerships since 1995. Mr. Peacock's initial term as a director of
the Company will expire at the annual meeting of stockholders to be held in
1999.
RICHARD L. HIGGINBOTHAM has been employed since 1988 as the Chief Executive
Officer of Tallahassee Motors, Inc., a subsidiary of the Company which owns the
Tallahassee Ford dealerships. He has also served as Chief Executive Officer of
Tallahassee Chrysler-Plymouth, Inc. since its acquisition by the Company in
1995. He has owned and managed automobile dealerships since 1982. From 1994 to
1997, Mr. Higginbotham served on the Board of Directors of the Ford Dealers
Advertising Fund, and from 1990 to 1993 he served on the Ford Dealership Council
for the Orlando Region. Mr. Higginbotham's initial term as a director of the
Company will expire at the annual meeting of stockholders of the Company to be
held in 2000. Richard Higginbotham is the father of Scott Higginbotham, the
General Manager of Tallahassee Chrysler-Plymouth. See "--Other Key Personnel."
EZRA P. MAGER joined the Company in April 1997 as Vice Chairman and
Director of Corporate Strategy. From January 1996 to February 1997, Mr. Mager
served as Vice Chairman of Cross-Continent Auto Retailers, Inc., a
publicly-owned dealership group. From 1990 to January 1996, Mr. Mager was in
charge of acquisitions for United Auto Group, Inc., one of the largest
automobile dealership groups in the United States, and served as its Executive
Vice Chairman from 1995 to January 1996. Prior to that time, Mr. Mager was an
executive vice president and director of Furman Selz, Mager, Dietz & Birney,
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<PAGE>
Incorporated. Mr. Mager's initial term as a director of the Company will expire
at the annual meeting of stockholders of the Company to be held in 1998. Mr.
Mager will be purchasing $1,000,000 ( shares) of Common Stock in the
Offering at the price to the public shown on the cover page of this Prospectus.
In addition, Mr. Mager was issued, effective as of the closing of the Offering,
shares of restricted Common Stock of the Company that will vest on a
pro-rata basis over the three year term of his employment agreement. See
"--Employment Agreements."
ROBERT M. KISSELBACK has been employed by the Company since 1986. He has
previously served as general sales manager and general manager of various First
Team dealerships, and currently serves as Vice President in charge of the
Company's finance and insurance operations.
Upon completion of the Offering, all of the members of the Company's Board
of Directors will be employees of the Company. No later than 90 days after the
closing of the Offering, the Company intends to elect at least two directors who
are neither officers nor employees of the Company or its affiliates
("Independent Directors"). At this time no candidate has been asked to serve as
an Independent Director. Upon completion of the Offering, the Company's Board of
Directors will not consist of a majority of Independent Directors and may not
consist of such a majority in the future. See "Risk Factors--Lack of Independent
Directors."
COMMITTEES OF THE BOARD
The Board of Directors will establish a Compensation Committee and an Audit
Committee upon the election of at least two independent directors. The
Compensation Committee will review and approve compensation for the executive
officers, and administer, and determine awards under, the Company's stock option
plan any other incentive compensation plans for employees of the Company. See
"--Stock Option Plan" and "--Incentive Compensation Plan." The Audit Committee
will recommend the selection of auditors for the Company and will review the
results of the audit and other reports and services provided by the Company's
independent auditors.
COMPENSATION OF DIRECTORS
The Company intends to provide competitive compensation to its non-employee
directors and reimburse all directors for their reasonable out-of-pocket
expenses incurred in connection with their attendance at Board meetings.
Non-employee directors will also receive, pursuant to the Company's Stock Option
Plan, options to purchase 1,000 shares of the Company's Common Stock upon their
initial election to the Board of Directors and on the first business day
following each annual meeting of the shareholders of the Company. The exercise
price for options granted to non-employee directors will be the market value of
the Common Stock on the date of grant. See "--Stock Option Plan."
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<PAGE>
OTHER KEY PERSONNEL
The following table sets forth information regarding other employees of the
Company which may be considered "Key Employees."
<TABLE>
<CAPTION>
YEARS WITH
NAME AGE THE COMPANY CURRENT POSITION
- ----------------------------- ------ -------------- ---------------------------------
<S> <C> <C> <C>
Thomas M. Downing ......... 43 18 General Manager
Royal
M. Douglas Etheridge ...... 41 9 General Manager
Seminole Ford
Whitney S. Gilman ......... 36 19 General Manager
Don Mealey Cadillac Oldsmobile
Edward Graham(1) ............ 45 -- General Manager
Graham Ford
Scott L. Higginbotham ...... 33 5 General Manager
Tallahassee Chrysler-Plymouth
Clarence O. Kearce ......... 50 11 General Manager
World Chevrolet
John G. Lumpkin ............ 48 7 General Manager
Tallahassee Mitsubishi
Gary Martin ............... 44 2 General Manager
Don Mealey Mitsubishi
Kevin C. Mealey ............ 37 7 General Manager
Don Mealey Chevrolet Oldsmobile
H. Carver Reeves(2) ...... 35 11 General Manager
Don Mealey Acura
Peter L. Wilson ............ 42 7 General Manager
Don Mealey Infiniti
Charles Whitehead(1) ...... 66 -- General Manager
Whitehead Ford
</TABLE>
- ----------------
(1) These employees have been employed by the Company for less than one year.
Messrs. Graham and Whitehead joined the Company in June 1997, in connection
with the Company's acquisition of Graham Ford and Whitehead Ford. Mr. Graham
has been employed by Graham Ford since 1972 and Mr. Whitehead has been
employed by Whitehead Ford since 1960. See "Recent Acquisitions."
(2) Mr. Reeves' employment with the Company has not been consecutive.
Each of the employees named in the table have entered into employment
agreements with the Company, effective upon completion of the Offering, which
provide for their employment through December 31, 2000. The agreements provide
for base salaries ranging from $60,000 to $120,000, plus a bonus equal to ten
percent of the net, pre-tax profit of the dealership or department managed by
such employee. The agreements may be terminated by the Company at any time, with
or without cause. If the Company terminates the agreement without cause the
Company must pay the employee a severance payment equal to (i) one month's base
salary, multiplied by (ii) the number of years the employee has been
continuously employed by the Company or any of its predecessors or subsidiaries
(but in no event shall the total severance payment exceed one year's salary).
Each agreement prohibits the employee from competing against the Company for a
period of three years following termination of his employment, for any reason,
at any location within a fifty mile radius of any of the Company's dealerships
or Driver's Mart/trademark/ superstores. If the Company terminates the employee
without cause, First Team will be required to continue to pay base salary to the
employee for so long as the Company elects to enforce the non-compete covenant
in the agreement.
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<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION. The following table shows compensation paid to the
Chief Executive Officer and each of the other executive officers who had total
compensation during 1996 exceeding $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------
ALL OTHER
NAME AND POSITION SALARY BONUS COMPENSATION
- ------------------------------------- ----------- ---------- ------------
<S> <C> <C> <C>
Donald C. Mealey .................. $300,000 -- --
Chairman, President and
Chief Executive Officer
W. Warner Peacock .................. $ 96,000 $234,566 --
Executive Vice-President,
Chief Financial Officer and Director
Richard L. Higginbotham ............ $ 90,000 $570,289 --
Senior Vice President and Director
Robert M. Kisselback ............... $ 96,000 $ 76,751 --
Vice President
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Mealey and
Peacock (the "Employment Agreements"), effective upon consummation of the
Offering, which provide for an annual base salary and certain other benefits.
Pursuant to the Employment Agreements, the 1997 base salaries of Messrs. Mealey
and Peacock will be $500,000 and $300,000, respectively, subject in each case to
annual increases based on increases in the consumer price index. The executives
will also receive such additional increases as may be determined by the
Compensation Committee. The Employment Agreements provide for the payment of
annual performance-based bonuses through the Company's Incentive Compensation
Plan, equal to a percentage of the executive's base salary, upon achievement by
the Company of certain performance objectives, based on the Company's pre-tax
income, to be established by the Compensation Committee. See "--Incentive
Compensation Plan." Under the terms of the Employment Agreements, the Company
will employ Messrs. Mealey and Peacock through December 31, 2000, which periods
will be automatically extended for additional three-year periods until their
respective Employment Agreements are terminated by the Company or the executive.
Pursuant to the Employment Agreements, if Messrs. Mealey or Peacock are
terminated by the Company without "cause" (as defined in each Employment
Agreement), if the Company does not renew their employment upon the expiration
of the original term or any renewal term, if the executive terminates the
Employment Agreement for "good reason" (which includes a material breach by the
Company under the agreement, or a material reduction in such executive's duties,
responsibilities, or compensation), or if the executive resigns following a
change in control of the Company, such executive will (i) be entitled to receive
a cash lump sum payment equal to three times the executive's average annual
compensation during the two years preceding the date of the termination; and
(ii) continue to receive health insurance benefits for himself and his family
for a period of three years. The foregoing provisions of the Employment
Agreements may have the effect of delaying or preventing a change in control of
the Company. See "Risk Factors--Control by Current Stockholders and
Anti-Takeover Provisions." In the event an executive's employment is terminated
due to death or disability, such executive or his legal representative (as
applicable) will be paid a cash lump sum payment equal to one and one-half times
the executive's annual compensation during the two years preceding the date of
termination, and the Company will provide health insurance benefits for the
executive and his family for a period of three years. If any of the executives
are terminated for cause, or if an executive resigns for any reason other than
"good reason," disability or a change in control of the Company, the payment
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<PAGE>
of compensation and benefits will cease as of the date of such termination. The
Employment Agreements prohibit Messrs. Mealey and Peacock from competing with
the Company, for a period of three years following the termination of their
respective employment, at any location within a fifty mile radius of any of the
Company's dealerships or used vehicle superstores.
Richard L. Higginbotham and Robert M. Kisselback have entered into
employment agreements with the Company, effective upon completion of the
Offering, which provide for their employment through December 31, 2000. The
agreements provide for a base salary of $120,000 for Mr. Higginbotham and
$96,000 for Mr. Kisselback, plus a bonus based on the profitability of the
dealership or department managed by such employee. The agreements may be
terminated by the Company at any time, with or without cause. If the Company
terminates the agreement without cause the Company must pay the employee a
severance payment equal to (i) one month's base salary, multiplied by (ii) the
number of years the employee has been continuously employed by the Company or
any of its predecessors or subsidiaries (but in no event shall the total
severance payment exceed one year's salary). Each agreement prohibits the
employee from competing against the Company for a period of three years
following termination of his employment, for any reason, at any location within
a fifty mile radius of any of the Company's dealerships or Driver's
Mart/trademark/ superstores. If the Company terminates the employee without
cause, First Team will be required to continue to pay base salary to the
employee for so long as the Company elects to enforce the non-compete covenant
in the agreement.
Pursuant to an agreement dated June 9, 1997, the Company employed Ezra P.
Mager as Vice Chairman and Director of Corporate Strategy for a term expiring
December 31, 2000. Mr. Mager will receive a salary of $20,000 per month and will
be reimbursed for the reasonable costs of maintaining an office in New York, New
York. Mr. Mager will be purchasing $1,000,000 ( shares) of Common Stock in
the Offering at the price to the public shown on the cover page of this
Prospectus. In addition, Mr. Mager was issued, effective as of the closing of
the Offering, shares of restricted Common Stock of the Company (the
"Restricted Shares"). The Restricted Shares will vest on a pro-rata basis over a
period of three years, so long as Mr. Mager remains employed by the Company.
Until such shares vest, they may not be sold or otherwise transferred by Mr.
Mager.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Because the Company was formed in 1997, it did not have a Compensation
Committee for 1996. Following the appointment of at least two outside directors
to the Company's Board, the Company intends to form a Compensation Committee and
will appoint its two outside directors to the committee.
STOCK OPTION PLAN
The Company has adopted a Stock Option Plan (the "Plan") which will be
effective immediately prior to completion of the Offering. The purpose of the
Plan is to provide employees (including officers), independent contractors,
agents and directors of the Company with additional incentives by increasing
their equity ownership in the Company. The Company has reserved a total of
authorized but unissued shares of Common Stock for issuance under the Plan.
These reserved shares represent 10% of the shares of Common Stock to be
outstanding immediately after the Offering. Pursuant to the Plan, the Company
has granted, subject to the closing of the Offering, options to purchase
shares of Common Stock, or approximately 5% of the total outstanding after the
Offering, exercisable at the initial public offering price set forth on the
cover page of this Prospectus. Of these options, Messrs. Higginbotham,
Kisselback and Peacock were awarded options to purchase , and
shares of Common Stock, respectively.
The Plan authorizes the issuance of options which qualify as incentive
stock options ("ISOs") under Section 422 of the Internal Revenue Code of 1986,
as amended, as well as options that do not qualify as ISOs ("NSOs"), provided
that ISOs may be granted only to employees.
The Plan is intended to satisfy the conditions of Section 16 of the
Securities Exchange Act of 1934, as amended, pursuant to Rule 16b-3 promulgated
thereunder, which rule exempts certain short-swing
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<PAGE>
gains from recapture by the Company. The Plan will be administered by the
Compensation Committee of the Company's Board of Directors (the "Compensation
Committee") which will be comprised exclusively of two or more "non-employee
directors" within the meaning of Rule 16b-3. Subject to the terms of the Plan,
the Compensation Committee will have the sole authority and discretion to grant
options, construe the terms of the Plan and make all other determinations and
take all other action with respect to the Plan.
Under the Plan, an option to purchase 1,000 shares will be granted to each
person who is a non-employee director of the Company on the effective date of
the Plan and an option to purchase 1,000 shares will be granted to each person
who is a non-employee director of the Company on the first business day
following each annual meeting of shareholders of the Company. These non-employee
director options shall terminate 10 years from the date of grant.
The per share exercise price of an option shall be as determined by the
Compensation Committee, provided that the exercise price of ISOs and NSOs may
not be less than fair market value on the date of grant and the exercise price
of NSOs granted to non-employee directors as part of the grant discussed in the
preceding paragraph will be equal to the fair market value on the date of grant.
Further, no person who owns, directly or indirectly, at the time of the granting
of an ISO to such person, stock representing more than 10% of the total combined
voting power of all classes of stock of the Company (a "10% Shareholder") shall
be eligible to receive any ISOs under the Stock Option Plan unless the exercise
price is at least 110% of the fair market value of the shares on the date of
grant. The purchase price for shares acquired pursuant to the exercise of an
option shall be paid as determined by the Compensation Committee and may consist
of cash, check, promissory note, surrender of other shares of the Company's
capital stock, or any combination thereof, or other payment permitted under law
and by the Committee. The term of each option will be ten years from the date of
grant or such shorter term as may be determined by the Committee, provided that
the automatic grant to non-employee directors will have the term discussed
above. In addition, in the case of an ISO granted to an employee who,
immediately before the ISO is granted, owns stock representing more than 10% of
the voting power of all classes of stock of the Company, the term of the ISO
will be five years from the date of grant or such shorter time as may be
provided by the Committee.
Options granted under the Plan may not be sold, pledged or otherwise
disposed of other than by will or by the laws of descent and distribution,
except that in certain circumstances the Committee may grant NSOs that permit an
optionee to transfer such options to his spouse or descendants, a trust
established primarily for the benefit of the optionee and/or his spouse or
descendants, or a charitable organization. Each of (i) the number of shares of
Common Stock covered by each outstanding option, (ii) the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an option, (iii) the price per share of
Common Stock covered by each outstanding option, (iv) the number of shares of
Common Stock to be granted to non-employee directors pursuant to the Plan and
(v) the maximum number of Shares with respect to which options may be granted to
any employee, will be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock resulting from a stock split, the
payment of a stock dividend with respect to the Common Stock or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company.
In the event of termination of employment other than by reason of
retirement or as a result of the employee's resignation or termination by the
Company for deliberate, willful or gross misconduct, the terminated employee's
options will be exercisable within twelve months after such termination, or
three months for ISOs (unless otherwise determined by the Compensation
Committee), to the extent the option was exercisable as of the date of
termination. Upon termination of employment by reason of retirement, such
employee's options remain exercisable for thirty-six months thereafter, or three
months in the case of ISOs, to the extent such options were exercisable on the
date of such termination. In the event of the employee's resignation or
termination of employment by the Company for deliberate, willful or gross
misconduct, the terminated employee's options will be immediately cancelled and
will
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<PAGE>
not be exercisable, unless otherwise determined by the Compensation Committee.
Upon termination of employment by reason of death, such optionee's options
remain exercisable, subject to certain limitations by the optionee's legal
representative or the person who acquired the right to exercise the option by
bequest or inheritence, but only to the extent such options were exercisable as
of the date of death (unless otherwise determined by the Compensation
Committee). If an optionee dies either while employed by the Company or within
three months after the termination of his employment, the options may be
exercised within 36 months following the date of his death to the extent the
options were exercisable at the date of the optionee's death. The exercise of
any option after termination of employment may be subject to the condition that
the optionee not engage in deliberate action which, as determined by the
Compensation Committee, causes substantial harm to the interests of the Company
or constitutes a breach of any obligation of the optionee to the Company. In no
case may options be exercised later than the expiration date of the stock
options originally specified in the option agreements. In the event of a
Change-of-Control (as defined in the Plan) of the Company, all options then
outstanding under the Plan will become immediately exercisable. See "Risk
Factors--Control by Current Stockholders and Anti-Takeover Provisions."
The Plan will expire in 2007 unless terminated earlier by the Board of
Directors. No options granted under the Plan can be exercised more than 10 years
from the date of grant, but ISO's issued to a 10% Shareholder are limited to a
five year term. Shares subject to unexercised options that expire or that
terminate upon an employee's ceasing to be employed by the Company become
available again for issuance under the Plan.
The Plan may be amended or terminated by the Committee without shareholder
approval, except that no amendment which increases the maximum aggregate number
of shares which may be issued under the Plan, except for an adjustment in
connection with a change in capitalization, changes the class of persons who are
eligible to participate in the Plan, materially increases the benefits accruing
to the participants, or increases the maximum number of shares with respect to
which options may be granted to any employee, may be made without the approval
of the shareholders of the Company. No amendment or termination of the Plan will
affect previously granted awards without the optionee's consent unless the
Compensation Committee determines that such amendment is in the best interest of
the shareholders or optionees.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Holders of ISOs are not taxed until they sell the stock received upon
exercise of the option. The difference between the sale proceeds and the ISO
exercise price is treated as long term capital gain. Although no Federal income
tax liability accrues to an optionee at the time an NSO is granted, the optionee
must recognize ordinary compensation income in the year in which the NSO is
exercised equal to the amount by which the fair market value of the purchased
shares on the date of exercise exceeds the exercise price. The tax basis of such
shares to such optionee will be equal to the exercise price paid plus the amount
includible in the optionee's gross income, and the optionee's holding period for
such shares will commence on the date on which the optionee recognizes taxable
income in respect of such shares. Gain or loss upon a subsequent sale of any
Common Stock received upon the exercise of an NSO generally would be taxed as
capital gain or loss (long-term or short-term, depending upon the holding period
of the stock sold). Certain additional rules apply if the exercise price for an
NSO is paid in shares previously owned by the optionee.
Subject to the applicable provisions of the Code and regulations
thereunder, the Company will generally be entitled to an income tax deduction
equal to the amount of ordinary compensation income the optionee recognizes in
connection with the exercise of any NSO. The deduction will, in general, be
allowed for the taxable year of the Company in which the participant recognizes
such ordinary compensation income.
INCENTIVE COMPENSATION PLAN
The Company's incentive compensation plan (the "Incentive Plan") is
designed to motivate executive officers to achieve the Company's annual
strategic goals. Incentive compensation is based on
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<PAGE>
the Company's achievement of actual consolidated pre-tax income measured against
objectives and other performance goals established by the Compensation
Committee. Under the Incentive Plan, each participating employee is assigned a
target bonus award that will be paid if these performance objectives are
achieved. An employee's annual award cannot exceed $1,000,000. Awards are
determined annually following determination of the Company's fiscal year-end
results. The Incentive Plan is subject to amendment or termination at any time,
but no such action may adversely affect any rights or obligations with respect
to any awards theretofore made under the Incentive Plan.
EMPLOYEE SAVINGS PLAN
The Company also sponsors a defined contribution profit-sharing plan (the
"401(k) Plan"). All full-time employees of the Company who are at least 21 years
old are eligible to participate in the 401(k) Plan on the first day of the
quarter following the employee's date of hire. Under the Plan, each participant
may, subject to the requirements and limitations imposed on 401(k) plans under
the Code, elect to have up to 15% of his or her annual earnings deferred and
contributed to the plan. Under the 401(k) Plan, the Company has agreed to
contribute an amount equal to 50% of the employee's annual contributions up to a
maximum of 4% of the employee's aggregate compensation. The 401(k) Plan also
allows the Company to make other discretionary contributions, including profit
sharing contributions, which will be administered by the Board of Directors or a
committee thereof.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock upon consummation of the Reorganization and after
giving effect to the Offering by: (a) each person who has granted the
Underwriters an option to purchase shares of Common Stock if the Underwriters'
over-allotment option is exercised (a "Selling Stockholder"), (b) each person
(or group of affiliated persons) who is known to the Company to own beneficially
more than 5% of the Common Stock, (c) each of the Company's directors and
executive officers and (d) all directors and executive officers as a group.
Except as indicated in the footnotes to this table, to the knowledge of the
Company, the persons shown in the table have sole voting and investment power
with respect to all shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT IF
SHARES PERCENT PERCENT SUBJECT TO OVER-ALLOTMENT
BENEFICIALLY BEFORE AFTER OVER-ALLOTMENT OPTION
BENEFICIAL OWNER(1) OWNED(2) OFFERING OFFERING(3) OPTION EXERCISED(4)
- -------------------------------------- --------------- ------------ -------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
Donald C. Mealey(5) ..................
Albert M. Serra(6) ..................
Richard L. Higginbotham(7) .........
Clarence O. Kearce ..................
W. Warner Peacock ..................
M. Douglas Etheridge ...............
Thomas M. Downing ..................
Whitney S. Gilman ..................
Peter L. Wilson .....................
H. Carver Reeves .....................
John V. Verner, Sr. ..................
Robert M. Kisselback ...............
Ezra P. Mager(8) ..................
All directors and executive officers
as a group (6 persons)(9) .........
</TABLE>
- ----------------
(1) The address for each beneficial owner is in care of First Team Automotive
Corp., 350 S. Lake Destiny Drive, Suite 200, Orlando, FL 32810.
(2) Assumes completion of the Reorganization and the Recent Acquisitions.
(3) Assumes no exercise of the Underwriters' over-allotment option.
(4) Assumes that the Underwriters' over-allotment option is exercised in full.
(5) Consists of shares owned by Mr. Mealey and shares owned by
trusts established for the benefit of Mr. Mealey's children.
(6) Consists of shares owned by Serra Investments Inc., a corporation
beneficially owned by Mr. Serra.
(7) Consists of shares owned by the Higginbotham Family Limited Partnership,
L.P., a partnership partly owned and controlled by Mr. Higginbotham.
(8) Consists of restricted shares to be granted to Mr. Mager upon the
completion of the Offering and shares to be acquired by Mr. Mager in
the Offering at the public offering price.
(9) Does not include shares of Common Stock issuable upon the exercise
of options granted immediately prior to the Offering, with an exercise price
equal to the initial public offering price.
Pursuant to the Underwriting Agreement, the Underwriters have agreed to
purchase shares of Common Stock from the Selling Stockholders, if and to the
extent the Underwriters' over-allotment option is exercised, in proportion to
the Selling Stockholders' respective ownership interests is the Company.
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<PAGE>
CERTAIN TRANSACTIONS
REORGANIZATION
Prior to the closing of the Offering, as part of the Reorganization (i) the
Company will acquire all of the Dealership Assets, excluding Real Property; (ii)
the Company will issue Common Stock in exchange for the Dealership Assets; and
(iii) certain of the Real Property will be retained by or distributed to the
Lessor Affiliates named below. The amounts of Common Stock to be issued by the
Company in the Reorganization were determined through negotiation among the
parties to the Reorganization. Mr. Mealey will remain the principal stockholder
of the Company immediately following the Reorganization and the Offering. See
"Principal Stockholders."
Prior to the Reorganization, the majority of the Real Property was owned by
the same partnerships or corporations which owned the Dealership Assets. The
Reorganization will separate the ownership of the dealership assets so that the
Company will own the operating assets of each dealership, and the Lessor
Affiliates, or third party lessors, will own the Real Property. The Lessor
Affiliates are Don Mealey and certain partnerships beneficially owned by Mr.
Mealey, Richard L. Higginbotham, Albert M. Serra, Clarence O. Kearce, and/or
John V. Verner, Sr., all of whom are stockholders of the Company. Mr. Mealey and
Mr. Higginbotham are officers and directors of the Company, and Mr. Kearce is
the general manager of World Chevrolet. See "Management" and "Principal
Stockholders."
Pursuant to the Reorganization, Real Property with an aggregate book value
of approximately $3.9 million as of March 31, 1997, will be retained by or
distributed to the Lessor Affiliates. This property is subject to Mortgage Debt
having an aggregate outstanding balance of approximately $3.7 million as of
March 31, 1997. This Mortgage Debt, which is shown as a liability of the Company
in the historical financial statements included in this Prospectus, will become
the primary obligation of the Lessor Affiliates after the Reorganization. The
Company will, however, remain responsible as a guarantor of the Mortgage Debt,
and the operating assets of each dealership have been pledged to secure the
Mortgage Debt which encumbers the Real Property leased by such dealership. See
"Business--Properties."
The terms of the Real Property transactions described above were determined
by Mr. Mealey and management of the Company and are not the result of arm's
length negotiations, although the Company believes that the terms of these
transactions are fair to the Company. See "Risk Factors--Potential Conflicts of
Interest."
AFFILIATE LEASES
After the Reorganization, the Company will lease the Real Property from the
Lessor Affiliates. The Affiliate Leases between the Company and the Lessor
Affiliates provide for aggregate monthly rent payments of $261,000 during 1997,
subject to increases based on increases in the consumer price index. Each of the
Affiliate Leases expires in August 2007, and provides for two renewal options,
in favor of the Company, each for a renewal term of five years. None of the
leases provides the Company an option to purchase the leased property. The
Affiliate Leases are "triple net" leases and require the Company to pay all real
estate taxes, maintenance, and insurance costs for the property.
After the acquisition of Whitehead Ford, the Company will lease a portion
of such dealership's facilities from Cook Family Enterprises, Ltd., an affiliate
of Charles Whitehead, the general manager of Whitehead Ford. The leases for such
facilities (the "Cook Leases") provide for aggregate monthly rent payments of
$10,000 during 1997, subject to increases based on increases in the consumer
price index, and expire in 1999 and 2002. For additional information on the
Company's facilities and leases, see "Business--Properties."
From time to time, the Company leases, for corporate use, an aircraft owned
by a corporation beneficially owned by Don Mealey. Pursuant to a lease agreement
(the "Aircraft Lease"), the Company pays rental of $750 per hour, plus all fuel,
pilot, operating and maintenance expenses. Rental paid by the Company under this
lease during 1995 and 1996 totaled $26,923 and $48,660 respectively.
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The terms of the Affiliate Leases, the Cook Leases and the Aircraft Lease
are not the result of arm's-length negotiations, although the Company believes
that these leases contain terms which are not less favorable to the Company than
the terms that would be available from third party lessors in the relevant
market.
Following the completion of the Offering, the Company intends to submit any
agreements and transactions between the Company and its directors or principal
stockholders and their affiliates to a committee of disinterested members of the
Company's Board of Directors or to require approval of such transactions by a
majority of the disinterested members of the Board of Directors. See "Risk
Factors--Potential Conflicts of Interest."
GUARANTEE OF STOCKHOLDER LOAN
Don Mealey Chevrolet, Inc., a subsidiary of the Company, has guaranteed a
loan payable by Don Mealey to GMAC. The loan had an outstanding balance of
$8,267,000 as of December 31, 1996, and is secured by a mortgage of the
dealership land and improvements leased by Mr. Mealey to Don Mealey Chevrolet,
Inc. See "Business--Properties." In addition, as security for its guaranty, Don
Mealey Chevrolet, Inc. has granted GMAC a lien on the parts and accessories
inventory, fixed assets, and receivables of Don Mealey Chevrolet.
PURCHASE OF GRAHAM FORD
Two stockholders of the Company, John V. Verner, Sr. and Edward M. Verner,
are partners in Graham Ford and sold their partnership interests to the Company
in June 1997 as part of the Company's acquisition of this dealership. The
aggregate purchase price for all the partnership interests is $12,050,000,
subject to certain adjustments based on the book value of the dealership as of
the date of closing. See "Recent Acquisitions" and "Principal Stockholders." The
terms of this acquisition were determined by negotiation among management of the
Company and the partners of Graham Ford.
OTHER MATTERS
In June 1997, Mr. Mealey advanced the sum of $3,375,000 to the Company, as
an acquisition loan, in order to fund a portion of the purchase price of the
Recent Acquisitions. This loan will bear interest at the prime rate and will be
payable on the earlier of: (i) August 1, 1998, or (ii) the closing of the
Offering. The Company will repay this loan in full from the proceeds of the
Offering. See "Use of Proceeds" and "Recent Acquisitions."
W. Warner Peacock, an executive officer and director of the Company, has an
outstanding loan payable to the Company arising from his purchase of securities
in the Company. Interest on the loan accrues at the "prime rate" plus 1%, and is
payable annually. Principal is payable in a single installment due on August 1,
1999. As of March 31, 1997, the total principal and interest outstanding under
the loan was approximately $83,600.
From time to time, the Company contracts with Automotive Information
Systems, Inc., a corporation controlled by Don Mealey's son, Robert Mealey, to
provide software development and consulting services. Amounts paid for such
services totalled $48,356 and $73,211 during 1995 and 1996, respectively.
Although the rates and terms of these services are not the result of arm's
length negotiations, the Company believes that these services are provided at
rates and on terms which are not less favorable to the Company than the terms
available from unrelated third parties.
The Company is entitled to deposit funds in certain deposit accounts
maintained by its floor plan lenders (the "Floor Plan Accounts") in an amount up
to 75% of the amount of inventory financed by the lender. The funds so deposited
earn interest at a rate equal to the rate charged under the floor plan.
Historically, the Company has permitted its employees (including its principal
stockholders) to advance funds to the Company for the purpose of investing in
the Floor Plan Accounts. The Company has acted only as an intermediary in this
process. At December 31, 1996 and March 31, 1997, amounts deposited in the Floor
Plan Accounts by the Company's principal stockholders totaled $3,206,127 and
$2,916,727, respectively. Following completion of the Offering, the Company
intends to deposit its funds in the Floor Plan Accounts before permitting its
employees, including its principal stockholders, to make deposits into the
accounts.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital consists of one hundred million shares of
Common Stock, par value $.01 per share, and ten million shares of Preferred
Stock, $.01 par value per share. No shares of Preferred Stock are outstanding as
of the date of this Prospectus.
COMMON STOCK
As of March 31, 1997, after giving effect to the Reorganization,
shares of Common Stock were issued and outstanding. Immediately following the
Offering, shares of Common Stock will be issued and outstanding.
Holders of the Common Stock have one vote per share on matters to be voted
upon by the stockholders of the Company. They do not have cumulative voting
rights. As a result, the holders of more than 50% of the shares of the Common
Stock will have the ability to elect all of the Company's directors. See "Risk
Factors--Control by Current Stockholders and Anti-Takeover Provisions." Holders
of the Common Stock may receive dividends when, as and if declared by the Board
of Directors from any assets legally available therefor and may share ratably in
the assets of the Company legally available for distribution to its stockholders
in the event of the liquidation, dissolution or winding up of the Company, in
each case subject to the rights of the holders of Preferred Stock. The Company
does not intend to pay cash dividends on the Common Stock for the foreseeable
future. See "Dividend Policy." Holders of the Common Stock have no preemptive,
subscription, redemption or conversion rights. All outstanding shares of Common
Stock are, and the shares of Common Stock being issued and sold hereby will be,
when issued, fully paid and non-assessable. The rights, privileges, preferences
and priorities of holders of the Common Stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
Preferred Stock that the Company may designate and issue in the future.
The Company intends to apply for listing of the Common Stock on the New
York Stock Exchange, under the symbol "FTA".
PREFERRED STOCK
The Board of Directors of the Company is authorized, without further
shareholder action, to divide any or all shares of the authorized Preferred
Stock into series and fix and determine the designations, preferences and
relative rights and qualifications, limitations, or restrictions thereon of any
series so established, including voting powers, dividend rights, liquidation
preferences, redemption rights and conversion privileges. As of the date of this
Prospectus, the Board of Directors has not authorized any series of Preferred
Stock, and there are no plans, agreements or understandings for the
authorization or issuance of any shares of Preferred Stock. The issuance of
Preferred Stock with voting rights or conversion rights may adversely affect the
voting power of the Common Stock, including the loss of voting control to
others. The issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change of control of the Company without shareholder
approval. See "Risk Factors-- Control by Current Stockholders and Anti-Takeover
Provisions."
As of the date hereof, the Board has not provided for the issuance of any
series of Preferred Stock, and there are no agreements or understandings in
effect which provide for the issuance of Preferred Stock.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW
CERTIFICATE OF INCORPORATION AND BYLAWS
The Company has included provisions in its Certificate of Incorporation and
Bylaws to help assure fair and equitable treatment of the Company's stockholders
if a person or group should seek to gain
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<PAGE>
control of the Company in the future. Such provisions, which are described
below, may make a takeover attempt more difficult, whether by tender offer,
proxy contest or otherwise. These provisions may diminish the likelihood that a
potential acquiror will make an offer for the Company's Common Stock, may
prevent or delay a transaction which may be favored by the Company's
stockholders, and may make it more difficult to remove the incumbent Board of
Directors and management, even if such removal would benefit the stockholders.
The Company's Board of Directors is divided into three classes, each of
which, after a transitional period, will serve for three years, with one class
being elected each year. Under the Delaware General Corporation Law,
stockholders of a corporation with a classified board may remove a director only
for cause. Under the Company's Certificate of Incorporation, an affirmative vote
of the holders of at least two-thirds of the shares is required to remove a
director for cause or amend or repeal the provisions related to the classified
board. In addition, all stockholder action must be taken at a duly called
meeting and not by a consent in writing. The Company's Bylaws provide that a
special meeting of stockholders may be called only by the Chief Executive
Officer, the Board of Directors, or at the request of shareholders owning a
majority of the outstanding Common Stock. See "Risk Factors--Control by Current
Stockholders and Anti-Takeover Provisions."
DELAWARE TAKEOVER STATUTE
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. The statute generally 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, prior
to the date the stockholder became an interested stockholder, the Board approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder or unless one of the two
exceptions to the prohibitions is satisfied: (a) upon consummation of the
transaction that resulted in such person becoming an interested stockholder, the
interested stockholder owned at least 85% of the corporation's voting stock
outstanding at the time the transaction commenced (excluding, for purposes of
determining the number of shares outstanding, shares owned by certain directors
or certain employee stock plans) or (b) on or after the date the stockholder
became an interested stockholder, the business combination is approved by the
board of directors and authorized by the affirmative vote (and not by written
consent) of at least two-thirds of the outstanding voting stock excluding that
stock owned by the interested stockholder. A "business combination", includes a
merger, asset sale or other transaction resulting in a financial benefit to the
interested stockholder. An "interested stockholder" is a person who (other than
the corporation and any direct or indirect majority-owned subsidiary of the
corporation), together with affiliates and associates, owns (or, as an affiliate
or associate, within three years prior, did own) 15% or more of the
corporation's outstanding voting stock. It is possible that these provisions may
have the effect of delaying, deterring or preventing a change in control of the
Company.
ANTI-TAKEOVER EFFECT OF PROVISIONS IN DEALER AGREEMENTS
The Company's Dealer Agreements with several manufacturers permit the
manufacturer to terminate the relevant agreement or agreements if a controlling
interest in the Common Stock of the Company is acquired by a person or entity
which has not been approved by the relevant manufacturer. See "Risk
Factors--Concentration of Voting Power and Anti-Takeover Provisions" and
"Business-- Relationships with Manufacturers." The change of control provisions
in the Company's Dealer Agreements could discourage a third party from
acquiring a significant equity position in the Company or from seeking control
of the Company.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Certificate of Incorporation and Bylaws contain certain
provisions permitted under the Delaware General Corporation Law that limit the
liability of directors. These provisions eliminate a director's personal
liability for monetary damages resulting from a breach of fiduciary duty, except
in
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certain circumstances involving certain wrongful acts, such as the breach of a
director's duty of loyalty, acts or omissions that involve intentional
misconduct or a knowing violation of law, or any transaction from which a
director derived an improper personal benefit. These provisions do not limit or
eliminate the rights of the Company or any stockholder to seek non-monetary
relief, such as an injunction or rescission, in the event of a breach of a
director's fiduciary duty. These provisions will not alter a director's
liability under federal securities laws. The Company's Certificate of
Incorporation and Bylaws also contain provisions indemnifying the directors and
officers of the Company to the fullest extent permitted by the Delaware General
Corporation Law. The Company believes that these provisions will assist it in
attracting and retaining qualified individuals to serve as directors.
TRANSFER AGENT AND REGISTRAR
The Company has appointed American Stock Transfer & Trust Company as the
transfer agent and registrar for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common
Stock. No information is currently available and no prediction can be made as to
the timing or amount of future sales of shares, or the effect, if any, that
market sales of shares or the availability of shares for sale will have on the
market price prevailing from time to time. Nevertheless, sales of substantial
amounts of Common Stock (including shares issuable upon exercise of stock
options) in the public market after the lapse of the restrictions described
below, or the perception that such sales may occur, could materially and
adversely affect the prevailing market prices for the Common Stock and the
ability of the Company to raise equity capital in the future. See "Risk
Factors--Shares Eligible for Future Sale."
After completion of the Offering, the Company will have shares of
Common Stock outstanding. All of the shares of Common Stock offered
hereby ( if the Underwriters' over-allotment option is exercised in
full), will be freely tradeable without restriction or further registration
under the Securities Act, unless purchased by "affiliates" of the Company, as
that term is defined in Rule 144, described below. All of the shares of Common
Stock held by the Company's current stockholders, are "Restricted Securities,"
as that term is defined in Rule 144, and may not be sold in the absence of
registration other than in accordance with Rule 144 or another exemption from
registration under the Securities Act.
In general, under Rule 144 as currently in effect, any affiliate of the
Company or any person (or persons whose shares are aggregated in accordance with
the Rule) who has beneficially owned Common Stock which is treated as Restricted
Securities for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of 1% of
the outstanding shares of Common Stock (approximately shares based
upon the number of shares outstanding after the Offering) or the reported
average weekly trading volume in the Common Stock during the four weeks
preceding the date on which notice of such sale was filed under Rule 144. Sales
under Rule 144 are also subject to certain manner of sale restrictions and
notice requirements and to the availability of current public information
concerning the Company. In addition, affiliates of the Company must comply with
the restrictions and requirements of Rule 144 (other than the one-year holding
period requirement) in order to sell Common Stock that are not Restricted
Securities (such as Common Stock acquired by affiliates in market transactions).
Further, if a period of at least two years has elapsed from the date Restricted
Securities were acquired from the Company or an affiliate of the Company, a
holder of such Restricted Securities who is not an affiliate at the time of the
sale and who has not been an affiliate for at least three months prior to such
sale would be entitled to sell the shares immediately without regard to the
volume, manner of sale, notice and public information requirements of Rule 144.
The Company intends to file a registration statement on Form S-8 covering
all shares of Common Stock issuable under the Company's Stock Option Plan in
effect on the date of this Prospectus. The
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<PAGE>
Company has granted stock options with respect to an aggregate of approximately
shares of Common Stock. Accordingly, any shares issued upon exercise
of outstanding options will be eligible for sale in the public market (subject
to the 180-day lock-up arrangement described below) beginning on the effective
date of such registration statement.
The Company and its current stockholders have agreed that, without the
prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated,
they will not, for a period of 180 days after the date of this Prospectus, (1)
directly or indirectly, offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise transfer or dispose of any
share of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or file any registration statement under the
Securities Act with respect to any of the foregoing or (2) enter into any swap
or any other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of the Common
Stock, whether any such swap or transaction described in clause (1) or (2) above
is to be settled by delivery of Common Stock or such other securities, in cash
or otherwise. The foregoing sentence shall not apply to (a) the shares of Common
Stock to be sold hereunder, (b) any shares of Common Stock issued by the Company
upon the exercise of an option or warrant or the conversion of a security
outstanding on the date hereof and referred to in this Prospectus, (c) any
shares of Common Stock issued or options to purchase Common Stock granted
pursuant to existing employee benefit plans of the Company referred to in this
Prospectus, or (d) any shares of Common Stock issued pursuant to any
non-employee director stock option plan.
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UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Company has agreed to sell to each of the
Underwriters named below, and each of the Underwriters, for whom Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Wheat, First
Securities, Inc. are acting as representatives (the "Representatives"), has
severally agreed to purchase from the Company, the number of shares of Common
Stock set forth opposite its name below. In the Purchase Agreement, the several
Underwriters have agreed, subject to the terms and conditions set forth therein,
to purchase all the shares of Common Stock offered hereby, if any are purchased.
In the event of default by an Underwriter, the Purchase Agreement provides that,
in certain circumstances, purchase commitments of the nondefaulting Underwriters
may be increased or the Purchase Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
-----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ..................
Wheat, First Securities, Inc. .........
-----------
Total ...........................
===========
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the shares of Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectus, and to certain dealers at
such price less a concession not in excess of $ per share of Common Stock.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of $ per share of Common Stock to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
At the request of the Company, the Underwriters have reserved up to
shares of Common Stock for sale at the initial public offering price
to directors, officers, employees, business associates and related persons of
the Company. The number of shares of Common Stock available for sale to the
general public will be reduced to the extent such persons purchase such reserved
shares. Any reserved shares which are not so purchased will be offered by the
Underwriters to the general public on the same basis as the other shares offered
hereby. Certain individuals purchasing reserved shares may be required to agree
not to sell, offer or otherwise dispose of any shares of Common Stock for a
period of 180 days after the date of this Prospectus.
The Company, certain shareholders and certain executive officers have
agreed, subject to certain exceptions, not to, directly or indirectly, (i) sell,
grant any option to purchase or otherwise transfer or dispose of any Common
Stock or securities convertible into or exchangeable or exercisable for Common
Stock or file a registration statement under the Securities Act with respect to
the foregoing or (ii) enter into any swap or other agreement or transaction that
transfers, in whole or part, the economic consequence of ownership of the Common
Stock, without the prior written consent of Merrill Lynch, for a period of 180
days after the date of this Prospectus.
The Selling Stockholders have granted an option to the Underwriters,
exercisable within 30 days after the date of this Prospectus, to purchase up to
an aggregate of additional shares of Common Stock at the initial
public offering price set forth on the cover page of this Prospectus, less the
underwriting discount. The Underwriters may exercise this option only to cover
over-allotments, if any, made on the sale of the Common Stock offered hereby. To
the extent that the Underwriters exercise this option, each Underwriter will be
obligated, subject to certain conditions, to purchase a number of additional
shares of Common Stock proportionate to such Underwriter's initial amount
reflected in the foregoing table.
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Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock was determined by
negotiation between the Company and the Representatives. The factors considered
in determining the initial public offering price, in addition to prevailing
market conditions, are price-earnings ratios of publicly traded companies that
the Representatives believe to be comparable to the Company, certain financial
information of the Company, the history of, and the prospects for, the Company
and the industry in which it competes, and an assessment of the Company's
management, its past and present operations, the prospects for, and timing of,
future revenues of the Company, the present state of the Company's development,
and the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to the Company. There
can be no assurance that an active trading market will develop for the Common
Stock or that the Common Stock will trade in the public market subsequent to the
Offering made hereby at or above the initial public offering price.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments the Underwriters may be required to make
in respect thereof.
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales of Common Stock offered hereby to any accounts over
which they exercise discretionary authority.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Common Stock. As an
exception to these rules, the Representatives are permitted to engage in certain
transactions that stabilize the price of the Common Stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Representatives may
reduce that short position by purchasing Common Stock in the open market. The
Representatives may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.
The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group members
who sold those shares as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Representatives will engage in such transaction or that such transactions, once
commenced, will not be discontinued without notice.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Shutts & Bowen LLP, Miami, Florida. Certain legal
matters will be passed upon for the Underwriters by Shearman & Sterling, New
York, New York.
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EXPERTS
The combined financial statements of the Company as of December 31, 1995
and 1996 and for each of the three years in the period ended December 31, 1996,
the financial statements of Graham Ford as of December 31, 1996 and the year
then ended, and the financial statements of Royal as of September 30, 1996 and
for the year then ended included in this Prospectus have been so included in
reliance on the report of Deloitte & Touche LLP, independent accountants, given
on the authority of said firm as experts in accounting and auditing. The
financial statements of Whitehead Ford as of December 31, 1995 and 1996 and for
each of the two years ended December 31, 1996 included in this Prospectus have
been so included in reliance on the report of George B. Jones & Co., P.C.,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act for the Common Stock offered hereby. This
Prospectus, filed as part of the Registration Statement, omits certain
information contained in the Registration Statement and the exhibits and
schedules thereto, to which reference is hereby made. Statements contained
herein concerning the provisions of any documents filed as exhibits to the
Registration Statement are not necessarily complete, and are qualified by
reference to the copy of such document. The Registration Statement, including
exhibits and schedules filed therewith, may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at 7 World Trade Center, 13th Floor, New York,
New York 10048 and 500 West Madison Street, Room 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained at prescribed rates from the Public
Reference Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and its public reference facilities in New
York, New York and Chicago, Illinois. The Commission also maintains a Website
(http://www-sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
Upon completion of the Offering, the Company will be subject to the
informational requirements of the Exchange Act, and in accordance therewith,
will file reports, proxy and information statements and other information with
the Commission. Such reports, proxy and information statements and other
information statements and other information can be inspected and copied at the
addresses set forth above. The Company intends to furnish its stockholders with
annual reports containing financial statements audited by its independent
accountants and quarterly reports for the first three quarters of each fiscal
year containing unaudited summary financial information.
76
<PAGE>
INDEX TO COMBINED FINANCIAL STATEMENTS
HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
FIRST TEAM AUTOMOTIVE CORP. AND AFFILIATED ENTITIES
Independent Auditors' Report ........................ F-2
Combined Balance Sheets .............................. F-3
Combined Statements of Operations ..................... F-4
Combined Statements of Stockholders' Equity ......... F-5
Combined Statements of Cash Flows ..................... F-6
Notes to Combined Financial Statements ............... F-9
BILL GRAHAM FORD COMPANY, INC.
Independent Auditors' Report ........................ F-24
Balance Sheets ....................................... F-25
Statements of Operations .............................. F-26
Statements of Stockholders' Equity .................. F-27
Statements of Cash Flows .............................. F-28
Notes to Financial Statements ........................ F-29
ROYAL JEEP EAGLE CHRYSLER-PLYMOUTH, INC.
Independent Auditors' Report ........................ F-33
Balance Sheets ....................................... F-34
Statements of Operations and Retained Earnings ...... F-35
Statements of Cash Flows .............................. F-36
Notes to Financial Statements ........................ F-37
COOK-WHITEHEAD FORD, INC.
Independent Auditors' Report ........................ F-42
Balance Sheets ....................................... F-43
Statements of Operations .............................. F-45
Statements of Stockholders' Equity .................. F-46
Statements of Cash Flows .............................. F-47
Notes to Financial Statements ........................ F-48
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
First Team Automotive Corp.:
We have audited the accompanying combined balance sheets of the First Team
Automotive Corp. and affiliated entities (the "Company") (Note 1) as of December
31, 1995 and 1996, and the related combined statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1996. 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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all material
respects, the combined financial position of the Company at December 31, 1995
and 1996, and the combined results of its operations and its combined cash flows
for each of the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Orlando, Florida
May 9, 1997
F-2
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
MARCH 31,
1995 1996 1997
--------------- ---------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ..................... $ 7,984,831 $ 11,496,091 $ 10,946,057
Receivables - net ........................... 9,234,713 11,170,614 10,970,862
Inventories ................................. 51,490,042 66,281,370 63,667,720
Prepaid expenses and other assets ............ 542,465 796,954 732,568
----------- ------------ -----------
Total current assets ........................ 69,252,051 89,745,029 86,317,207
FIXED ASSETS - Net ........................... 9,308,167 9,804,127 9,738,736
INVESTMENTS .................................... 289,609 598,475 870,243
NOTES RECEIVABLE .............................. 1,022,458 317,810 317,148
OTHER ASSETS ................................. 161,888 245,731 287,790
INTANGIBLE ASSETS - Net ........................ 1,137,485 2,062,929 1,826,673
----------- ------------ -----------
TOTAL .......................................... $ 81,171,658 $ 102,774,101 $ 99,357,797
=========== ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Temporary bank overdrafts ..................... $ 3,087,215 $ 4,967,726 $ 4,930,213
Notes payable - floorplan ..................... 54,535,009 67,663,529 64,318,113
Current maturities:
Long-term debt .............................. 1,349,679 2,009,925 2,009,924
Obligation under noncompete agreements ...... 298,785 330,071 330,071
Capital lease obligations .................. 144,630 169,071 175,000
Accounts payable .............................. 4,052,768 5,304,017 4,031,778
Accrued liabilities ........................... 8,775,025 8,955,754 8,845,670
Deferred income taxes ........................ 67,540 67,540
----------- ------------ -----------
Total current liabilities .................. 72,243,111 89,467,633 84,708,309
LONG-TERM DEBT ................................. 3,791,180 4,547,417 4,405,075
OBLIGATION UNDER NONCOMPETE
AGREEMENTS .................................... 507,850 177,779 95,262
CAPITAL LEASE OBLIGATIONS ..................... 514,091 374,341 328,390
DEFERRED INCOME TAXES ........................ 188,810 66,360 66,360
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST .............................. 1,967,315 3,651,241 4,148,428
STOCKHOLDERS' EQUITY:
Common stock ................................. 3,753 3,753 3,753
Additional paid-in capital .................. 7,663,665 9,063,665 9,063,665
Accumulated deficit ........................... (5,340,236) (4,210,207) (3,093,564)
Treasury stock .............................. (367,881) (367,881) (367,881)
----------- ------------ -----------
Total stockholders' equity .................. 1,959,301 4,489,330 5,605,973
----------- ------------ -----------
TOTAL .......................................... $ 81,171,658 $ 102,774,101 $ 99,357,797
=========== ============ ===========
</TABLE>
See notes to combined financial statements.
F-3
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
----------------------------------------------- ---------------------------------
1994 1995 1996 1996 1997
--------------- --------------- --------------- ---------------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Vehicle sales ........................ $ 318,837,949 $ 325,451,692 $ 390,260,326 $ 90,335,491 $ 98,353,125
Parts, service, and collision repair 35,058,026 40,903,862 50,000,676 10,838,117 13,181,225
Other .............................. 8,153,905 7,546,482 9,170,078 1,554,882 2,130,437
------------ ------------ ------------ ------------ ------------
Total .............................. 362,049,880 373,902,036 449,431,080 102,728,490 113,664,787
------------ ------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales ........................ 316,641,724 324,753,343 389,336,996 88,411,186 97,103,329
Selling, general, and administrative 37,262,022 40,124,921 47,378,122 11,264,091 12,895,225
Depreciation and amortization ...... 1,313,478 1,714,184 2,096,882 455,481 507,422
------------ ------------ ------------ ------------ ------------
Total .............................. 355,217,224 366,592,448 438,812,000 100,130,758 110,505,976
------------ ------------ ------------ ------------ ------------
OPERATING INCOME ..................... 6,832,656 7,309,588 10,619,080 2,597,732 3,158,811
INTEREST EXPENSE - Net ............... 3,388,361 4,721,020 5,375,299 1,166,170 1,425,981
------------ ------------ ------------ ------------ ------------
INCOME BEFORE INCOME
TAXES AND MINORITY
INTEREST ........................... 3,444,295 2,588,568 5,243,781 1,431,562 1,732,830
PROVISION FOR INCOME TAXES ............ 889,704 725,651 483,094 174,000 119,000
MINORITY INTEREST IN
EARNINGS ........................... 728,903 741,431 1,641,027 338,814 497,187
------------ ------------ ------------ ------------ ------------
NET INCOME ........................... $ 1,825,688 $ 1,121,486 $ 3,119,660 $ 918,748 $ 1,116,643
============ ============ ============ ============ ============
PRO FORMA NET INCOME
DATA (Unaudited):
Income before income taxes
and minority interest,
as reported ........................ $ 3,444,295 $ 2,588,568 $ 5,243,781 $ 1,431,562 $ 1,732,830
Pro forma provision for
income taxes ........................ (1,296,000) (974,000) (1,973,000) (539,000) (652,000)
------------ ------------ ------------ ------------ ------------
Pro forma net income before
minority interest .................. 2,148,295 1,614,568 3,270,781 892,562 1,080,830
Pro forma minority interest
in earnings ........................ (455,000) (462,000) (1,023,000) (211,000) (310,000)
------------ ------------ ------------ ------------ ------------
Pro forma net income ............... $ 1,693,295 $ 1,152,568 $ 2,247,781 $ 681,562 $ 770,830
============ ============ ============ ============ ============
</TABLE>
See notes to combined financial statements.
F-4
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
AND THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED TREASURY
STOCK CAPITAL DEFICIT STOCK TOTAL
------------ ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 ......... $ 17,378 $3,744,918 $ (5,115,131) $ (8,597) $ (1,361,432)
Capital contributions ............ 409,286 792,000 -- 1,201,286
Distributions .................. (1,000) -- 1,000 -- --
Dividends declared ............... -- -- (1,866,462) -- (1,866,462)
Purchase of treasury stock ...... -- -- -- (359,284) (359,284)
Net income ..................... -- -- 1,825,688 -- 1,825,688
-------- ----------- ------------ ---------- ------------
BALANCE, DECEMBER 31, 1994 ......... 16,378 4,154,204 (4,362,905) (367,881) (560,204)
Capital contributions ............ (13,625) 2,383,552 941,158 -- 3,311,085
Issuance of common stock ......... 1,000 1,125,909 (1,126,909) -- --
Dividends declared ............... -- -- (1,913,066) -- (1,913,066)
Net income ..................... -- -- 1,121,486 -- 1,121,486
-------- ----------- ------------ ---------- ------------
BALANCE, DECEMBER 31, 1995 ...... 3,753 7,663,665 (5,340,236) (367,881) 1,959,301
Capital contributions ............ -- 1,400,000 -- -- 1,400,000
Dividends declared ............... -- -- (1,989,631) -- (1,989,631)
Net income ..................... -- -- 3,119,660 -- 3,119,660
-------- ----------- ------------ ---------- ------------
BALANCE, DECEMBER 31, 1996 ......... 3,753 9,063,665 (4,210,207) (367,881) 4,489,330
Net income (unaudited) ......... -- -- 1,116,643 -- 1,116,643
-------- ----------- ------------ ---------- ------------
BALANCE, MARCH 31, 1997
(Unaudited) ..................... $ 3,753 $9,063,665 $ (3,093,564) $ (367,881) $ 5,605,973
======== =========== ============ ========== ============
</TABLE>
See notes to combined financial statements.
F-5
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------------------------
1994 1995 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income ....................................... $ 1,825,688 $ 1,121,486 $ 3,119,660
------------ ----------- -----------
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization .................. 1,313,478 1,714,184 2,096,882
Change in LIFO reserve ........................... 1,847,246 954,896 (167,092)
Minority interest in earnings .................. 728,903 741,431 1,641,027
Expense of obligation under rent subsidy ......... -- 215,743 --
Equity in operations of unconsolidated
affiliates ..................................... (110,691) 9,707 (497,142)
Provision for deferred taxes ..................... (136,838) 21,722 (50,978)
Decrease (increase) in operating assets -
net of acquired assets:
Receivables .................................... (2,160,939) (34,955) 98,557
Inventories .................................... (11,740,052) (6,185,665) (6,190,217)
Prepaid expenses .............................. (59,017) (43,711) (221,892)
Other assets .................................... 104,958 22,683 (86,263)
Increase (decrease) in operating liabilities - net
of acquired liabilities:
Accounts payable .............................. 353,895 307,139 535,016
Accrued liabilities ........................... 1,625,928 (2,385,887) 763,349
Other - net .................................... 238,344 166,498 132,834
------------ ----------- -----------
Total adjustments .............................. (7,994,785) (4,496,215) (1,945,919)
------------ ----------- -----------
Net cash provided by (used in)
operating activities .......................... (6,169,097) (3,374,729) 1,173,741
------------ ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of dealerships - net of cash acquired ... (1,136,371) -- (1,878,548)
Purchase of fixed assets ........................ (1,574,514) (812,283) (1,844,525)
Dividends received from investment in
unconsolidated affiliates ...................... 325,000 -- --
Purchase of investments in unconsolidated
affiliates ..................................... (7,404) (5,961) (101,999)
------------ ----------- -----------
Net cash used in investing activities ......... (2,393,289) (818,244) (3,825,072)
------------ ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase (decrease) in temporary
bank overdrafts ............................... (80,685) 2,340,489 1,880,511
Net borrowings on notes payable - floorplan ...... 9,282,371 6,462,185 4,325,696
Principal payments on long-term debt ............ (452,218) (704,426) (348,718)
Borrowings on long-term debt ..................... 875,000 140,000 1,765,201
Principal payments on capital lease obligations ... (10,336) (130,943) (115,309)
Payments on obligation under noncompete
agreements ..................................... (244,827) (270,387) (298,861)
Proceeds from sale-leaseback agreement ............ 800,000 -- --
Capital contributions ........................... 792,000 433,181 1,400,000
Capital contributions by minority stockholders ... 305,948 -- 631,071
Distributions to minority stockholders ............ (219,368) (575,721) (464,873)
Dividends paid .................................... (1,461,278) (1,505,330) (2,612,127)
------------ ----------- -----------
Net cash provided by (used in)
financing activities ........................... 9,586,607 6,189,048 6,162,591
------------ ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ................................. 1,024,221 1,996,075 3,511,260
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD .............................. 4,964,535 5,988,756 7,984,831
------------ ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD .................................... $ 5,988,756 $ 7,984,831 $ 11,496,091
============ =========== ===========
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1996 1997
------------- --------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income ....................................... $ 918,749 $ 1,116,643
----------- -----------
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization .................. 455,481 507,422
Change in LIFO reserve ........................... -- (65,000)
Minority interest in earnings .................. 338,814 497,187
Expense of obligation under rent subsidy ......... -- --
Equity in operations of unconsolidated
affiliates ..................................... (17,558) (271,768)
Provision for deferred taxes ..................... -- --
Decrease (increase) in operating assets -
net of acquired assets:
Receivables .................................... 1,775,163 199,752
Inventories .................................... 3,606,462 2,678,650
Prepaid expenses .............................. (429,416) 64,386
Other assets .................................... (2,420) (42,721)
Increase (decrease) in operating liabilities - net
of acquired liabilities:
Accounts payable .............................. 295,020 (1,272,239)
Accrued liabilities ........................... 823,742 148,861
Other - net .................................... 32,168 --
----------- -----------
Total adjustments .............................. 6,877,456 2,444,530
----------- -----------
Net cash provided by (used in)
operating activities ........................... 7,796,205 3,561,173
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of dealerships - net of cash acquired ... -- --
Purchase of fixed assets ........................ (461,131) (205,775)
Dividends received from investment in
unconsolidated affiliates ...................... -- --
Purchase of investments in unconsolidated
affiliates ..................................... -- --
----------- -----------
Net cash used in investing activities ......... (461,131) (205,775)
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase (decrease) in temporary
bank overdrafts ............................... (980,251) (37,513)
Net borrowings on notes payable - floorplan ...... (6,303,116) (3,345,416)
Principal payments on long-term debt ............ (276,824) (141,019)
Borrowings on long-term debt ..................... -- --
Principal payments on capital lease obligations ... (34,821) (40,022)
Payments on obligation under noncompete
agreements ..................................... (13,911) (82,517)
Proceeds from sale-leaseback agreement ............ -- --
Capital contributions ........................... -- --
Capital contributions by minority stockholders ... -- --
Distributions to minority stockholders ............ -- (258,945)
Dividends paid .................................... -- --
----------- -----------
Net cash provided by (used in)
financing activities ........................... (7,608,923) (3,905,432)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ................................. (273,849) (550,034)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD .............................. 7,984,831 11,496,091
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD .................................... $ 7,710,982 $ 10,946,057
=========== ===========
</TABLE>
(CONTINUED)
F-6
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
COMBINED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
--------------------------------------------- ------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest ......... $3,358,000 $4,701,000 $5,325,000 $732,000 $ 955,000
=========== =========== =========== ======== ========
Cash paid for income taxes ...... $ 919,000 $ 714,000 $ 314,000 $ -- $ --
=========== =========== =========== ======== ========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
YEAR ENDED DECEMBER 31, 1994:
Dividends in the amount of $39,000 declared by the Company were used to reduce
certain shareholder receivables during 1994.
Dividends declared and unpaid as of December 31, 1994 were approximately
$736,000.
Certain stockholders contributed approximately $340,000 of notes receivable and
approximately $20,000 of accrued interest receivable to additional paid-in
capital. Additionally, dividends declared of approximately $50,000 were
contributed, and the Company issued notes payable in the amount of $340,028 to
facilitate this transaction. These items were contributed to additional paid-in
capital, the Company repurchased stock owned by certain stockholders causing an
increase in additional paid-in capital and treasury stock of approximately
$410,000 and $340,000, respectively.
YEAR ENDED DECEMBER 31, 1995:
One of the combined companies received a note receivable from a minority
stockholder totaling approximately $249,000 in connection with the issuance of
stock of that combined affiliate. During the year, dividends declared by the
combined company reduced the note receivable to $-0- as of December 31, 1995.
Distributions to certain minority stockholders totaling approximately $58,000
were used to reduce notes receivable from such minority stockholders.
Dividends declared and unpaid as of December 31, 1995 amounted to approximately
$1,244,000.
The Company recorded an obligation for a rent subsidy provided to a buyer of an
entity previously managed by the Company totaling approximately $225,000.
Accounts and notes receivable of approximately $1,608,000 were contributed to
the Company via a capital contribution by a stockholder. Notes payable of
$861,000 were offset against the corresponding notes receivable.
YEAR ENDED DECEMBER 31, 1996:
The Company received a contribution of approximately $97,000, including a note
receivable of $13,000 from an individual in exchange for a minority ownership
position in one of the combined companies and the establishment of a note
payable of $44,000 to such minority stockholder. The contribution was then
partially distributed to stockholders, reducing stockholder loans by $19,000.
F-7
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
COMBINED STATEMENTS OF CASH FLOWS--(CONTINUED)
One of the combined companies issued common stock for $220,000 in exchange for
the forgiveness of interest receivable of $10,000, the reduction of dividends
declared in a prior year of $158,000, the reduction of dividends declared in
1996 of $77,000, and the receipt of $1,000.
Dividends declared and unpaid as of December 31, 1996 amounted to approximately
$259,000.
In 1996, a certain dealership of the Company received a contribution from a
minority interest of $32,671, which included a note receivable of $7,671 and the
forgiveness of a note payable of $25,000, in exchange for 9% of the outstanding
partnership interest and the establishment of a note payable of $8,090 to such
partner.
As of April 1, 1996, the Company purchased an ownership position in a dealership
for $2,550,000. Goodwill related to the acquisition totaled approximately
$1,380,000.
(Concluded)
See notes to combined financial statements.
F-8
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION--The combined financial statements include the
accounts of the following entities:
First Team Management, Inc.
Don Mealey Chevrolet, Inc.
Don Mealey Oldsmobile, Inc. (began operations in 1996)
Colonial Imports, Ltd. (and its predecessor company)
First Team Imports, Ltd. (and its predecessor company)
First Team Infiniti, Ltd. (and its predecessor company)
First Team Cadillac-Oldsmobile, Ltd.
Pacific Rim Imports, Ltd. (began operations in 1996)
Chevrolet World, Inc.
Mealey Holdings, Inc. (began operations in 1995)
First Team Ford, Ltd. (began operations in 1996)
Tallahassee Automotive Group, Inc.
Tallahassee Motors, Inc.
Tallahassee Imports, Inc.
Tallahassee Chrysler-Plymouth, Inc.
Tallahassee Used Cars, Inc. (began operations in 1995)
Tallahassee Motors, Inc., Tallahassee Imports, Inc., Tallahassee
Chrysler-Plymouth, Inc. and Tallahassee Used Cars, Inc. are wholly owned
subsidiaries of Tallahassee Automotive Group, Inc. Colonial Imports, Ltd., First
Team Imports, Ltd., First Team Infiniti, Ltd., First Team Cadillac-Oldsmobile,
Ltd., Pacific Rim Imports, Ltd., and First Team Ford, Ltd. are majority owned by
Mealey Holdings, Inc.
Minority interest has been recorded for ownership interests not owned or
controlled by Donald C. Mealey.
Colonial Imports, Ltd., First Team Imports, Ltd., First Team Infiniti, Ltd.,
First Team Cadillac-Oldsmobile, Ltd., Pacific Rim Imports, Ltd., and First Team
Ford, Ltd. are limited partnerships.
First Team Management, Inc. Don Mealey Chevrolet, Inc. Don Mealey Oldsmobile,
Inc., and Chevrolet World, Inc. are "Small Business Corporations" under Section
1362(a) of the Internal Revenue Code.
The Company plans to sell 2,750,000 shares of common stock in an initial public
offering (the "Offering").
Upon the consumation of the Offering, the stockholders and partners of the
combined entities will exchange their shares of stock and partnership interests
in these entities for shares of common stock in a newly created
company, First Team Automotive Corp., representing all of such corporation's
outstanding common stock prior to the Offering.
Prior to the exchange of stock, First Team Automotive Corp. did not conduct any
business or have any assets and liabilities and, thus, has not operated as a
stand-alone company. The term "Company," when used hereinafter, includes First
Team Automotive Corp., its subsidiaries and its predecessors.
F-9
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
The Company operates in one business segment--the retail sales and service of
new and used vehicles. The Company has two Chevrolet dealerships, two Ford
dealerships, two Kia dealerships, two Oldsmobile dealerships, two Mitsubishi
dealerships, two Infiniti dealerships, an Acura dealership, a Cadillac
dealership, and a Chrysler-Plymouth dealership. One each of the Ford, Infiniti,
Mitsubishi, Kia dealerships, and the Chrysler-Plymouth dealership are located in
Tallahassee, Florida. The remaining dealerships are located in greater Orlando,
Florida.
All costs of the Company of doing business are properly included in the combined
financial statements. Management considers all such costs reasonable. All
significant intercompany transactions and balances have been eliminated in
combination.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS--Cash and cash equivalents include cash on hand and
contracts in transit pertaining to the sale of vehicles which generally mature
within five to ten days of sale.
REVENUE RECOGNITION--Revenues from vehicle and parts sales and from service
operations are recognized at the time the vehicle is delivered to the customer
or service is completed.
FINANCE FEES AND INSURANCE COMMISSIONS--Finance fees represent revenue earned by
the Company for notes placed with financial institutions in connection with
customer vehicle financing. Finance fees are recognized in income upon
acceptance of the credit by the financial institution. Insurance income
represents commissions earned on credit life, accident and disability insurance
sold in connection with a vehicle on behalf of third-party insurance companies.
Insurance commissions are recognized in income upon customer acceptance of the
insurance terms as evidenced by contract execution. Net revenues related to
finance fees and insurance commissions are included in other revenues in the
combined statements of operations.
The Company is charged back a portion of these fees and commissions if the
customer terminates the finance or insurance contract prior to its scheduled
maturity. The estimated allowance for these chargebacks ("chargeback allowance")
is based upon the Company's historical experience for prepayments or defaults on
the finance and insurance contracts.
INVENTORIES--Vehicles and parts are stated at the lower of cost or market. Cost
of new vehicles is determined using the last-in, first-out basis ("LIFO")
method. Cost of used vehicles and parts is determined on a specific
identification basis. The Company intends to adopt the first-in, first-out
(FIFO) method of accounting for new vehicle inventories upon closing of the
Offering. The FIFO method of inventory accounting is preferable for the Company
upon closing of the Offering because it is the method generally used by publicly
held automobile dealership companies.
F-10
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
POSTRETIREMENT BENEFITS--The Company has no postretirement or postemployment
benefit arrangements as defined in Statement of Financial Accounting Standards
(SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," or SFAS No. 112, "Employers' Accounting for Postemployment Benefits."
FIXED ASSETS--Fixed assets are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are provided on straight-line and
accelerated methods over the estimated useful lives of the assets. The ranges of
estimated useful lives are as follows:
<TABLE>
<S> <C>
Buildings ........................ 39 years
Furniture and fixtures ............ 5-7 years
Leasehold improvements ............ 5-39 years
Machinery and shop equipment ...... 5-7 years
Computer equipment ............... 3-5 years
</TABLE>
Repairs and maintenance are expensed as incurred.
GOODWILL--Goodwill represents the excess purchase price over the fair value of
net assets acquired and is being amortized on the straight-line method over 15
to 40 years.
IMPAIRMENT OF LONG-LIVED ASSETS--In March 1995, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-
Lived Assets to be Disposed Of" ("SFAS 121"), which is effective for fiscal
years beginning after December 15, 1995. Effective December 31, 1996, the
Company adopted SFAS 121 which requires that long-lived assets (i.e., property,
equipment, goodwill and other intangible assets) held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the net book value of the asset may not be recoverable. An impairment loss
is recognized if the sum of expected future cash flows (undiscounted and before
interest) from the use of the asset is less than the net book value of the
asset. Generally, the amount of the impairment loss is measured as the
difference between the net book value of the assets and the estimated fair value
of the related assets. The adoption of SFAS 121 did not have a material effect
on the Company's 1996 results of operations or its financial position.
ACCOUNTING FOR STOCK-BASED COMPENSATION--In October 1995, the FASB issued SFAS
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), which is
effective for fiscal years beginning after December 15, 1995. Effective January
1, 1996, the Company adopted SFAS 123 which establishes financial accounting and
reporting standards for stock-based compensation plans. The pronouncement
defines a fair value based method of accounting for an employee stock option or
similar equity instrument and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. However, it
allows an entity to continue to measure compensation cost for those plans using
the intrinsic value based method of accounting as prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"). Entities electing to remain with the accounting in APB 25 must make
pro forma disclosures of net income and earnings per share as if the fair value
based method of accounting defined in SFAS 123 had been applied. The
F-11
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Company has elected to account for stock-based employee compensation plans under
the intrinsic method pursuant to APB 25 and make the disclosures in its
footnotes as required by SFAS 123.
INCOME TAXES--Certain of the combined entities are limited partnerships and are
not taxable entities for federal and state income tax purposes. The revenues and
expenses of the limited partnerships flow through to the partners for tax
purposes. The tax returns and the amount of distributable partnership income or
loss are subject to examination by the federal and state taxing authorities. If
such examinations result in changes to distributable partnership income or loss,
the tax liability of the partners would be changed accordingly.
The stockholders of certain other combined entities have elected, under Section
1362(a) of the Internal Revenue Code, to be treated as a "Small Business
Corporation" for federal and state income tax purposes. Under this provision,
the stockholders include their pro rata share of the Company's taxable income
for the year, whether distributed or undistributed, in their individual income
tax returns. Accordingly, no provision for federal or state income taxes is
included for these entities.
Tallahassee Automotive Group, Inc. and its subsidiaries are taxable corporations
and file consolidated income tax returns and account for income taxes using an
asset and liability approach. The asset and liability approach requires the
recognition of deferred taxes and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of assets and liabilities.
The tax status of the limited partnerships and the entities taxed as small
business corporations and " S" corporations will terminate immediately prior to
the effectiveness of the Offering. At that time, the Company will establish its
net deferred income tax liability and record an accompanying provision for
income taxes. As of March 31, 1997, the amount of deferred income tax liability
and related provisions for income taxes that will result from the termination of
the entities' tax status and adoption of the FIFO method of inventory accounting
is approximately $2.7 million.
The accompanying combined statements of operations for each of the three
years in the period ended December 31, 1996, and the three months ended March
31, 1996 and 1997, reflect provisions for income taxes on an unaudited pro forma
basis using the asset and liability approach, as if the Company had been fully
subject to federal and state income taxes.
EARNINGS PER SHARE--Earnings per share data is not presented, as the historical
capital structure prior to the Offering is not comparable to the capital
structure that will exist after the Offering.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The fair value of financial instruments is
determined by reference to various market data and other valuation techniques,
as appropriate. Unless otherwise disclosed, the fair value of financial
instruments approximates their recorded values due primarily to the short-term
nature of their maturities.
CONCENTRATIONS OF CREDIT RISK--Concentrations of credit risk with respect to
accounts receivable are limited due to the large number of customers comprising
the Company's customer base.
F-12
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of cash deposits and contracts in transit. At
times, amounts invested with financial institutions may be in excess of FDIC
insurance limits. As of December 31, 1996, the Company has not experienced any
losses on its cash equivalents.
MAJOR SUPPLIERS AND DEALER AGREEMENTS--The Company purchases substantially all
of its new vehicles and parts inventory from various manufacturers at the
prevailing prices charged by the manufacturers to all franchised dealers.
The Company enters into agreements ("Dealer Agreements") with each manufacturer.
The Dealer Agreements generally limit the location of the dealership and include
manufacturer approval rights over changes in dealership management and
ownership. A manufacturer is also entitled to terminate the Dealer Agreement if
the dealership is in material breach of its terms.
INTERIM FINANCIAL INFORMATION--The accompanying unaudited financial information
for the three months ended March 31, 1996 and 1997 have been prepared on
substantially the same basis as the audited financial statements, and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial information set forth therein.
2. ACQUISITIONS
On April 1, 1996, the company acquired 47% of the partnership interests,
including 100% of the general partner's interest, in First Team Ford, Ltd. which
owns a Ford dealership in Sanford, Florida. The purchase price was approximately
$2,550,000 in cash.
The acquisition was accounted for as a purchase, and the results of First Team
Ford, Ltd. have been included in the accompanying combined statements of
operations since the date of acquisition. The cost of the acquisition has been
allocated on the basis of the estimated fair value of the assets acquired and
the liabilities assumed. Goodwill related to this acquisition totaled
approximately $1,380,000.
The unaudited combined statements of operations data is presented below on a pro
forma basis as though the acquisition had occurred as of the beginning of 1995
and 1996:
<TABLE>
<CAPTION>
1995 1996
-------------- --------------
<S> <C> <C>
Operating revenues ...... $416,402,000 $462,725,000
============= =============
Net income ............... $ 1,737,000 $ 3,390,000
============= =============
</TABLE>
The pro forma results of operations information is not necessarily indicative of
the operating results that would have occurred had the acquisition been
consummated as of the beginning of each period, nor is it necessarily indicative
of future operations.
F-13
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
3. RECEIVABLES
RECEIVABLES CONSIST OF THE FOLLOWING AT DECEMBER 31, 1995 AND 1996:
<TABLE>
<CAPTION>
1995 1996
------------- -----------
<S> <C> <C>
Vehicles, service, parts and trade ......... $4,176,252 $ 7,142,343
Factory .................................... 3,384,945 2,422,197
Warranty claims ........................... 642,152 853,260
Finance companies ........................ 531,616 675,562
Receivables--affiliates .................. 587,121 126,832
Officers and employees ..................... 64,830 221,957
Other .................................... 224,251 140,595
----------- -----------
9,611,167 11,582,746
Less allowance for doubtful accounts ...... 376,454 412,132
----------- -----------
Total receivables--net ..................... $9,234,713 $11,170,614
=========== ===========
</TABLE>
4. INVENTORIES
INVENTORIES CONSIST OF THE FOLLOWING AT DECEMBER 31, 1995 AND 1996:
1995 1996
------------- -----------
New cars ................................. $22,240,855 $30,858,486
New trucks ................................. 20,157,835 22,065,215
Used cars and trucks ..................... 11,074,113 14,422,131
Parts and accessories ..................... 3,659,868 4,323,028
Demonstrator, rental, and other vehicles ... 3,919,484 4,007,531
------------ -----------
61,052,155 75,676,391
Less LIFO reserve ........................ 9,562,113 9,395,021
------------ -----------
Total inventories ........................ $51,490,042 $66,281,370
============ ===========
If the FIFO method of inventory accounting was used by the Company, net income
would have been higher (lower) by $1,847,000, $955,000, and $(167,000) for the
years ended December 31, 1994, 1995, and 1996, respectively.
F-14
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
5. FIXED ASSETS
FIXED ASSETS CONSIST OF THE FOLLOWING AT DECEMBER 31, 1995 AND 1996:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Buildings and improvements ........................... $ 3,986,382 $ 4,010,971
Land ................................................ 1,188,746 1,285,753
Leasehold improvements .............................. 3,419,162 4,133,578
Machinery and shop equipment ........................ 3,097,822 3,465,632
Furniture and fixtures .............................. 1,979,047 2,809,650
Computer equipment ................................. 1,812,143 1,846,638
Other ................................................ 459,039 533,284
----------- -----------
15,942,341 18,085,506
Less accumulated depreciation and amortization ...... 6,634,174 8,281,379
----------- -----------
Total fixed assets--net .............................. $ 9,308,167 $ 9,804,127
=========== ===========
</TABLE>
6. ACCOUNTS PAYABLE
ACCOUNTS PAYABLE CONSIST OF THE FOLLOWING AT DECEMBER 31, 1995 AND 1996:
<TABLE>
<CAPTION>
1995 1996
----------- ----------
<S> <C> <C>
Account payable--trade ............ $4,052,768 $5,284,110
Account payable--affiliates ...... -- 19,907
----------- ----------
Total accounts payable ............ $4,052,768 $5,304,017
=========== ==========
</TABLE>
7. NOTES PAYABLE--FLOORPLAN
NOTES PAYABLE--FLOORPLAN CONSIST OF THE FOLLOWING AT DECEMBER 31, 1995 AND 1996:
<TABLE>
<CAPTION>
1995 1996
-------------- -------------
<S> <C> <C>
New vehicles are financed at rates ranging from 8.5% to
9.75%. The underlying notes are due when the related
vehicles are sold. The notes are collateralized by new
vehicle inventories. ....................................... $51,520,274 $63,461,069
Used vehicles are financed at prime rate plus 1% (9.5% at
December 31, 1996) via lines of credit agreements with a
finance company. The agreements are cancelable by
either party. The maximum amount of borrowings
available under the agreements, which is based on units
held in inventory, was $4,932,325 at December 31, 1996. ...... 3,014,735 4,202,460
------------ -----------
Total notes payable--floorplan ................................ $54,535,009 $67,663,529
============ ===========
</TABLE>
F-15
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
8. ACCRUED LIABILITIES
ACCRUED LIABILITIES CONSIST OF THE FOLLOWING AT DECEMBER 31, 1995 AND 1996:
<TABLE>
<CAPTION>
1995 1996
------------- ----------
<S> <C> <C>
Payroll and bonuses ........................ $1,752,430 $2,041,318
Chargeback allowance ........................ 3,312,516 2,783,719
Insurance ................................. 793,173 997,363
Taxes other than income taxes ............... 563,306 852,110
Interest .................................... 437,895 480,934
Warranty claims and customer deposits ...... 329,189 402,515
Dividends payable ........................... 1,243,775 258,945
Professional services ..................... 182,639 277,969
Other ....................................... 160,102 860,881
----------- ----------
Total accrued liabilities .................. $8,775,025 $8,955,754
=========== ==========
</TABLE>
F-16
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
9. LONG-TERM DEBT
LONG-TERM DEBT CONSISTS OF THE FOLLOWING AT DECEMBER 31, 1995 AND 1996:
<TABLE>
<CAPTION>
1995 1996
------------- ------------
<S> <C> <C>
Mortgage note payable to a finance company; interest at the
prime rate plus 1% (effective rate of 9.5% at December 31,
1996); principal and interest are payable monthly; maturing
in March 2002; collateralized by related assets of the
Company. ......................................................... $2,029,471 $1,985,595
Mortgage note payable to a bank; interest at the prime rate
(8.5% at December 31, 1996); principal payable monthly in
installments of $12,100, maturing on April 30, 1999;
collateralized by related assets of the Company. ............... 1,169,457 1,558,994
Mortgage note payable to a finance company bearing annual
interest at the prime rate plus 1.0% (effective interest rate
of 9.25% at December 31, 1996); principal and interest are
payable monthly with principal payments of $4,167. The
note matures in December 2001 and is collateralized by
related assets of the Company. ................................. -- 245,833
Unsecured demand notes payable to stockholder and officers;
noninterest bearing. ............................................. 666,533 666,533
Note payable to former owners, interest at 10%; principal and
interest payments totaling $10,000 monthly, maturing in
January 2002. ................................................... 550,654 494,659
Note payable to a finance company at the Chrysler
Corporation wholesale rate plus .5% (effective rate of 9.75%
at December 31, 1996); interest only is payable monthly;
maturing October 1, 1997; collateralized by related assets of
the Company. ................................................... 375,000 375,000
Note payable to a finance company at the prime rate plus .5%
or LIBOR plus 2.5% (effective rate of 9.5% at
December 31, 1996); quarterly payments of principal and
interest; collateralized by related assets of the Company. ...... -- 1,056,256
Obligation under rent subsidy (net of unamortized discount of
$49,257 and $30,528 in 1995 and 1996, respectively). ............ 215,743 174,472
Other notes payable ............................................... 134,001 --
----------- ----------
5,140,859 6,557,342
Less current maturities ............................................ 1,349,679 2,009,925
----------- ----------
Total long-term debt ............................................... $3,791,180 $4,547,417
=========== ==========
</TABLE>
F-17
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
9. LONG-TERM DEBT--(CONTINUED)
As of December 31, 1996, long-term debt matures as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- -------------------- ------------
<S> <C>
1997 ....................................... $2,009,925
1998 ....................................... 583,410
1999 ....................................... 628,696
2000 ....................................... 1,752,762
Thereafter ................................. 1,582,549
-----------
Total ....................................... $6,557,342
===========
</TABLE>
10. INTANGIBLE ASSETS
INTANGIBLE ASSETS CONSIST OF THE FOLLOWING AT DECEMBER 31, 1995 AND 1996:
<TABLE>
<CAPTION>
1995 1996
------------- ----------
<S> <C> <C>
Noncompete agreements ............... $2,269,109 $2,237,911
Goodwill ........................... 687,161 2,095,662
----------- ----------
2,956,270 4,333,573
Less accumulated amortization ...... 1,818,785 2,270,644
----------- ----------
Total intangible assets--net ...... $1,137,485 $2,062,929
=========== ==========
</TABLE>
The Company has noncompete agreements with the former owners of certain of its
dealerships. The agreements are for periods of seven to ten years and provide
that the former owners will not compete within a 50-mile radius in any business
engaged in the sale, leasing, or service of new or used automobiles, trucks,
parts, or accessories. One of the agreements requires monthly payments of
$30,500 for 120 months. The net present value of these payments at 10% was
capitalized and is being amortized monthly over the term of the agreement by an
amount equal to the reduction of the principal obligation.
Future obligations under the above agreements are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- -------------------------------------------- --------
<S> <C>
1997 .................................... $366,000
1998 .................................... 183,000
--------
549,000
Aggregate future interest payments ...... 41,150
--------
Total .................................... $507,850
========
</TABLE>
F-18
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
11. CAPITAL LEASES
IN NOVEMBER 1994, THE COMPANY ENTERED INTO A SALE-LEASEBACK AGREEMENT WITH A
BANK FOR CERTAIN computer equipment totaling $800,000. There was no gain or loss
recorded on the transaction and the lease is classified as a capital lease.
Equipment under capital lease is included under computer equipment in the
accompanying balance sheets. The effective interest rate of the capital lease is
approximately 10%. In October 1996, the Company entered into a capital lease
agreement with a finance company for certain equipment totaling $37,294.
As of December 31, 1996, minimum annual rental commitments under the capital
leases are as follows:
<TABLE>
<S> <C>
1997 .................................... $213,213
1998 .................................... 213,214
1999 .................................... 196,218
2000 .................................... 7,517
--------
Total .................................... 630,162
Less amounts representing interest ...... 86,750
--------
543,412
Less current portion ..................... 169,071
--------
Long-term portion ........................ $374,341
========
</TABLE>
12. INCOME TAXES
THE COMPONENTS OF THE PROVISION (BENEFIT) FOR INCOME TAXES FOR THE YEARS ENDED
DECEMBER 31, 1994, 1995, and 1996 are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------------ --------- ----------
<S> <C> <C> <C>
Income taxes--current:
Federal ..................... $ 904,338 $615,167 $ 482,552
State ..................... 122,204 88,762 51,520
--------- -------- --------
1,026,542 703,929 534,072
Income taxes--deferred ...... (136,838) 21,722 (50,978)
--------- -------- --------
Total ........................ $ 889,704 $725,651 $ 483,094
========= ======== ========
</TABLE>
F-19
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
12. INCOME TAXES--(CONTINUED)
The provision for income taxes is different than the amount computed by applying
the federal income tax rate to income before income taxes. The reasons for these
differences are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------------ ----------- -----------
<S> <C> <C> <C>
Computed statutory amount ........................... $ 923,233 $ 628,027 $ 1,224,936
Increases (decreases):
State income taxes--net of benefit of federal income
taxes ........................................... 98,569 67,051 130,780
Partnership, S corporation and small business
corporation earnings not subject to taxation
at corporate level ............................... (388,857) (95,445) (685,370)
Prior year overaccrual .............................. -- -- (227,426)
Effect of prior year tax audit ..................... 185,354 -- --
Nondeductible expenses ........................... 71,405 101,213 41,075
Other--net .......................................... -- 24,805 (901)
--------- -------- ----------
Total provision for income taxes .................. $ 889,704 $ 725,651 $ 483,094
========= ======== ==========
</TABLE>
F-20
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
12. INCOME TAXES--(CONTINUED)
The components of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1995 1996
----------- ------------
<S> <C> <C>
Current:
Deferred tax asset--other ..................... $ 11,073 $ 6,861
Deferred tax liability--inventory ............... (8,653) (74,401)
---------- ---------
Net current deferred tax asset (liability) ...... $ 2,420 $ (67,540)
========== =========
Noncurrent:
Deferred tax assets:
Chargeback allowance ........................... $ 383,000 $ 302,000
Depreciation ................................. -- 16,249
Net operating loss carryforwards ............... 59,281 110,836
Other .......................................... -- 65,770
---------- ---------
442,281 494,855
---------- ---------
Deferred tax liabilities:
Inventory .................................... (561,633) (561,215)
Depreciation ................................. (50,201) --
Other .......................................... (19,257) --
---------- ---------
(631,091) (561,215)
---------- ---------
Net noncurrent deferred tax liability ............ $ (188,810) $ (66,360)
========== =========
</TABLE>
See Note 1 regarding the Company's change in taxable status upon closing of the
Offering.
13. COMMITMENTS AND CONTINGENCIES
WORKMEN'S COMPENSATION AND HEALTH INSURANCE--The Company is self-insured for
workers' compensation and health insurance up to an aggregate annual stop loss
of 115% of premiums paid, or approximately $960,000. Approximately $433,000,
$669,000, and $1,093,000 of expense under self-insurance was recognized for the
years ended December 31, 1994, 1995, and 1996, respectively, covering all
estimated liabilities at these dates. Management believes that the accruals
recorded on the December 31, 1995 and 1996 combined balance sheets are adequate
to provide for the final disposition of self-insured workers' compensation and
health insurance claims.
OPERATING LEASES--The Company rents certain operating assets under agreements
accounted for as operating leases. The leases contain renewal clauses and expire
during years ranging from 1997-1999.
Rent expense for the years ended December 31, 1994, 1995, and 1996 was
approximately $520,000, $614,000, and $595,000, respectively.
F-21
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
13. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Future obligations under noncancelable operating lease agreements are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- --------------- ----------
<S> <C>
1997 ...... $ 633,000
1998 ...... 465,000
1999 ...... 267,000
----------
Total ...... $1,365,000
==========
</TABLE>
Note 14 describes commitments which the Company has under operating lease
agreements entered into directly or indirectly with certain stockholders.
14. RELATED PARTY TRANSACTIONS
SUBSTANTIALLY ALL OF THE REAL PROPERTY ON WHICH THE COMPANY'S BUSINESS IS
CONDUCTED IS LEASED DIRECTLY OR indirectly from certain stockholders on an
annual or month-to-month basis. Rent expense under these leases was
approximately $1,830,000, $2,300,000, and $2,242,000 for the years ended
December 31, 1994, 1995 and 1996, respectively. Future obligations under such
leases are as follows:
<TABLE>
<S> <C>
1997 ...... $1,231,000
1998 ...... 1,003,000
1999 ...... 321,000
2000 ...... 321,000
----------
Total ...... $2,876,000
==========
</TABLE>
One of the combined entities is a guarantor for the majority stockholder's note
payable to General Motors Acceptance Corporation with a principal balance of
approximately $8,267,000 for the year ended December 31, 1996. The guarantor's
parts and accessories inventory, fixed assets, and receivables are pledged as
collateral.
The Company is a guarantor of certain real estate loans of affiliated entities
amounting to approximately $7,284,000 at December 31, 1996.
The Company's employees participate in one of two 401(k) profit sharing plans
(the "Plans"). The Plans cover substantially all employees who meet the
eligibility requirements of one year of service and having worked 1,000 hours
during the year. The Company has agreed to contribute an amount equal to 50% of
a participant's contributions up to 4% of the participant's aggregate
compensation. Expense for the years ended December 31, 1994, 1995, and 1996 was
approximately $200,000, $188,000, and $188,000, respectively.
F-22
<PAGE>
FIRST TEAM AUTOMOTIVE CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
15. DEFERRED COMPENSATION AND INCENTIVE PLAN
THE COMPANY HAS A DEFERRED COMPENSATION AND INCENTIVE PLAN, WHICH BEGAN IN 1995,
WHICH PERMITS certain key employees at certain of the combined entities to
acquire up to a specified amount of "plan units." These units may be acquired by
cash purchase, deferred compensation, and entity grant at a price determined
based on the prior year's adjusted per share net book value of outstanding
entity stock. Employees are 100% vested in "plan units" through purchase or
salary deferral and vest in both the amounts granted and in the appreciation of
"plan units" between years 5 and 10 from the date of plan inception. Total plan
compensation accrued but unfunded, which is recorded in accrued liabilities at
December 31, 1995 and 1996 is $75,000 and $54,000, respectively. The related
deferred compensation expense at December 31, 1995 and 1996 amounted to
approximately $61,000 and $247,000, respectively.
16. SUBSEQUENT EVENTS
A. ROYAL ACQUISITION--In April 1997, the Company entered into a contract to
acquire a 51% ownership interest in Royal Jeep Eagle, Chrysler-Plymouth, Inc.
("Royal"). The purchase price is approximately $2,000,000, will be paid in cash,
and is subject to adjustment based on the net worth of Royal as of the closing
date. The Company has the option to purchase the remaining interest in Royal.
The purchase is expected to close in May 1997 and is subject to normal closing
conditions and approval by Chrysler.
B. BILL GRAHAM ACQUISITION--In April 1997, the Company entered into a contract
to acquire a 50% ownership interest in Bill Graham Ford Company ("Graham"). The
purchase price is approximately $4,750,000, will be paid in cash, and is subject
to adjustment based on the net worth of Graham as of the closing date. The
Company has the option to purchase the remaining interest in Graham. The
purchase is expected to close in June 1997 and is subject to normal closing
conditions and approval by Ford.
C. DEALERSHIP DIVESTITURES--In April 1997, the Company entered into a binding
contract to sell its Infiniti/Kia dealership in Tallahassee, Florida. The
Company expects that this sale will be completed in June 1997. The sale is not
expected to result in a material gain or loss for the Company.
In addition, the Company has decided to sell or discontinue its Kia dealership
in Orlando, Florida (Pacific Rim Imports, Ltd.). The Company has not yet entered
into any sale agreement with respect to Pacific Rim Imports, Ltd.
For the year ended December 31, 1996, these dealerships had revenues of
approximately $11,147,000 and a net loss of approximately $500,000.
F-23
<PAGE>
INDEPENDENT AUDITORS' REPORT
Bill Graham Ford Company, Inc.:
We have audited the accompanying balance sheet of Bill Graham Ford Company, Inc.
(the "Company") as of December 31, 1996, and the related statements of
operations, stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1996, and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Orlando, Florida
April 25, 1997
F-24
<PAGE>
BILL GRAHAM FORD COMPANY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
-------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................. $ 1,339,005 $ 2,202,305
Receivables .............................. 966,495 617,664
Inventories .............................. 12,537,965 8,994,024
Prepaid expenses and other assets ......... 156,508 203,288
----------- -----------
Total current assets ..................... 14,999,973 12,017,281
----------- -----------
FIXED ASSETS--Net ........................... 1,552,340 1,552,495
----------- -----------
TOTAL ....................................... $ 16,552,313 $ 13,569,776
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable--floorplan .................. $ 11,779,007 $ 8,408,553
Current maturities of long-term debt ...... 23,340 17,505
Accounts payable ........................... 725,352 921,547
Accrued liabilities ........................ 633,058 830,615
Demand note payable--stockholder ......... 1,300,000 1,300,000
Revolving line of credit .................. 235,000 235,000
----------- -----------
Total current liabilities ............... 14,695,757 11,713,220
----------- -----------
LONG-TERM DEBT 276,090 276,090
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $100 par value--5,400 shares
authorized; issued and outstanding ......... 540,000 540,000
Additional paid-in capital ............... 1,068,000 1,068,000
Accumulated deficit ........................ (27,534) (27,534)
----------- -----------
Total stockholders' equity ............... 1,580,466 1,580,466
----------- -----------
TOTAL ....................................... $ 16,552,313 $ 13,569,776
=========== ===========
</TABLE>
See notes to financial statements.
F-25
<PAGE>
BILL GRAHAM FORD COMPANY, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ------------------------------
1996 1996 1997
-------------- -------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
REVENUE:
Vehicle sales ........................... $75,494,728 $21,055,321 $18,571,967
Parts, service, and collision repair ...... 8,993,058 2,287,845 2,327,019
Other .................................... 1,159,207 287,972 192,862
------------ ------------ ------------
Total .................................... 85,646,993 23,631,138 21,091,848
------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales ........................... 74,947,863 20,654,289 18,464,735
Selling, general, and administrative ...... 7,903,324 2,150,553 1,917,160
Depreciation and amortization ............ 141,132 22,500 13,445
------------ ------------ ------------
Total .................................... 82,992,319 22,827,342 20,395,340
------------ ------------ ------------
OPERATING INCOME ........................... 2,654,674 803,796 696,508
INTEREST EXPENSE--Net ..................... 1,132,607 272,130 275,843
------------ ------------ ------------
NET INCOME ................................. $ 1,522,067 $ 531,666 $ 420,665
============ ============ ============
</TABLE>
See notes to financial statements.
F-26
<PAGE>
BILL GRAHAM FORD COMPANY, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1996 AND
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
--------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 ......... $540,000 $1,068,000 $ (49,869) $ 1,558,131
Dividends declared ............ -- -- (1,499,732) (1,499,732)
Net income ..................... -- -- 1,522,067 1,522,067
-------- ----------- ---------- -----------
BALANCE, DECEMBER 31, 1996 ...... 540,000 1,068,000 (27,534) 1,580,466
======== =========== ========== ===========
Dividends declared ............ -- -- (420,665) (420,665)
Net income ..................... -- -- 420,665 420,665
-------- ----------- ---------- -----------
BALANCE, MARCH 31, 1997 ......... $540,000 $1,068,000 $ (27,534) $ 1,580,466
======== =========== ========== ===========
</TABLE>
See notes to financial statements.
F-27
<PAGE>
BILL GRAHAM FORD COMPANY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, -----------------------------
1996 1996 1997
--------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 1,522,067 $ 531,666 $ 420,665
----------- ----------- -----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ........................ 141,132 22,500 13,445
Increase in LIFO reserve .............................. 214,282 -- --
Loss on disposal of fixed assets ..................... 4,838 -- --
(Increase) decrease in operating assets:
Receivables .......................................... (623,801) 106,737 348,831
Inventories .......................................... (3,311,224) 1,074,221 3,543,941
Prepaid expenses and other assets ..................... (123,736) 15,277 (46,780)
Increase (decrease) in operating liabilities:
Accounts payable ....................................... 419,808 (233,544) 196,195
Accrued liabilities .................................... 81,868 237,045 (66,266)
----------- ----------- -----------
Total adjustments .................................... (3,196,833) 1,222,236 3,989,366
----------- ----------- -----------
Net cash provided by (used in) operating activities . (1,674,766) 1,753,902 4,410,031
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets .............................. (231,781) -- (13,600)
Proceeds from sale of equipment ........................ 1,500 -- --
----------- ----------- -----------
Net cash used in investing activities ............... (230,281) -- (13,600)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid .......................................... (2,378,874) (937,306) (156,842)
Net borrowings on notes payable--floorplan ............ 3,150,316 (1,162,809) (3,370,454)
Principal payments on long-term debt .................. (323,340) (5,835) (5,835)
----------- ----------- -----------
Net cash provided by (used in) financing activities . 448,102 (2,105,950) (3,533,131)
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ....................................... (1,456,945) (352,048) 863,300
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD .................................... 2,795,950 2,795,950 1,339,005
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD .......................................... $ 1,339,005 $ 2,443,902 $ 2,202,305
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION--
Cash paid for interest ................................. $ 1,102,000 $ 272,000 $ 276,000
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-28
<PAGE>
BILL GRAHAM FORD COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS--Bill Graham Ford Company (the "Company"), located in Bradenton,
Florida, is an authorized Ford automobile dealership with related used vehicle,
parts and service departments.
USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS--The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
CASH EQUIVALENTS--Cash equivalents represent receivables due from banks,
pertaining to the sale of vehicles, which are collected within 5 to 10 days of
sale.
INVENTORIES--New vehicle and demonstrator vehicle inventories and parts and
accessories inventories are stated at the lower of cost or market, with cost
determined using the last-in, first-out (LIFO) method, which is not in excess of
market. Used vehicle inventory is stated at the lower of cost or market, with
cost determined by specific identification.
FIXED ASSETS--Fixed assets are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are provided on the straight-line
method over the estimated useful lives of the respective assets, which range
from 5 to 30 years. Leasehold improvements are amortized over the lesser of the
lease term or the estimated useful lives of the leased assets.
FINANCE FEES AND INSURANCE COMMISSIONS--Finance fees represent revenue earned by
the Company for notes placed with financial institutions in connection with
customer vehicle financing. Finance fees are recognized in income upon
acceptance of the credit by the financial institution. Insurance income
represents commissions earned on credit life, accident and disability insurance
sold in connection with the vehicle on behalf of third-party insurance
companies. Insurance commissions are recognized in income upon customer
acceptance of the insurance terms as evidenced by contract execution. Net
revenues related to finance fees and insurance commissions are included in other
revenues in the statements of operations.
The Company is charged back for a portion of these fees and commissions should
the customer terminate the finance contract prior to its scheduled maturity. The
estimated allowance for these chargebacks ("chargeback allowance") is based upon
the Company's historical experience for prepayments or defaults on the finance
contracts, total approximately $336,000 at December 31, 1996, and is included in
accrued liabilities.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying values of the Company's
financial instruments, which includes cash and cash equivalents, accounts
receivable, notes payable - floorplan, accounts payable, and long-term debt,
approximate their estimated fair values at March 31, 1997 and December 31, 1996.
MAJOR SUPPLIER AND DEALER AGREEMENT--The Company purchases substantially all of
its new vehicles, parts and accessories inventories from Ford Motor Company
("Ford"). There are receivables and payables in the normal course of business
with Ford.
F-29
<PAGE>
BILL GRAHAM FORD COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
The Company has entered into a Dealer Agreement with Ford. The Dealer Agreement
generally limits the location of the dealership and retains manufacturer
approval rights over changes in dealership management and ownership. The
manufacturer is also entitled to terminate the Dealer Agreement if the
leadership is in material breach of its terms.
INCOME TAXES--The stockholders of the Company have elected, under Section
1362(a) of the Internal Revenue Code, to be treated as a "Small Business
Corporation" for federal and state income tax purposes. Under this provision,
the stockholders include their pro rata share of the Company's taxable income
for the year, whether distributed or undistributed, in their individual income
tax returns. Accordingly, no provision for federal or state income taxes is
included in the statements of operations.
INTERIM FINANCIAL INFORMATION--The accompanying unaudited financial information
for the three months ended March 31, 1996 and 1997 have been prepared on
substantially the same basis as the audited financial statements, and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial information set forth therein.
2. RECEIVABLES
RECEIVABLES CONSIST OF THE FOLLOWING AT DECEMBER 31, 1996:
<TABLE>
<S> <C>
Vehicle service and parts ...... $ 64,925
Factory receivables ............ 457,335
Warranty claims ............... 291,531
Finance companies ............... 83,785
Other receivables ............... 68,919
--------
Total receivables ............... $966,495
========
</TABLE>
3. INVENTORIES
INVENTORIES CONSIST OF THE FOLLOWING AT DECEMBER 31, 1996:
<TABLE>
<S> <C>
New cars .................. $ 4,165,274
New trucks .................. 5,779,391
Used cars and trucks ...... 1,491,837
Parts and accessories ...... 896,228
Demonstrator vehicles ...... 1,325,632
-----------
13,658,362
Less LIFO reserve ......... 1,120,397
-----------
Total inventories ......... $12,537,965
===========
</TABLE>
If the first-in, first-out ("FIFO") method of inventory accounting was used by
the Company, net income for the year ended December 31, 1996 would have been
higher by approximately $214,000. Use of the FIFO method of inventory accounting
would not have had a significant effect on net income for the three months ended
March 31, 1996 and 1997.
F-30
<PAGE>
BILL GRAHAM FORD COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED DECEMBER 31, 1996
4. FIXED ASSETS
FIXED ASSETS CONSIST OF THE FOLLOWING AT DECEMBER 31, 1996:
<TABLE>
<S> <C>
Land ......................................................................... $ 1,290,433
Buildings and improvements .................................................... 1,207,241
Machinery and shop equipment ................................................. 938,692
-----------
3,436,366
Less accumulated depreciation and amortization ............................... 1,884,026
-----------
Total fixed assets--net .............................. $ 1,552,340
===========
</TABLE>
5. NOTES PAYABLE--FLOORPLAN
NOTES PAYABLE--FLOORPLAN CONSIST OF THE FOLLOWING AT DECEMBER 31, 1996:
<TABLE>
<S> <C>
New vehicles are financed at the prime rate (8.50% at December 31, 1996). The
underlying notes are due when the related vehicles are sold. The notes are
collateralized by new vehicle inventories. .................................. $ 11,779,007
============
</TABLE>
6. DEMAND NOTE PAYABLE--STOCKHOLDER
DEMAND NOTE PAYABLE CONSISTS OF THE FOLLOWING AT DECEMBER 31, 1996:
<TABLE>
<S> <C>
Note payable to stockholder at the prime rate plus 1% (effective rate of 9.5% at
December 31, 1996); interest is payable monthly ............................ $ 1,300,000
============
</TABLE>
7. REVOLVING LINE OF CREDIT
REVOLVING LINE OF CREDIT CONSISTS OF THE FOLLOWING AT DECEMBER 31, 1996:
<TABLE>
<S> <C>
Line of credit with Ford Motor Credit Company for up to $750,000, interest at
the prime rate plus 1% (effective rate of 9.5% at December 31, 1996); interest is
payable monthly. ............................................................ $ 235,000
============
</TABLE>
8. LONG-TERM DEBT
LONG-TERM DEBT CONSISTS OF THE FOLLOWING AT DECEMBER 31, 1996:
<TABLE>
<S> <C>
Mortgage note payable to Barnett Bank; interest 9.25%; principal and interest are
payable monthly in installments of $1,945 for principal reduction, plus the
amount necessary to pay the interest expense for the month; maturing on
October 25, 2009, collateralized by land. .................................... $ 299,430
Less current maturities ....................................................... 23,340
------------
Long-term debt ................................................................ $ 276,090
============
</TABLE>
F-31
<PAGE>
BILL GRAHAM FORD COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED DECEMBER 31, 1996
8. LONG-TERM DEBT--(CONTINUED)
The future principal payments on long-term debt at December 31, 1996 are as
follows:
<TABLE>
<S> <C>
1997 ............ $ 23,340
1998 ............ 23,340
1999 ............ 23,340
2000 ............ 23,340
2001 ............ 23,340
Thereafter ...... 159,390
--------
$276,090
========
</TABLE>
9. RELATED PARTY TRANSACTIONS
THE COMPANY PARTICIPATES IN THE BILL GRAHAM FORD COMPANY 401(K) PROFIT SHARING
PLAN AND TRUST (THE "Plan"). The Plan is a 401(k) plan covering substantially
all employees who meet the eligibility requirements of one year of service and
having worked 1,000 hours during the year. The Company did not contribute to the
Plan during 1996, as the minimum customer satisfaction rating requirement was
not met.
10. SUBSEQUENT EVENT
IN APRIL 1997, THE COMPANY ENTERED INTO A CONTRACT TO SELL SUBSTANTIALLY ALL OF
ITS OPERATING ASSETS AND related liabilities. The sale is expected to close in
June 1997 and is subject to normal closing conditions and approval by Ford.
F-32
<PAGE>
INDEPENDENT AUDITORS' REPORT
Royal Jeep Eagle Chrysler-Plymouth, Inc.:
We have audited the accompanying balance sheet of Royal Jeep Eagle
Chrysler-Plymouth, Inc. (the "Company") as of September 30, 1996, and the
related statements of operations and retained earnings and of cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at September 30, 1996, and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Orlando, Florida
May 9, 1997
F-33
<PAGE>
ROYAL JEEP EAGLE CHRYSLER-PLYMOUTH, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1996 1997
---------------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................... $ 2,949,781 $ 2,334,874
Receivables--net .................................... 2,455,236 1,956,672
Inventories .......................................... 10,470,009 9,463,193
Prepaid expenses .................................... 292,472 309,530
Deferred income taxes .............................. 204,277 10,214
------------ -----------
Total current assets .............................. 16,371,775 14,074,483
FIXED ASSETS--Net .................................... 987,319 1,056,130
OTHER ASSETS .......................................... 14,279 14,279
------------ -----------
TOTAL ............................................. $17,373,373 $15,144,892
============ ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Notes payable--floorplan ........................... $11,453,121 $ 9,557,613
Other notes payable ................................. 107,784 55,167
Accounts payable .................................... 830,473 745,402
Accrued liabilities ................................. 1,055,504 590,963
------------ -----------
Total current liabilities ........................ 13,446,882 10,949,145
------------ -----------
DEFERRED INCOME TAXES ................................. 9,577 --
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, $1 par value--10,000 shares
authorized; 1,000 shares issued and outstanding ...... 30,000 30,000
Additional paid-in capital ........................... 100,000 100,000
Retained earnings .................................... 3,786,914 4,065,747
------------ -----------
Total stockholder's equity ........................ 3,916,914 4,195,747
------------ -----------
TOTAL ................................................ $17,373,373 $15,144,892
============ ===========
</TABLE>
See notes to financial statements.
F-34
<PAGE>
ROYAL JEEP EAGLE CHRYSLER-PLYMOUTH, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ------------------------------
1996 1996 1997
-------------- -------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES:
Vehicle sales .............................. $ 68,546,209 $30,217,209 $30,937,034
Parts, service, and collision repair ...... 7,784,685 3,359,767 4,276,092
Other .................................... 657,075 374,477 388,577
----------- ------------ ------------
Total ................................. 76,987,969 33,951,453 35,601,703
----------- ------------ ------------
COSTS AND EXPENSES:
Cost of sales .............................. 66,644,224 29,018,971 31,070,606
Selling, general, and administrative ...... 8,351,295 3,763,624 3,524,509
Depreciation and amortization ............ 122,505 75,789 54,845
----------- ------------ ------------
Total ................................. 75,118,024 32,858,384 34,649,960
----------- ------------ ------------
OPERATING INCOME ........................... 1,869,945 1,093,069 951,743
INTEREST EXPENSE--Net ..................... 909,619 375,834 500,694
----------- ------------ ------------
INCOME BEFORE INCOME TAXES .................. 960,326 717,235 451,049
PROVISION FOR INCOME TAXES .................. 367,000 272,696 172,216
----------- ------------ ------------
NET INCOME ................................. 593,326 444,539 278,833
RETAINED EARNINGS, BEGINNING OF PERIOD ...... 3,243,588 3,243,588 3,786,914
DIVIDENDS ................................. (50,000) -- --
----------- ------------ ------------
RETAINED EARNINGS , END OF PERIOD ............ $ 3,786,914 $ 3,688,127 $ 4,065,747
=========== ============ ============
</TABLE>
See notes to financial statements.
F-35
<PAGE>
ROYAL JEEP EAGLE CHRYSLER-PLYMOUTH, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31,
SEPTEMBER 30, -----------------------------
1996 1996 1997
-------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 593,326 $ 444,539 $ 278,833
----------- ----------- -----------
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization .............................. 122,505 75,789 54,845
Increase (decrease) in LIFO reserve ........................ 80,366 -- (22,216)
Change in deferred income taxes ........................... (33,955) 76,040 184,486
(Increase) decrease in operating assets:
Receivables ................................................ (939,825) (719,509) 498,564
Inventories ................................................ (5,213,813) (2,995,240) 1,029,032
Prepaid expenses and other assets ........................ (84,801) (130,593) (17,057)
Increase (decrease) in operating liabilities:
Accounts payable .......................................... 413,886 (666,025) (85,071)
Accrued liabilities ....................................... (308,744) 698,194 (414,541)
----------- ----------- -----------
Total adjustments ....................................... (5,964,381) (3,661,344) 1,228,042
----------- ----------- -----------
Net cash provided by (used in)
operating activities ................................... (5,371,055) (3,216,805) 1,506,875
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets .................................... (217,971) (179,350) (123,657)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on notes
payable--floorplan .......................................... 6,231,753 3,979,727 (1,895,508)
Principal payments on other notes payable .................. -- -- (52,617)
Dividends paid ............................................. -- -- (50,000)
----------- ----------- -----------
Net cash provided by (used in) financing activities ...... 6,231,753 3,979,727 (1,998,125)
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ............................................. 642,727 583,572 (614,907)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD .......................................... 2,307,054 2,293,239 2,949,781
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD ................................................ $ 2,949,781 $ 2,876,811 $ 2,334,874
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION--
Cash paid for interest ....................................... $ 878,000 $ 439,000 $ 511,000
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-36
<PAGE>
ROYAL JEEP EAGLE CHRYSLER-PLYMOUTH, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS--Royal Jeep Eagle Chrysler-Plymouth, Inc. (the "Company") was organized
on January 7, 1975 and is an authorized Jeep, Eagle, and Chrysler-Plymouth
automobile dealership with related used vehicle and service departments located
in Casselberry, Florida.
USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS--The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
CASH AND CASH EQUIVALENTS--Cash and cash equivalents include cash on hand and
contracts in transit pertaining to the sale of vehicles which generally mature
within five to ten days of sale.
REVENUE RECOGNITION--Revenues from vehicle and parts sales and from service
operations are recognized at the time the vehicle is delivered to the customer
or service is completed.
FINANCE FEES AND INSURANCE COMMISSIONS--Finance fees represent revenue earned by
the Company for notes placed with financial institutions in connection with
customer vehicle financing. Finance fees are recognized in income upon
acceptance of the credit by the financial institution. Insurance income
represents commissions earned on credit life, accident and disability insurance
sold in connection with the vehicle on behalf of third-party insurance
companies. Insurance commissions are recognized in income upon customer
acceptance of the insurance terms as evidenced by contract execution.
The Company is charged back a portion of these fees and commissions if the
customer terminates the finance or insurance contract prior to their scheduled
maturity. The estimated allowance for these chargebacks ("chargeback allowance")
is based upon the Company's historical experience for prepayments or defaults on
the finance and insurance contracts.
INVENTORIES--Vehicles and parts are stated at the lower of cost or market. Cost
of new vehicles is determined using the last-in, first-out basis ("LIFO")
method. Cost of used vehicles and parts is determined on a specific
identification basis.
FIXED ASSETS--Fixed assets are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed using declining balance
methods over the estimated useful lives of assets.
INCOME TAXES--The Company accounts for income taxes using an asset and liability
approach. The asset and liability approach requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of assets and
liabilities.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying values of the Company's
financial instruments: cash and cash equivalents, receivables, notes
payable--floor plan, other notes payable, and accounts payable approximate their
estimated fair values at March 31, 1997 and September 30, 1996.
F-37
<PAGE>
ROYAL JEEP EAGLE CHRYSLER-PLYMOUTH, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED SEPTEMBER 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
CONCENTRATIONS OF CREDIT RISK--Concentrations of credit risk with respect to
accounts receivable are limited due to the large number of customers comprising
the Company's customer base.
Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of cash deposits and contracts in transit. At
times, amounts invested with financial institutions may be in excess of FDIC
insurance limits. As of September 30, 1996, the Company has not experienced any
losses on its cash equivalents.
MAJOR SUPPLIERS AND DEALER AGREEMENTS--The Company purchases substantially all
of its new vehicles and parts inventory from the manufacturer at the prevailing
prices charged by the manufacturer to all franchised dealers.
The Company has entered into an agreement ("Dealer Agreement") with Chrysler
Corporation. The Dealer Agreement generally limits the location of the
dealership and retain manufacturer approval rights over changes in dealership
management and ownership. Chrysler Corporation is also entitled to terminate the
Dealer Agreement if the dealership is in material breach of its terms.
INTERIM FINANCIAL INFORMATION--The accompanying unaudited financial information
for the six months ended March 31, 1996 and 1997 have been prepared on
substantially the same basis as the audited financial statements, and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial information set forth therein.
2. RECEIVABLES
RECEIVABLES CONSIST OF THE FOLLOWING AT SEPTEMBER 30, 1996:
<TABLE>
<S> <C>
Vehicles, service, parts, and trade ......... $1,327,046
Factory .................................... 984,629
Finance companies ........................ 159,735
Warranty claims ........................... 33,225
----------
2,504,635
Less allowance for doubtful accounts ...... 49,399
----------
Total receivables--net ..................... $2,455,236
==========
</TABLE>
F-38
<PAGE>
ROYAL JEEP EAGLE CHRYSLER-PLYMOUTH, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED SEPTEMBER 30, 1996
3. INVENTORIES
INVENTORIES CONSIST OF THE FOLLOWING AT SEPTEMBER 30, 1996:
<TABLE>
<S> <C>
New cars .............................. $ 4,386,732
New trucks ........................... 2,856,724
Used cars and trucks .................. 2,458,323
Parts and accessories ............... 578,249
Demonstrator and other vehicles ...... 1,010,267
-----------
11,290,295
Less LIFO reserve ..................... 820,286
-----------
Total inventories ..................... $10,470,009
===========
</TABLE>
If the first-in, first-out ("FIFO") method of inventory accounting was used by
the Company, net income would have been higher by $80,000 for the year ended
September 30, 1996 and lower by $22,000 for the six months ended March 31, 1997.
Use of the FIFO method of inventory accounting would not have had a significant
effect on net income for the six months ended March 31, 1996.
4. FIXED ASSETS
FIXED ASSETS CONSIST OF THE FOLLOWING AT SEPTEMBER 30, 1996:
<TABLE>
<S> <C>
Land ......................................................................... $ 450,000
Land improvements ............................................................. 196,721
Leasehold improvements ....................................................... 148,271
Machinery and shop equipment ................................................. 456,466
Furniture and fixtures ....................................................... 531,460
Company vehicles ............................................................. 27,920
------------
1,810,838
Less accumulated depreciation and amortization ............................... 823,519
------------
Total fixed assets--net ....................................................... $ 987,319
============
</TABLE>
5. NOTES PAYABLE--FLOORPLAN
NOTES PAYABLE--FLOORPLAN CONSIST OF THE FOLLOWING AT SEPTEMBER 30, 1996:
<TABLE>
<S> <C>
Vehicles are financed at annual interest rate of prime plus 3/4%, or 9.0% at
9/30/96. The underlying notes are due when the related vehicles are sold. The
notes are collateralized by new vehicle inventories. ...................... $11,453,121
===========
</TABLE>
F-39
<PAGE>
ROYAL JEEP EAGLE CHRYSLER-PLYMOUTH, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED SEPTEMBER 30, 1996
6. OTHER NOTES PAYABLE
OTHER NOTES PAYABLE CONSIST OF THE FOLLOWING AT SEPTEMBER 30, 1996:
<TABLE>
<S> <C>
Notes payable to Chrysler Financing Company, $9,450 monthly payments
including interest at 9.5%, due September 1997, collateralized by various assets,
guaranteed by the Company's sole stockholder. .................................... $107,784
=========
</TABLE>
7. ACCRUED LIABILITIES
ACCRUED LIABILITIES CONSIST OF THE FOLLOWING AT SEPTEMBER 30, 1996:
<TABLE>
<S> <C>
Payroll and bonuses ............... $ 246,622
Taxes other than income taxes ...... 131,545
Chargeback allowance ............... 291,625
Interest ........................... 89,788
Dividends payable .................. 50,000
Other .............................. 245,924
----------
Total accrued liabilities ......... $1,055,504
==========
</TABLE>
8. INCOME TAXES
THE COMPONENTS OF THE PROVISION FOR INCOME TAXES FOR THE YEAR ENDED SEPTEMBER
30, 1996 ARE AS follows:
<TABLE>
<S> <C>
Income taxes--current:
Federal .............................. $ 342,456
State ................................. 58,499
--------
400,955
Income taxes--deferred ............... (33,955)
--------
Total provision for income taxes ...... $ 367,000
========
</TABLE>
Income tax expense for the year ended September 30, 1996 is different than the
amount computed by applying the federal income tax rate to income before income
taxes. The reasons for these differences are as follows:
<TABLE>
<S> <C>
Computed statutory amount ....................................... $ 326,511
Increases (decreases):
State income taxes--net of benefit of federal income taxes ...... 38,609
Nondeductible expenses .......................................... 31,490
Other ............................................................ (29,610)
--------
Total provision for income taxes ................................. $ 367,000
========
</TABLE>
F-40
<PAGE>
ROYAL JEEP EAGLE CHRYSLER-PLYMOUTH, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED SEPTEMBER 30, 1996
8. INCOME TAXES--(CONTINUED)
The components of deferred tax assets and liabilities are as follows:
<TABLE>
<S> <C>
Current:
Deferred tax assets:
Chargeback allowance ........................... $ 84,705
Bad debt allowance .............................. 45,203
Inventory ....................................... 13,259
Workmen's compensation reserve .................. 20,597
Vacation accrual ................................. 8,864
Legal fee accrual .............................. 21,477
Advertising .................................... 7,205
Other .......................................... 2,967
--------
Total current deferred income tax asset ............ $ 204,277
========
Noncurrent:
Deferred tax asset--advertising .................. $ 7,205
Deferred tax liability--depreciation ............ (16,782)
--------
Net noncurrent deferred income tax liability ...... $ (9,577)
========
</TABLE>
9. RETIREMENT PLAN
THE COMPANY MAINTAINS A PROFIT SHARING PLAN FOR ITS EMPLOYEES. THE PLAN IS A
401(K) PLAN COVERING substantially all employees who meet the eligibility
requirements of one year of service. An annual contribution is made by the
Company. The amount is at the discretion of the Company's sole stockholder.
Contributions by the Company amounted to approximately $100,000 during the year
ended September 30, 1996.
10. RELATED PARTY TRANSACTIONS
Advertising fees in the amount of $180,000 for the year ended September 30, 1996
were paid to Volume Advertising, Inc., an affiliate of which the Company's sole
stockholder is a majority owner.
The Company has a lease agreement with its sole stockholder for all dealership
facilities. The lease is a year-to-year operating lease, the terms of which are
renegotiated on an annual basis. Rent expense related to this lease amounted to
approximately $455,000 for the year ended September 30, 1996. In addition, the
Company is liable for all property taxes, repairs, maintenance, and insurance.
The Company leases vacant land from its sole stockholder which it intends to use
as a future building site. Rent expense related to this operating lease amounted
to approximately $103,000 for the year ended September 30, 1996.
11. SUBSEQUENT EVENT
IN APRIL 1997, THE COMPANY ENTERED INTO AN AGREEMENT TO SELL ALL OF ITS ASSETS
AND RELATED LIABILITIES. THE sale is expected to close in May 1997 and is
subject to normal closing conditions and approval by Chrysler Corporation.
F-41
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors Board of Directors
Cook-Whitehead Ford, Inc. First Team Management, Inc.
Panama City, Florida Orlando, Florida
We have audited the accompanying balance sheets of Cook-Whitehead Ford,
Inc., an S corporation, as of December 31, 1996 and 1995, and the related
statements of operations, stockholder's equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
Except as explained in the following paragraph, 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.
We did not observe the physical inventory (stated at $6,580,901) as of
December 31, 1994, since that date was prior to our initial engagement as
auditors for the Company. Accordingly, the scope of our work was not sufficient
to enable us to express, and we do not express, an opinion on the statements of
operations, stockholder's equity and cash flows for the year ended December 31,
1995.
In our opinion, the balance sheet as of December 31, 1995 and the 1996
financial statements referred to in the first paragraph present fairly, in all
material respects, the financial position of Cook-
Whitehead Ford, Inc. as of December 31, 1996 and 1995 and the results of its
operations and its cash flows for the year ended December 31, 1996 in conformity
with generally accepted accounting principles.
George B. Jones & Co., P.C.
Tampa, Florida
February 28, 1997 (Except for Note 12,
as to which the date is May 9, 1997)
F-42
<PAGE>
COOK-WHITEHEAD FORD, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995 AND MARCH 31, 1997
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------- MARCH 31,
1995 1996 1997
------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ............... $ 1,028,680 $ 1,576,884 $1,728,946
Receivables, net ........................ 2,022,682 538,995 315,371
Inventories ........................... 6,628,703 6,381,811 4,226,468
Prepaid expenses and other assets ...... 206,441 184,188 179,423
----------- ----------- -----------
Total current assets .................. 9,886,506 8,681,878 6,450,208
FIXED ASSETS, net ........................ 1,467,581 1,479,475 1,510,167
OTHER ASSETS ........................... 65,004 35,122 55,850
----------- ----------- -----------
TOTAL ASSETS ........................ $11,419,091 $10,196,475 $8,016,225
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-43
<PAGE>
COOK-WHITEHEAD FORD, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995 AND MARCH 31, 1997--(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
MARCH 31,
1995 1996 1997
------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Notes payable--floorplan .............................. $ 8,288,279 $ 7,090,527 $4,066,375
Current maturities of long-term debt .................. 183,823 68,198 69,198
Current maturities of capital lease obligations ...... -- 37,240 37,240
Accounts payable .................................... 408,038 222,714 308,265
Accrued liabilities ................................. 874,539 492,995 642,055
----------- ----------- -----------
Total current liabilities ........................... 9,754,679 7,911,674 5,123,133
LONG-TERM DEBT ....................................... 573,129 384,079 373,088
CAPITAL LEASE OBLIGATIONS .............................. -- 114,302 105,206
COMMITMENTS AND CONTINGENCIES ........................ -- -- --
----------- ----------- -----------
Total liabilities ................................. 10,327,808 8,410,055 5,601,427
----------- ----------- -----------
STOCKHOLDER'S EQUITY
CAPITAL STOCK--Common stock, $10 par value,
30,000 shares authorized, 10,000 shares issued
and outstanding ....................................... 100,000 100,000 100,000
RETAINED EARNINGS .................................... 991,283 1,686,420 2,314,798
----------- ----------- -----------
Total stockholder's equity ........................ 1,091,283 1,786,420 2,414,798
----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY ................................. $11,419,091 $10,196,475 $8,016,225
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-44
<PAGE>
COOK-WHITEHEAD FORD, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND
THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------- ------------------------------
1995 1996 1996 1997
-------------- -------------- -------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE:
Vehicle sales .............................. $47,668,903 $48,875,791 $10,867,048 $10,645,781
Parts, service and collision repair ...... 5,321,976 6,016,185 1,324,798 1,483,186
Other .................................... 1,595,159 1,821,740 359,875 380,503
------------ ------------ ------------ ------------
Total .................................... 54,586,038 56,713,716 12,551,721 12,509,470
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales .............................. 46,496,410 47,172,023 10,194,409 10,285,868
Selling, general, and administrative ...... 5,747,826 5,916,915 1,498,065 1,377,726
Depreciation and amortization ............ 215,008 251,434 63,351 74,637
------------ ------------ ------------ ------------
Total .................................... 52,459,244 53,340,372 11,755,825 11,738,231
------------ ------------ ------------ ------------
OPERATING INCOME ........................... 2,126,794 3,373,344 795,896 771,239
INTEREST EXPENSE, net ..................... 574,407 702,898 205,417 142,861
------------ ------------ ------------ ------------
NET INCOME .............................. $ 1,552,387 $ 2,670,446 $ 590,479 $ 628,378
============ ============ ============ ============
</TABLE>
See notes to financial statements.
F-45
<PAGE>
COOK-WHITEHEAD FORD, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
DECEMBER 31, 1996 AND 1995 AND MARCH 31, 1997
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
--------- --------------- --------------
<S> <C> <C> <C>
Balance, December 31, 1994 .................. $100,000 $ 1,902,447 $ 2,002,447
Prior period adjustments ..................... -- (434,600) (434,600)
-------- ----------- -----------
Balance, December 31, 1994, as restated ...... 100,000 1,467,847 1,567,847
Distributions .............................. -- (2,028,951) (2,028,951)
Net income ................................. -- 1,552,387 1,552,387
-------- ----------- -----------
Balance, December 31, 1995 .................. 100,000 991,283 1,091,283
Distributions .............................. -- (1,975,309) (1,975,309)
Net income ................................. -- 2,670,446 2,670,446
-------- ----------- -----------
Balance, December 31, 1996 .................. 100,000 1,686,420 1,786,420
Unaudited:
Net income ................................. -- 628,378 628,378
-------- ----------- -----------
Balance, March 31, 1997 ..................... $100,000 $ 2,314,798 $ 2,414,798
======== =========== ===========
</TABLE>
See notes to financial statements.
F-46
<PAGE>
COOK-WHITEHEAD FORD, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND
THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------------------------- -----------------------------
1995 1996 1996 1997
--------------- --------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income ....................................... $ 2,670,446 $ 1,552,387 $ 590,479 $ 628,378
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .................. 251,434 215,008 63,351 74,637
Change in LIFO reserve ........................... 124,310 338,048 31,000 (55,485)
Loss on disposal of fixed assets ............... 152,666 242,705 38,200 --
(Increase) decrease in operating assets:
Receivables .................................... 1,483,688 (1,456,194) 763,536 223,624
Inventories .................................... 112,673 (538,057) (10,793) 2,210,828
Prepaid expenses and other assets ............... 62,045 (164,242) 118,332 (15,963)
Increase (decrease) in operating liabilities:
Accounts payable .............................. (183,326) 360,814 (29,338) 85,551
Accrued liabilities ........................... (383,546) 154,394 122,237 149,060
----------- ----------- ----------- -----------
Net cash provided by operating
activities ....................................... 4,290,390 704,863 1,687,004 3,300,630
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and equipment ............... (600,914) (494,851) (164,265) (105,329)
Proceeds from sale of property and
equipment ....................................... 366,441 -- 92,000 --
----------- ----------- ----------- -----------
Net cash used in investing activities ......... (234,473) (494,851) (72,265) (105,329)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
S corporation distributions ..................... (1,975,309) (2,028,951) (719,268) --
Net borrowings on notes payable-floorplan ......... (1,197,752) 2,191,063 (312,253) (3,024,152)
Principal payments on long-term debt ............ (334,652) (183,636) (15,275) (19,087)
----------- ----------- ----------- -----------
Net cash used in financing activities ......... (3,507,713) (21,524) (1,046,796) (3,043,239)
----------- ----------- ----------- -----------
Increase in cash and cash equivalents ............ 548,204 188,488 567,943 152,062
Cash and cash equivalents, beginning of year ...... 1,028,680 840,192 1,028,680 1,576,884
----------- ----------- ----------- -----------
Cash and cash equivalents, end of year ............ $ 1,576,884 $ 1,028,680 $ 1,596,623 $ 1,728,946
=========== =========== =========== ===========
Supplemental disclosure of cash
flow information:
Cash paid for interest ........................... $ 630,340 $ 566,103 $ 176,998 $ 158,811
============ ============ ============ ============
Property acquired under capital leases:
Assets .......................................... $ 184,682 $ -- $ 166,437 $ --
============ ============ ============ ============
Liabilities .................................... $ 181,519 $ -- $ 163,274 $ --
============ ============ ============ ============
</TABLE>
See notes to financial statements.
F-47
<PAGE>
COOK-WHITEHEAD FORD, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995 AND
MARCH 31, 1997 AND 1996
1. DESCRIPTION OF BUSINESS
COOK-WHITEHEAD FORD, INC. (THE COMPANY), AN S CORPORATION ORGANIZED ON JUNE
7, 1966, IS A franchised dealer for Ford Motor Company and Kia Motors America,
Inc. The Company's principal place of business is 730 W. 15th Street, Panama
City, Florida.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS--The Company considers contracts in transit to be cash
equivalents as the contracts are normally purchased by a financial institution
for face value within several business days.
CONCENTRATIONS OF CREDIT RISK ARISING FROM CASH DEPOSITS IN EXCESS OF
INSURED LIMITS--The Company maintains its cash balances in one financial
institution. The balances are insured by the Federal Deposit Insurance
Corporation up to $100,000.
ACCOUNT RECEIVABLE--The Company grants credit to the franchisors and to
customers, substantially all of whom are local businesses. The Company believes
it maintains an adequate allowance for any uncollectible accounts.
INVENTORIES--New vehicles are stated at cost (determined on the Last-In,
First-Out method) while all other inventories are valued at the lower of cost or
market.
PROPERTY AND EQUIPMENT--Property and equipment are carried at cost.
Expenditures which materially increase the values or extend the useful lives are
capitalized, while replacements, maintenance and repairs which do not improve or
extend the lives of the respective assets are charged against income as
incurred.
The cost of property and equipment is depreciated over the estimated useful
lives of the assets. Depreciation is computed using the straight-line method and
accelerated methods.
FINANCE FEES AND INSURANCE COMMISSIONS--Finance fees represent revenue
earned by the Company for notes placed with financial institutions in connection
with customer vehicle financing. Finance fees are recognized as income upon
acceptance of the credit by the financial institution. Insurance income
represents commissions earned on credit life, accident, and disability insurance
sold in connection with the vehicle on behalf of third-party insurance
companies. Insurance commissions are recognized as income upon customer
acceptance of the insurance terms as evidenced by contract execution.
The Company is charged back for a portion of these fees and commissions
should the customer terminate the finance contract prior to its scheduled
maturity. The estimated allowance for these chargebacks ("chargeback allowance")
is based upon the Company's historical experience for prepayments or defaults on
the finance contracts and is included in accrued liabilities.
INCOME TAXES--The Company has elected by consent of its stockholder to be
treated as an S Corporation under Internal Revenue Code and Florida provisions.
Under those provisions, the Company does not pay Federal or State corporate
income taxes on its taxable income. Instead, the stockholder is liable for
individual income taxes on his respective shares of the Company's taxable
income.
F-48
<PAGE>
COOK-WHITEHEAD FORD, INC.
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1995 AND
MARCH 31, 1997 AND 1996
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
INTEREST EXPENSE--Interest expense resulting from the floorplanning of
vehicle inventories has been reduced by the floorplan assistance rebates offered
by Ford Motor Company.
ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
ADVERTISING--Advertising costs are charged to operations when incurred. The
amount expensed for advertising totaled $523,858 and $504,594 in 1996 and 1995,
respectively.
INTERIM FINANCIAL INFORMATION--The accompanying unaudited financial
information for the three months ended March 31, 1996 and 1997 has been prepared
on substantially the same basis as the audited financial statements, and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial information set forth therein.
3. RECEIVABLES
RECEIVABLES CONSIST OF THE FOLLOWING AT DECEMBER 31,
<TABLE>
<CAPTION>
1995 1996
------------ ---------
<S> <C> <C>
Vehicle service and parts ...... $ 81,281 $ 92,089
Factory receivables ............ 303,625 213,935
Warranty claims .................. 6,339 17,937
Finance companies ............... 32,791 31,750
Other receivables ............... 1,598,646 183,284
---------- --------
Totals ........................ $2,022,682 $538,995
========== ========
</TABLE>
4. INVENTORIES
INVENTORIES CONSIST OF THE FOLLOWING AT DECEMBER 31,
<TABLE>
<CAPTION>
1995 1996
------------- ----------
<S> <C> <C>
New cars .................. $2,484,274 $2,539,783
New trucks .................. 3,673,634 3,665,470
Used cars and trucks ...... 1,349,671 1,083,420
Parts and accessories ...... 328,302 424,626
----------- ----------
Subtotal .................. 7,835,881 7,713,299
Less LIFO reserve ......... 1,207,178 1,331,488
----------- ----------
Totals .................. $6,628,703 $6,381,811
=========== ==========
</TABLE>
F-49
<PAGE>
COOK-WHITEHEAD FORD, INC.
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1995 AND
MARCH 31, 1997 AND 1996
5. PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT CONSIST OF THE FOLLOWING AT DECEMBER 31,
<TABLE>
<CAPTION>
1995 1996
------------- --------------
<S> <C> <C>
Land .............................. $ 264,110 $ 264,110
Building and improvements ......... 769,131 781,854
Machinery and shop equipment ...... 471,781 410,562
Furniture and fixtures ............ 422,064 637,287
Company vehicles .................. 528,118 491,255
----------- ------------
2,455,204 2,585,068
Less accumulated depreciation ...... (987,623) (1,105,593)
----------- ------------
Totals ........................... $ 1,467,581 $ 1,479,475
=========== ============
</TABLE>
6. NOTES PAYABLE-FLOORPLAN
NOTES PAYABLE-FLOORPLAN CONSIST OF THE FOLLOWING AT DECEMBER 31,
<TABLE>
<CAPTION>
1995 1996
------------- ------------
<S> <C> <C>
Vehicles are financed with Ford Motor Credit Company at
prime rate plus one percent (8% at December 31, 1996 and 8.5%
at December 31,1995). The underlying notes are due when the
related vehicles are sold. The notes are collateralized by the
inventories, receivables, and equipment ..................... $8,288,279 $7,090,527
=========== ===========
</TABLE>
7. NOTES PAYABLE
LONG-TERM DEBT CONSIST OF THE FOLLOWING AT DECEMBER 31,
<TABLE>
<CAPTION>
1995 1996
----------- ----------
<S> <C> <C>
Promissory note to Cook Family Enterprises, LTD, interest at 8% per
annum, due in monthly installments of $8,493 each, including
interest. The note matures July 1, 2002 .............................. $515,248 $452,277
Promissory note to the Estate of W.J. Cook, Jr., interest at 8.06% ... 241,704 --
Less current maturities ............................................. 183,823 68,198
--------- ---------
Long-term debt ......................................................... $573,129 $384,079
========= =========
</TABLE>
F-50
<PAGE>
COOK-WHITEHEAD FORD, INC.
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1995 AND
MARCH 31, 1997 AND 1996
7. NOTES PAYABLE--(CONTINUED)
Future principal payments of long-term debt at December 31,
<TABLE>
<CAPTION>
ANNUAL
MATURITIES
-----------------------
YEAR ENDING DECEMBER 31, 1995 1996
- --------------------------- ----------- ---------
<S> <C> <C>
1996 .................. $183,823 $ --
1997 .................. 189,050 68,198
1998 .................. 73,858 73,858
1999 .................. 79,988 79,988
2000 .................. 86,627 86,627
2001 .................. 93,817 93,817
Thereafter ............ 49,789 49,789
-------- --------
Total .................. $756,952 $452,277
======== ========
</TABLE>
8. CAPITAL LEASE OBLIGATIONS
LONG-TERM DEBT RELATED TO CAPITAL LEASES CONSISTS OF THE FOLLOWING AT
DECEMBER 31,
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Capital lease obligation payable to Reyna Financial Corporation,
due in 48 remaining monthly installments of $3,163 each, including
interest at 5.5%, collateralized by equipment ..................... $ -- $136,061
Capital lease obligation payable to Copy Products Company, due
in 29 remaining monthly installments of $603 each, including
interest at 10%, collateralized by equipment ..................... -- 15,481
------ --------
Total ............................................................ $ -- $151,542
Less current portion ............................................. -- 37,240
------ --------
Total long-term portion .......................................... $ -- $114,302
====== ========
</TABLE>
Minimum future lease payments under capital leases of December 31 are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
- ------------------------------------------------------ ------------
<S> <C>
1997 ............................................. $ 45,188
1998 ............................................. 45,188
1999 ............................................. 40,966
2000 ............................................. 37,951
--------
Total minimum lease payments ..................... 169,293
Less interest portion .............................. (17,751)
--------
Present value of net minimum lease payments ...... $ 151,542
========
</TABLE>
F-51
<PAGE>
COOK-WHITEHEAD FORD, INC.
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1995 AND
MARCH 31, 1997 AND 1996
9. ACCRUED LIABILITIES
ACCRUED LIABILITIES CONSIST OF THE FOLLOWING AT DECEMBER 31,
<TABLE>
<CAPTION>
1995 1996
--------- --------
<S> <C> <C>
Taxes payable .................. $541,543 $187,792
Other expenses payable ............ 198,846 199,828
Estimated contingent losses ...... 134,150 105,375
-------- --------
Total ........................... $874,539 $492,995
======== ========
</TABLE>
10. LEASE COMMITMENTS
THE FOLLOWING IS A LIST OF OPERATING LEASES IN EFFECT:
<TABLE>
<CAPTION>
DESCRIPTION ANNUAL
LESSOR OF ASSETS LEASE TERMS RENTAL
- ---------------------------------- --------------- ------------------- ---------
<S> <C> <C> <C>
Cook Family Enterprises, LTD.,
a related party ............. Bldgs. & Lot Expires 12/1/99 $ 36,000
Cook Family Enterprises, LTD.,
a related party, C.A. Whitehead,
a shareholder ................ Lot Expires 1/31/02 84,000
Scotty's, Inc. ............... Lot Expires 12/31/01 9,000
Dees Estate .................. Lot Expires 12/31/01 31,000
--------
Total ........................
$160,000
========
</TABLE>
Future minimum lease commitments are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
- --------------------------- --------
<S> <C>
1997 .................. $166,000
1998 .................. 160,000
1999 .................. 162,500
2000 .................. 124,000
2001 .................. 124,000
--------
Total ............... $736,500
========
</TABLE>
Rent expense relating to leases totaled $182,201 and $163,800 for 1996 and
1995, respectively.
F-52
<PAGE>
COOK-WHITEHEAD FORD, INC.
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1995 AND
MARCH 31, 1997 AND 1996
11. CORRECTION OF ERROR
RETAINED EARNINGS AT THE BEGINNING OF 1995 HAS BEEN ADJUSTED TO CORRECT
ERRORS IN THE REPORTING OF LIFO deductions, interest expense, and other
expenses. These errors had no effect on net income for 1995. Had the errors not
been made, net income for prior years would have been affected as follows:
<TABLE>
<CAPTION>
YEAR LIFO DEDUCTIONS INTEREST EXPENSE OTHER EXPENSES TOTAL
- ------- ------------------ ------------------- ----------------- --------
<S> <C> <C> <C> <C>
1992 $ 28,528 $ 8,569 $ -- $ 37,097
1993 125,711 12,348 -- 138,059
1994 (18,996) 129,132 149,308 259,444
--------- --------- --------- -------
$ 135,243 $150,049 $149,308 $434,600
========= ========= ========= =======
</TABLE>
12. SUBSEQUENT EVENTS
THE COMPANY TERMINATED ITS KIA DEALER SALES AND SERVICE AGREEMENT WITH KIA
MOTORS AMERICA, Inc. effective March 8, 1997. Any costs associated with this
termination have yet to be determined but are estimated to be insignificant
based on materiality.
In May 1997, the Company reached an agreement to sell substantially all of
its operating assets to First Team Automotive Corp. The sale is expected to
close in June 1997 and is subject to normal closing conditions and approval by
Ford Motor Company.
F-53
<PAGE>
===============================================================================
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Summary ................................. 3
Risk Factors ........................... 9
Recent Acquisitions ..................... 17
Use of Proceeds ........................ 19
Dividend Policy ........................ 19
Capitalization ........................... 20
Dilution ................................. 21
Selected Combined Financial Data ......... 22
Pro Forma Combined Financial Data ...... 24
Management's Discussion and
Analysis of Financial Condition and
Results of Operations .................. 30
Business ................................. 38
Management .............................. 59
Principal Stockholders .................. 67
Certain Transactions ..................... 68
Description of Capital Stock ............ 70
Shares Eligible for Future Sale ......... 72
Underwriting ........................... 74
Legal Matters ........................... 75
Experts ................................. 76
Additional Information .................. 76
Index to Combined Financial Statements . F-1
</TABLE>
------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
SHARES
FIRST TEAM
AUTOMOTIVE CORP.
COMMON STOCK
--------------
PROSPECTUS
--------------
MERRILL LYNCH & CO.
WHEAT FIRST BUTCHER SINGER
, 1997
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Company in connection with the sale of
the Common Stock being registered. All the amounts shown are estimates, except
for the registration fee with the Securities and Exchange Commission, the NASD
filing fee and the New York Stock Exchange fees.
<TABLE>
<S> <C>
SEC registration fee .................. $15,152.52
NASD filing fee ........................ 5,500
New York Stock Exchange fees ............ *
Blue Sky fees and expenses ............ 15,000
Printing and engraving expenses ......... *
Legal fees and expenses ............... *
Accounting fees and expenses ............ *
Transfer agent and registrar fees ...... *
Miscellaneous ........................... *
------------
TOTAL ................................. $ *
</TABLE>
- ----------------
*To be completed by amendment.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Company's Certificate of Incorporation and Bylaws set forth the extent
to which officers or directors of the Company may be indemnified against any
liabilities which they may incur. The general effect of such provisions is that
any person made a party to an action, suit or proceeding by reason of the fact
that he is or was a director or officer of the Company, or of another
corporation or other enterprise for which he served as such at the request of
the Company, shall be indemnified by the Company against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding,
to the full extent permitted under the laws of the State of Delaware. The
Company's Certificate of Incorporation and Bylaws extend such indemnification to
any employee who serves as an officer or director of any corporation at the
request of the Company. These provisions of the Company's Certificate of
Incorporation and Bylaws are not exclusive of any other indemnification rights
to which an officer or director may be entitled, whether by contract or
otherwise.
The general effect of the indemnification provisions contained in Section
145 of the Delaware General Corporation Law is as follows: A director or officer
who, by reason of such directorship or officership, is involved in any action,
suit or proceeding (other than an action by or in the right of the corporation)
may be indemnified by the corporation against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, has no reasonable cause to believe that his conduct was unlawful.
A director or officer who, by reason of such directorship or officership, is
involved in any action or suit by or in the right of the corporation may be
indemnified by the corporation against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which he shall have been adjudged to be liable to the
corporation unless and only to the extent that a court of appropriate
jurisdiction shall approve such indemnification.
II-1
<PAGE>
The Company's Certificate of Incorporation provides that a director shall
not be personally liable to the Company or to any of its stockholders for
monetary damages for breach of fiduciary duty as a director of the Company
provided, however, that such provision shall not eliminate or limit the
liability of a director: (i) for breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit.
The Company intends to purchase directors' and officers' liability
insurance for its executive officers and directors, assuming that such insurance
is available on commercially reasonable terms.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Pursuant to a Reorganization Agreement dated June 5, 1997, filed as Exhibit
2.1 to this Registration Statement, the Company will acquire (the
"Reorganization") all of the operating assets of the Company's dealerships.
Immediately prior to the closing of the Offering, the Company will consummate
the transactions contemplated by the Reorganization agreement, and issue shares
of the Company's Common Stock to the former owners of the First Team
dealerships.
Pursuant to an agreement dated June 6, 1997 between the Company and Charles
Whitehead, filed as Exhibit 2.2 to this Registration Statement, the Company has
agreed to purchase all the issued and outstanding shares of common stock of
Cook-Whitehead Ford, Inc. The Company will pay a portion of the purchase price
pursuant to a $5,900,000 promissory note which is due and payable on the earlier
of: (i) one year after consummation of the purchase, or (ii) the closing of the
Offering. Immediately prior to the closing of the Offering, the Company will
issue shares of Common Stock to Mr. Whitehead in part payment of the
promissory note.
Pursuant to an agreement dated June 9, 1997 between the Company and the
three stockholders of Bill Graham Ford Co., filed as Exhibit 2.3.3 to this
Registration Statement, the Company has agreed to purchase all the issued and
outstanding shares of common stock of Bill Graham Ford Co. The Company will pay
a portion of the purchase price by issuing shares of Common Stock to the
three shareholders of Bill Graham Ford Co.
The Common Stock to be issued by the Company in connection with the
foregoing transactions will be acquired by the respective stockholders for
investment purposes only, and not with a view toward their resale or
distribution. Such shares may not be resold unless they are registered under the
Securities Act of 1933 (the "Act") or unless such resale qualifies for an
exemption from registration. Accordingly, all of the issuances of Common Stock
described above will be exempt from registration under the Act pursuant to
Section 4(2) thereof.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement(1)
2.1 Reorganization Agreement dated June 5, 1997 among First Team
Automotive Corp., its shareholders, and others
2.2 Acquisition Agreement dated June 6, 1997 between the Company and
Charles Whitehead providing for the purchase of Whitehead Ford
2.3 Acquisition Agreements providing for the purchase of Bill Graham
Ford
2.3.1 Contract for Sale dated April 10, 1997
2.3.2 Agreement for Purchase and Sale of Class A Partnership Interest
2.3.3 Contract for Sale dated June 9, 1997
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------
<S> <C>
2.4 Acquisition Agreement between the Company and Ray Tatum providing
for the purchase of Royal Jeep-Eagle Chrysler-Plymouth
2.5 Contract for Sale of Stock in Seminole Ford, Inc. dated June 9,
1997
3.1 Amended and Restated Certificate of Incorporation of First Team
Automotive Corp. (formerly First Team Management, Inc.)
3.2 Bylaws of First Team Automotive Corp.
4.1 Specimen Stock Certificate(1)
4.2 Form of 1997 First Team Automotive Corp. Stock Option Plan
4.3 Form of First Team Automotive Corp. Incentive Compensation Plan
5.1 Opinion of Shutts & Bowen LLP
10.1 Form of Lease Agreement between First Team Automotive Corp.
and/or its subsidiaries and the Lessor/Affiliates(2)
10.2 Lease Agreement dated April 1, 1996 between Plant Fruit Company
and First Team Ford, Inc.
10.3 Lease Agreement dated July 1, 1988 between E. W. Richardson, Jr.,
Frank Shaw, Jr. and Sarah C. Shaw and Tallahassee Motors, Inc.
10.4 Lease Agreement dated January 3, 1991 between Argonaut Holdings,
Inc. (formerly Auto Air, Inc.) and World Chevrolet, Inc.
10.5 Lease Agreement between the Company and Ray Tatum
10.6 Lease Agreement dated June 14, 1991 between XWAY, Inc. and the
Company
10.7 Lease Agreements between Cook-Whitehead Ford, Inc. and various
lessors
10.7.1 Lease Agreement between Cook-Whitehead Ford, Inc. and Cook Family
Enterprises, Ltd. expiring 1999(1)
10.7.2 Lease Agreement between Cook-Whitehead Ford, Inc. and Cook Family
Enterprises, Ltd. expiring 2002(1)
10.7.3 Lease Agreement between Cook-Whitehead Ford, Inc. and Scotty's
Inc.(1)
10.7.4 Lease Agreement between Cook-Whitehead Ford, Inc. and Dees
Estate(1)
10.8 Inventory Financing Agreements between Comerica Bank ("Comerica")
and certain subsidiaries of the Company(3)
10.8.1 Motor Vehicle Floor Planning Agreement & Security Agreement
10.8.2 Master Revolving Note
10.8.3 Security Agreement (Equipment)
10.8.4 Security Agreement (Accounts, Chattel Paper, and Inventory)
10.9 Inventory Financing Agreements between General Motors Acceptance
Corporation ("GMAC") and certain subsidiaries of the Company(4)
10.9.1 Used Vehicle Wholesale Borrowing Base Credit Line Loan Agreement
10.9.2 First Amendment to Used Vehicle Wholesale Borrowing Base Credit
Line Loan Agreement
10.10 Inventory Financing Agreements between SunTrust Bank of Florida,
N.A. ("SunTrust") and certain subsidiaries of the Company(5)
10.10.1 Renewal Floor Plan Line-of-Credit Note
10.10.2 Loan and Security Agreement
10.11 Retailer Agreement between Drivers Mart/trademark/ Worldwide,
Inc. and First Team Automotive Corp. and Market Area Plan
10.12 Employment Agreement between First Team Automotive Corp. and
Donald C. Mealey
10.13 Employment Agreement between First Team Automotive Corp. and W.
Warner Peacock
10.14 Agreement between First Team Automotive Corp. and Ezra P. Mager
21.1 Subsidiaries
23.1 Consent of Deloitte & Touche LLP, independent accountants,
relating to the financial statements of First Team Automotive
Corp. and subsidiaries
23.2 Consent of Shutts & Bowen LLP (included in Exhibit 5.1)
23.3 Consent of George B. Jones & Co., P.C.
24.1 Power of Attorney of Donald C. Mealey
24.2 Power of Attorney of W. Warner Peacock
24.3 Power of Attorney of Richard L. Higginbotham
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------
<S> <C>
24.4 Power of Attorney of Ezra P. Mager
</TABLE>
- ----------------
(1) To be filed by amendment.
(2) This form of lease agreement will be used for each lease between First Team
Automotive Corp. and/or its subsidiaries, as lessee, and the following
persons and entities as lessor: Donald C. Mealey, World Chevrolet, Ltd.,
Colonial Imports, Ltd., First Team Imports, Ltd., First Team Cadillac-Olds,
Ltd., Capital Circle Team Partners and First Team Infiniti, Ltd.
(3) Substantially identical agreements exist between Comerica and each of the
following subsidiaries of the Company: First Team Jeep-Eagle
Chrysler-Plymouth, Inc. (to be executed), Graham Ford, Ltd. (to be
executed), First Team Ford, Ltd. and Cook- Whitehead Ford, Inc. (to be
executed).
(4) Substantially identical agreements exist between GMAC and each of the
following subsidiaries of the Company: First Team Imports, Ltd., Colonial
Imports, Ltd., First Team Cadillac-Olds, Ltd., Don Mealey Oldsmobile, Inc.,
Don Mealey Chevrolet, Inc., World Chevrolet, Inc. and First Team Infiniti,
Ltd.
(5) Substantially identical agreements exist between SunTrust and each of the
following subsidiaries of the Company: Tallahassee Motors, Inc.,
Tallahassee Chrysler-Plymouth, Inc. and Tallahassee Imports, Inc.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) 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.
(2) For purposes of determining any liability under the Securities Act of
1933, 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 registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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 registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Orlando, State of
Florida, on June 9, 1997.
FIRST TEAM AUTOMOTIVE CORP.
By: /s/ DONALD C. MEALEY
-----------------------------------------
Donald C. Mealey
Chairman, President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------- -------------------------------------- ---------------
<S> <C> <C>
/s/ DONALD C. MEALEY Chairman, President and June 9, 1997
- ------------------------------ Chief Executive Officer
Donald C. Mealey
/s/ W. WARNER PEACOCK Executive Vice President, June 9, 1997
- ------------------------------ Chief Financial Officer
W. Warner Peacock and Director
* Director June 9, 1997
- ------------------------------
Richard L. Higginbotham
/s/ EZRA P. MAGER Vice Chairman June 9, 1997
- ------------------------------
Ezra P. Mager
*By Donald C. Mealey,
attorney-in-fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------
2.1 Reorganization Agreement dated June 5, 1997 among First Team
Automotive Corp., its shareholders, and others
2.2 Acquisition Agreement dated June 6, 1997 between the Company and
Charles Whitehead providing for the purchase of Whitehead Ford
2.3 Acquisition Agreements between the Company and Bill Graham Ford,
Co. providing for the purchase of Bill Graham Ford
2.3.1 Contract for Sale dated April 10, 1997
2.3.2 Agreement for Purchase and Sale of Class A Partnership Interest
2.3.1 Contract for Sale dated June 9, 1997
2.4 Acquisition Agreement between the Company and Ray Tatum providing
for the purchase of Royal Jeep-Eagle Chrysler-Plymouth
2.5 Contract for Sale of Stock in Seminole Ford, Inc. dated June 9,
1997
3.1 Amended and Restated Certificate of Incorporation of First Team
Automotive Corp. (formerly First Team Management, Inc.)
3.2 Bylaws of First Team Automotive Corp.
4.2 Form of 1997 First Team Automotive Corp. Stock Option Plan
4.3 Form of First Team Automotive Corp. Incentive Compensation Plan
5.1 Opinion of Shutts & Bowen LLP
10.1 Form of Lease Agreement between First Team Automotive Corp.
and/or its subsidiaries and the Lessor/Affiliates(2)
10.2 Lease Agreement dated April 1, 1996 between Plant Fruit Company
and First Team Ford, Inc.
10.3 Lease Agreement dated July 1, 1988 between E. W. Richardson, Jr.,
Frank Shaw, Jr. and Sarah C. Shaw and Tallahassee Motors, Inc.
10.4 Lease Agreement dated January 3, 1991 between Argonaut Holdings,
Inc. (formerly Auto Air, Inc.) and World Chevrolet, Inc.
10.5 Lease Agreement between the Company and Ray Tatum(1)
10.6 Lease Agreement dated June 14, 1991 between XWAY, Inc. and the
Company
10.7 Lease Agreements between Cook-Whitehead Ford, Inc. and various
lessors
10.7.1 Lease Agreement between Cook-Whitehead Ford, Inc. and Cook Family
Enterprises, Ltd. expiring 1999(1)
10.7.2 Lease Agreement between Cook-Whitehead Ford, Inc. and Cook Family
Enterprises, Ltd. expiring 2002(2)
10.7.3 Lease Agreement between Cook-Whitehead Ford, Inc. and Scotty's
Inc.(1)
10.7.4 Lease Agreement between Cook-Whitehead Ford, Inc. and Dees
Estate(1)
10.8 Inventory Financing Agreements between Comerica Bank ("Comerica")
and certain subsidiaries of the Company(3)
10.8.1 Motor Vehicle Floor Planning Agreement & Security Agreement
10.8.2 Master Revolving Note
10.8.3 Security Agreement (Equipment)
10.8.4 Security Agreement (Accounts, Chattel Paper, and Inventory)
10.9 Inventory Financing Agreements between General Motors Acceptance
Corporation ("GMAC") and certain subsidiaries of the Company(4)
10.9.1 Used Vehicle Wholesale Borrowing Base Credit Line Loan Agreement
10.9.2 First Amendment to Used Vehicle Wholesale Borrowing Base Credit
Line Loan Agreement
10.10 Inventory Financing Agreements between SunTrust Bank of Florida,
N.A. ("SunTrust") and certain subsidiaries of the Company(5)
10.10.1 Renewal Floor Plan Line-of-Credit Note
10.10.2 Loan and Security Agreement
10.11 Retailer Agreement between Drivers Mart/trademark/ Worldwide,
Inc. and First Team Automotive Corp. and Market Area Plan
10.12 Employment Agreement between First Team Automotive Corp. and
Donald C. Mealey
10.13 Employment Agreement between First Team Automotive Corp. and W.
Warner Peacock
10.14 Agreement between First Team Automotive Corp. and Ezra P. Mager
21.1 Subsidiaries
23.1 Consent of Deloitte & Touche LLP, independent accountants,
relating to the financial statements of First Team Automotive
Corp. and subsidiaries
23.2 Consent of Shutts & Bowen LLP (included in Exhibit 5.1)
23.3 Consent of George B. Jones & Co., P.C.
24.1 Power of Attorney of Donald C. Mealey
24.2 Power of Attorney of W. Warner Peacock
24.3 Power of Attorney of Richard L. Higginbotham
24.4 Power of Attorney of Ezra P. Mager
EXHIBIT 2.1
REORGANIZATION AGREEMENT
THIS REORGANIZATION AGREEMENT (the "Agreement") is made and entered
into as of the 5th day of June, 1997, by and among First Team Automotive Corp.
and the corporations, limited partnerships, trusts and individuals named below.
First Team Automotive Corp. (the "COMPANY" or "FTAC"), is a Delaware
corporation. Serra Investments, Inc. is a Michigan corporation. Higginbotham
Family Limited Partnership, L.P. is a Georgia Limited Partnership. All other
corporations and limited partnerships named below are organized under the laws
of Florida.
<TABLE>
<CAPTION>
LIMITED
CORPORATIONS PARTNERSHIPS TRUSTS INDIVIDUALS
------------ ------------ ------ -----------
<S> <C> <C> <C>
Mealey Holdings, Inc. First Team Imports, Ltd. Donald C. Mealey Trust Donald C. Mealey
First Team Management, Inc. Colonial Imports, Ltd. for Jay Donald Mealey W. Warner Peacock
Don Mealey Imports, Inc. First Team Cadillac- Donald C. Mealey Trust H. Carver Reeves
Colonial Imports, Inc. Oldsmobile, Ltd. for Robert Glen Mealey Thomas M. Downing
Don Mealey Infiniti, Inc. First Team Infiniti, Ltd. Donald C. Mealey Trust Whitney S. Gilman
Don Mealey Chevrolet, Inc. First Team Ford, Ltd. for Mark David Mealey Peter L. Wilson
Chevrolet World, Inc. First Team Ford Donald C. Mealey Trust M. Douglas Etheridge
Don Mealey Oldsmobile, Inc. of Manatee, Ltd. for Kevin Charles Mealey Clarence O. Kearce
Serra Investments, Inc. First Team Jeep Eagle, Kevin C. Mealey
Chrysler Plymouth, Ltd. Mark D. Mealey
Higginbotham Family Jay D. Mealey
Limited Partnership, L.P. Robert G. Mealey
</TABLE>
RECITALS
1. FTAC has no outstanding capital stock. The common stock of FTAC, par
value $.01 per share (the "FTAC Shares"), will be issued in accordance with this
Reorganization Agreement. Each of the parties hereto who will be issued FTAC
Shares pursuant to this Agreement is hereinafter referred to as a "Shareholder"
and all such parties are collectively referred herein to as the "Shareholders."
B. The purpose of this Agreement is to set forth a procedure for the
reorganization (the "Reorganization") of certain of the corporations and
partnerships which are parties hereto so that, after the Reorganization (1) FTAC
and its wholly-owned subsidiaries will own all of the Operating Assets (as
defined below) of the automobile dealerships (the "Dealerships") described in
Recitals "G" through "P"; (2) the land and improvements used by the Dealerships
will be owned by other parties; and (3) FTAC will issue shares of its common
stock to the Shareholders in exchange for the Shareholders' interests in the
Operating Assets of the Dealerships. This Agreement is intended to constitute a
Plan of Share Exchange, pursuant to F.S. ss. 607.1102, and has been unanimously
approved as such by the parties hereto. In addition, the transfers and exchanges
contemplated herein
<PAGE>
are intended to qualify as pursuant to Internal Revenue Code ("Code") Sec. 351
and the regulations thereunder.
C. The issued and outstanding common stock of Mealey Holdings, Inc., is
owned by Donald C. Mealey. M. Douglas Etheridge, W. Warner Peacock, H. Carver
Reeves, Thomas M. Downing, Whitney S. Gilman, and Peter L. Wilson each own
options to purchase common stock in Mealey Holdings, Inc.
D. Donald C. Mealey owns 100% of the outstanding capital stock of First
Team Management, Inc.; Don Mealey Imports, Inc.; Colonial Imports, Inc.; Don
Mealey Infiniti, Inc.; Dealership Accounting Services, Inc.; and Driver's Mart
of Central Florida, Inc.
E. The issued and outstanding capital stock of Don Mealey Chevrolet,
Inc. is owned in the following percentages: Donald C. Mealey 70%; Kevin C.
Mealey, 10%; Donald C. Mealey Trust for Jay Donald Mealey, 5%; Donald C. Mealey
Trust for Robert Glen Mealey, 5%; Donald C. Mealey Trust for Mark David Mealey,
5%; Donald C. Mealey Trust for Kevin Charles Mealey, 5%. Don Mealey Chevrolet,
Inc. owns the dealership known as "Don Mealey Chevrolet."
F. The issued and outstanding stock of Don Mealey Oldsmobile, Inc. is
held in the following percentages: Donald C. Mealey, 70%; Kevin C. Mealey, 15%;
Jay David Mealey, 5%; Robert Glen Mealey, 5%; and Mark David Mealey, 5%. Don
Mealey Oldsmobile, Inc. owns the dealership known as "Don Mealey Oldsmobile."
G. The issued and outstanding stock of Chevrolet World, Inc. is owned
in the following percentages: Donald C. Mealey, 65%; Clarence O. Kearce, 35%.
Chevrolet World, Inc. owns the dealership known as "World Chevrolet."
H. The issued and outstanding stock of Tallahassee Auto Group, Inc.
("TAG") is owned in the following percentages: First Team Management, Inc., 37
1/2%; Higginbotham Family Limited Partnership, L.P., 25%; Serra Investments,
Inc., 37 1/2%. TAG owns, through wholly-owned subsidiaries, the dealerships
known as "Tallahassee Ford," "Tallahassee Chrysler-Plymouth" and "Tallahassee
Mitsubishi."
I. On or before the Reorganization Closing (as defined below), Mealey
Holdings, Inc. will own (i) 100% of the outstanding capital stock of
Cook-Whitehead Ford, Inc, and a corporation to be formed and named "First Team
Jeep Eagle, Chrysler Plymouth Inc." Cook-Whitehead Ford, Inc. owns the
dealership known as "Cook-Whitehead Ford."
J. First Team Imports, Ltd. owns the dealership known as "Don Mealey
Acura," and has a corporate general partner, and Class B and Class A limited
partnership interests. First Team Management, Inc. is the sole general partner
and holds a 1% Class A general partnership interest and a 1% Class B general
partnership interest. Dealership Properties, Ltd., a Florida limited
partnership, holds a 99% Class A limited partnership interest. W. Warner Peacock
holds a 5% Class B limited
-2-
<PAGE>
partnership interest. Don Mealey Imports, Inc. holds a 94% Class B limited
partnership interest. H. Carver Reeves holds an option to purchase a 15% Class
B partnership interest.
K. Colonial Imports, Ltd. owns the dealership known as "Don Mealey
Mitsubishi," and has a corporate general partner, and Class B and Class A
limited partnership interests. First Team Management, Inc. is the sole general
partner and holds a 1% Class A general partnership interest and a 1% Class B
general partnership interest. Thomas M. Downing holds a 15% Class B limited
partnership interest. W. Warner Peacock holds a 5% Class B limited partnership
interest. Colonial Imports, Inc. holds a 79% Class B limited partnership
interest. Dealership Properties, Ltd. holds a 99% Class A limited partnership
interest.
L. First Team Cadillac-Oldsmobile, Ltd. owns the dealership known as
"Don Mealey Cadillac-Oldsmobile," and has a corporate general partner, and Class
A and Class B limited partnership interests. First Team Management, Inc. is the
sole general partner and holds a 1% Class A general partnership interest and a
1% Class B general partnership interest. Whitney S. Gilman holds a 6% Class B
limited partnership interest. W. Warner Peacock holds a 5% Class B limited
partnership interest. Mealey Holdings, Inc. holds an 88% Class B limited
partnership interest. Dealership Properties, Ltd. holds a 99% Class A limited
partnership interest.
M. First Team Infiniti, Ltd. owns the dealership known as "Don Mealey
Infiniti," and has a corporate general partner, and Class A and Class B limited
partnership interests. First Team Management, Inc. is the sole general partner,
holds a 30% Class A general partnership interest and holds a 1% Class B general
partnership interest. Peter Wilson holds a 15% Class B limited partnership
interest. W. Warner Peacock holds a 5% Class B limited partnership interest. Don
Mealey Infiniti, Inc. holds a 79% Class B limited partnership interest.
Dealership Properties, Ltd. holds a 70% Class A limited partnership interest.
N. First Team Ford, Ltd. owns the dealership known as "Don Mealey's
Seminole Ford," and has a corporate general partner, and only one class of
limited partnership interest. First Team Management, Inc. is the sole general
partner and holds a 1% general partnership interest in the partnership. Mealey
Holdings, Inc. holds a 46% limited partnership interest. M. Douglas Etheridge
holds a 3% limited partnership interest. Seminole Ford, Inc. holds a 50% limited
partnership interest.
O. On or before the Reorganization Closing, (i) First Team Jeep-Eagle,
Chrysler- Plymouth, Ltd. will own the dealership known as "Royal Jeep-Eagle
Chrysler-Plymouth," and will have a corporate general partner, and only one
class of limited partnership interests; (ii) First Team Management, Inc. will be
the sole general partner, and will own a 1% general partnership interest and
Mealey Holdings, Inc. will own a 50% limited partnership interest; and (iii)
First Team Jeep- Eagle Chrysler-Plymouth, Inc. will own a 49% limited
partnership interest.
P. On or before the Reorganization Closing (i) First Team Ford of
Manatee, Ltd. will own the dealership known as "Bill Graham Ford," and will have
a corporate general partner, and Class A and Class B limited partnership
interests; (ii) First Team Management, Inc. will be the sole
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<PAGE>
general partner and will own a 1% Class A general partnership interest and a 1%
Class B general partnership interest; (iii) Mealey Holdings, Inc. will own a 49%
Class B limited partnership interest in First Team Ford of Manatee, Ltd.; (iv)
Bill Graham Ford Co. will hold a 50% Class B limited partnership interest; and
(v) Dealership Properties, Ltd. will own 99% of the Class A limited partnership
interests.
Q. With respect to certain limited partnerships described herein, which
own automobile dealerships and have outstanding Class A and Class B limited
partnership interests, the Class A interests represent the right to own the
dealership's land and improvements, and the Class B interests represent the
right to own the dealership's Operating Assets.
NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. OVERVIEW. The above stated recitals are true and correct as of the
date of this Reorganization Agreement. This Reorganization Agreement sets forth
a series of stages or steps which collectively must be taken in order to effect
the Reorganization. References shall be made to each stage, or step, in the
order it shall occur, and each step or stage must be completed prior to the
following step or stage.
2. STAGE ONE - EXERCISE OF OPTIONS. Each of the persons listed in the
Recitals hereto, as holders of options (the "Options") to acquire stock or
partnership interests (each an "Optionee" and collectively the "Optionees"),
hereby exercises his Option effective immediately. Each Optionee agrees to
execute and deliver such additional exercise notices, promissory notes and other
documentation as may be reasonably requested by counsel to FTAC to effect the
exercise of the Options, and to pay the exercise price thereof, in accordance
with this Agreement and the terms of the Options.
3. STAGE TWO.
3.1 W. Warner Peacock shall transfer to FTAC all rights, title
and interest he may hold in (i) First Team Imports, Ltd., Colonial Imports,
Ltd., First Team Cadillac-Oldsmobile, Ltd., and First Team Infiniti, Ltd.,
including without limitation his Class B limited partnership interests in such
partnerships; and (ii) Mealey Holdings, Inc., including any stock or stock
options held by him.
3.2 H. Carver Reeves shall transfer to FTAC all rights, title
and interest he may hold in (i) First Team Imports, Ltd., including without
limitation his Class B limited partnership interests in such partnership; and
(ii) Mealey Holdings, Inc., including any stock or stock options held by him.
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<PAGE>
3.3 Thomas M. Downing shall transfer to FTAC all rights, title
and interest he may hold in (i) Colonial Imports, Ltd., including, without
limitation, Class B limited partnership interests; and (ii) Mealey Holdings,
Inc., including, without limitation, stock or stock options.
3.4 Whitney S. Gilman shall transfer to FTAC all rights, title
and interest that he may hold in (i) First Team Cadillac-Oldsmobile, Ltd.
including without limitation, all Class B limited partnership interests; and
(ii) Mealey Holdings, Inc., including, without limitation, stock or stock
options.
3.5 Peter L. Wilson shall transfer to FTAC all rights, title
and interest he may hold in (i) First Team Infiniti, Ltd., including, without
limitation, any Class B limited partnership interests; and (ii) Mealey Holdings,
Inc., including, without limitation, stock or stock options.
3.6 M. Douglas Etheridge shall transfer to FTAC all right,
title, and interest he may hold in (i) First Team Ford, Ltd., including, without
limitation, his limited partnership interest; and (ii) Mealey Holdings, Inc.,
including, without limitation, stock or stock options.
3.7 Donald C. Mealey shall transfer to FTAC all of his rights,
title and interest in the following corporations, including without limitation
all capital stock: Mealey Holdings, Inc., Don Mealey Imports, Inc., Colonial
Imports, Inc., Don Mealey Infiniti, Inc., Don Mealey Chevrolet, Inc., Chevrolet
World , Inc., First Team Management, Inc., Dealership Accounting Services, Inc.,
Don Mealey Oldsmobile, Inc., and Driver's Mart of Central Florida, Inc.
3.8 Clarence O. Kearce shall transfer to FTAC all rights,
title and interest he may hold in Chevrolet World, Inc., including without
limitation any capital stock in such corporation.
3.9 Kevin C. Mealey shall transfer to FTAC all rights, title
and interest he may hold in Don Mealey Chevrolet, Inc. and Don Mealey
Oldsmobile, Inc., including without limitation any capital stock in such
corporations.
3.10 Donald C. Mealey Trust for Jay Donald Mealey, Donald C.
Mealey Trust for Robert Glen Mealey, Donald C. Mealey Trust for Mark Donald
Mealey, and Donald C. Mealey Trust for Kevin Charles Mealey, shall transfer or
cause to be transferred to FTAC all of their rights, title and interest in Don
Mealey Chevrolet, Inc.; Mark D. Mealey, Robert G. Mealey and Jay Donald Mealey
shall transfer or cause to be transferred to FTAC all of their rights, title and
interest in Don Mealey Oldsmobile, Inc., including without limitation any
capital stock in such corporation.
3.11 Higginbotham Family Limited Partnership, L.P. shall
transfer to FTAC all rights, title and interest it may hold in TAG, including
without limitation any capital stock in such corporation.
3.12 First Team Management, Inc. shall transfer to FTAC all
rights, title and interest it may hold in TAG, including without limitation any
capital stock in such corporation.
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<PAGE>
3.13 Serra Investments, Inc. shall transfer to FTAC all its
rights, title and interest it may hold in TAG, including without limitation any
capital stock in such corporation.
3.14 In exchange for the interests transferred pursuant to
this Section 3, the Shareholders shall receive FTAC Shares in the amounts set
forth opposite their respective names on Schedule "A". From and after the
transfers contemplated by this Section 3, FTAC and its wholly-owned subsidiaries
will own (a) 100% of the limited partnership interests in First Team Ford, Ltd.
and First Team Jeep-Eagle Chrysler-Plymouth, Ltd.; (b) 100% of the Class B
limited partnership interests in the partnerships listed in Schedule "B" hereto;
and (c) 100% of the outstanding capital stock of TAG and the corporations listed
in Section 3.7 above.
4. STAGE THREE - DISTRIBUTION OF PARTNERSHIP INTERESTS BY FIRST TEAM
AUTOMOTIVE CORP.
4.1 FTAC shall contribute or cause to be contributed to its
subsidiary, Don Mealey Imports, Inc., all of Class B partnership interests in
First Team Imports, Ltd.
4.2 FTAC shall contribute or cause to be contributed to its
subsidiary, Colonial Imports, Inc., all of its Class B partnership interests in
Colonial Imports, Ltd.
4.3 FTAC shall contribute or cause to be contributed to its
subsidiary, Don Mealey Infiniti, Inc., all of its Class B partnership interests
in First Team Infiniti, Ltd.
4.4 FTAC shall contribute or cause to be contributed to its
subsidiary, First Team Cadillac-Oldsmobile, Inc., all of its Class B partnership
interests in First Team Cadillac-Oldsmobile, Ltd.
4.5 FTAC shall contribute or cause to be contributed to its
subsidiary, Seminole Ford, Inc., all of its limited partnership interests in
First Team Ford, Ltd.
4.6 FTAC shall contribute or cause to be contributed to its
subsidiary, Bill Graham Ford Co., all of its limited partnership interest in
First Team Ford of Manatee, Ltd.
5. STAGE FOUR - FIRST TEAM MANAGEMENT, INC.. First Team Management,
Inc. is the owner and holder of the remaining Class B partnership interests (the
"Remaining Interests") in certain partnerships which own dealership assets and
are listed below. First Team Management, Inc. shall transfer all of the
Remaining Interests to the following subsidiaries of FTAC, as set forth below.
5.1 First Team Management, Inc. shall transfer all of its
Class B partnership interests in First Team Imports, Ltd. to Don Mealey Imports,
Inc.
5.2 First Team Management, Inc. shall transfer all of its
Class B partnership interests in Colonial Imports, Ltd. to Colonial Imports,
Inc.
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<PAGE>
5.3 First Team Management, Inc. shall transfer all of its
Class B partnership interests in First Team Infiniti, Ltd. to Don Mealey
Infiniti, Inc.
5.4 First Team Management, Inc. shall transfer all of its
Class B partnership interests in First Team Cadillac-Oldsmobile, Ltd. to First
Team Cadillac-Oldsmobile, Inc.
5.5 First Team Management, Inc. shall transfer all of its
partnership interests in First Team Ford, Ltd. to Seminole Ford, Inc.
5.6 First Team Management, Inc., shall transfer all of its
Class B partnership interest in First Team Ford of Manatee, Ltd. to Bill Graham
Ford Co.
5.7 First Team Management, Inc. shall transfer all of its
partnership interests in First Team Jeep Eagle Chrysler-Plymouth Ltd. to First
Team Jeep-Eagle Chrysler-Plymouth, Inc.
6. STAGE FIVE. Prior to Closing, and in any case prior to the
termination of First Team Management Inc.'s Subchapter "S" election, First Team
Management, Inc. shall make the following transfers to Mealey Real Estate, Inc.,
a Florida corporation ("MRE"), which shall be formed and owned by Donald C.
Mealey:
6.1 First Team Management, Inc. shall transfer to MRE its 1%
Class A general partnership interest in Dealership Properties, Ltd.
6.2 First Team Management, Inc. shall transfer to MRE its 1%
Class A general partnership interest in First Team Ford of Manatee, Ltd.
6.3 First Team Management, Inc. shall transfer to MRE its
Class A general partnership interests in First Team Infiniti, Ltd., First Team
Cadillac-Oldsmobile, Ltd., Colonial Imports, Ltd., and First Team Imports, Ltd.
7. STAGE SIX. Mealey Holdings, Inc. shall transfer all of its limited
partnership interests as follows:
7.1 Mealey Holdings, Inc. shall transfer its Class B limited
partnership interests in First Team Cadillac-Oldsmobile, Ltd. to First Team
Cadillac-Oldsmobile, Inc.
7.2 Mealey Holdings, Inc. shall transfer its limited
partnership interests in First Team Ford, Ltd. to Seminole Ford, Inc.
7.3 Mealey Holdings, Inc. shall transfer its limited
partnership interests in First Team Jeep-Eagle Chrysler-Plymouth, Ltd. to First
Team Jeep-Eagle Chrysler-Plymouth, Inc.
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<PAGE>
7.4 Mealey Holdings, Inc. shall transfer its Class B limited
partnership interests in First Team Ford of Manatee, Ltd. to Bill Graham Ford
Co.
8. STAGE SEVEN. Mealey Holdings, Inc. shall be liquidated pursuant to
Code Sec. 332, and as a liquidating distribution, shall transfer to FTAC, all of
the stock that Mealey Holdings, Inc. has received pursuant to this
Reorganization Agreement and all rights, title, and interest it may hold in
Cook-Whitehead Ford, Inc.
9. STAGE EIGHT.
9.1 After giving effect to the transactions contemplated by
Stages One through Seven, (i) FTAC shall own 100% of the outstanding capital
stock of the corporations listed in Column A below (the "Column A
Subsidiaries"); (ii) each such corporation shall own limited partnership
interests (the "Dealership Interests") in the limited partnerships (the
"Dealership Partnerships") shown opposite its name below; and (iii) the
Dealership Interests represent the ownership rights to the dealership Operating
Assets (defined below) owned by the Dealership Partnerships.
COLUMN A COLUMN B
SUBSIDIARIES DEALERSHIP PARTNERSHIPS
------------ -----------------------
Don Mealey Imports, Inc. First Team Imports, Ltd.
Colonial Imports, Inc. Colonial Imports, Ltd.
First Team Cadillac-Oldsmobile, Inc. First Team Cadillac-Oldsmobile, Ltd.
Don Mealey Infiniti, Inc. First Team Infiniti, Ltd.
Bill Graham Ford Co. First Team Ford of Manatee, Ltd.
Seminole Ford, Inc. First Team Ford, Ltd.
First Team Jeep-Eagle First Team Jeep-Eagle
Chrysler-Plymouth, Inc. Chrysler-Plymouth, Ltd.
9.2 The Dealership Partnerships shall acquire and redeem the
Dealership Interests owned by the Column A Subsidiaries, and in consideration
therefor shall distribute to each Column A Subsidiary the Operating Assets of
the Dealership Partnership in which such corporation owned a Dealership
Interest. As used herein, the "Operating Assets" of a dealership means all of
the dealership assets, tangible or intangible, including without limitation the
dealer agreement, inventory, parts, supplies, accounts receivable, dealership
name, and goodwill; BUT EXCLUDING the dealership's land and the improvements
thereon.
10. CONCLUSION. From and after giving effect to the transactions
contemplated by Stages One through Seven, FTAC shall own all of the outstanding
capital stock of the corporations listed below (the "FTAC Subsidiaries") and
each of such subsidiaries will own the Operating Assets of the dealership set
forth opposite its name below:
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<PAGE>
<TABLE>
<CAPTION>
FTAC SUBSIDIARY DEALERSHIP
- ------------------------------------ -------------------------------
<S> <C>
Don Mealey Imports, Inc. Don Mealey Acura
Colonial Imports, Inc. Don Mealey Mitsubishi
Don Mealey Infiniti, Inc. Don Mealey Infiniti
Don Mealey Chevrolet, Inc. Don Mealey Chevrolet
Don Mealey Oldsmobile, Inc. Don Mealey Oldsmobile
Chevrolet World, Inc. World Chevrolet
Tallahassee Auto Group, Inc.
Tallahassee Motors, Inc.(1) Tallahassee Ford
Tallahassee Chrysler-Plymouth, Inc.(1) Tallahassee Chrysler-Plymouth
Tallahassee Imports, Inc.(1) Tallahassee Mitsubishi
First Team Cadillac-Oldsmobile, Inc. Don Mealey Cadillac-Oldsmobile
Dealership Accounting Services, Inc.(2)
Bill Graham Ford Co. Bill Graham Ford
Seminole Ford, Inc. Don Mealey's Seminole Ford
First Team Jeep Eagle, Chrysler- Plymouth, Inc Royal Jeep-Eagle Chrysler-Plymouth
Cook-Whitehead Ford, Inc. Cook-Whitehead Ford
First Team Management, Inc.(2)
Driver's Mart of Central Florida, Inc. Driver's Mart
</TABLE>
- ------------
(1) These companies are wholly owned subsidiaries of Tallahassee Auto
Group, Inc.
(2) This company does not own a dealership.
11. CLOSING AND EFFECTIVE DATE. The transactions contemplated hereby
shall be consummated at a closing (the "Reorganization Closing") to be held on
the same date as the closing ("IPO Closing") for the sale of FTAC's common stock
to the public (the "IPO") pursuant to an effective Registration Statement filed
under the Securities Act of 1933. Notwithstanding anything to the contrary
contained in this Agreement, (i) it shall be a condition precedent to the
parties' obligations to consummate the Reorganization Closing that the IPO
Closing be consummated on the same date as the Reorganization Closing; (ii) if
the IPO Closing has not been consummated by November 15, 1997, this Agreement
shall terminate and the parties shall be released from all obligations
hereunder; and (iii) if the Reorganization Closing is consummated, (A) the
component transactions thereof shall be deemed to have occurred in the same
order as the stages set forth in this Agreement, and (B) the Reorganization
Closing shall be deemed to have occurred, and been completed, prior to the IPO
Closing.
12. INVESTMENT REPRESENTATION.
12.1 SHARES. Each of the Shareholders hereby represents and
warrants to the other parties hereto as follows:
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<PAGE>
(i) The Shareholder is knowledgeable and experienced
in financial and business matters generally (and specifically in the business of
automotive retailing) and is capable of evaluating the merits and risks of an
investment in the FTAC Shares.
(ii) The Shareholder hereby acknowledges that FTAC
has made available to the Shareholder prior to any investment in the FTAC Shares
all information reasonably necessary to enable the Shareholder to evaluate the
risks and merits of an investment in FTAC. Without limiting the generality of
the foregoing, the Shareholder has reviewed the Registration Statement to be
filed by FTAC with the Securities and Exchange Commission.
(iii) The FTAC Shares are being acquired for the
Shareholder's own account for investment only and not with a view to or for
sale, resale, distribution, or fractionalization. The Shareholder will not
resell, offer to resell or otherwise transfer any FTAC Shares except in
accordance with the terms hereof, in compliance with all applicable securities
laws, and in accordance with the terms of the Underwriting Agreement (the
"Underwriting Agreement") to be entered into by FTAC and the Shareholders in
connection with IPO. Without limiting the generality of the foregoing, the
Underwriting Agreement shall prohibit sales of, or offers to sell, the
Shareholders' FTAC Shares for 180 days after the IPO Closing.
(iv) The Shareholder understands that the FTAC Shares
have not been registered pursuant to the provisions of federal and applicable
state securities laws and the proposed purchase of the FTAC Shares is taking
place in a transaction not involving any public offering.
(v) The Shareholder understands that he has the
right, under Florida securities laws, to cancel and void a purchase of the FTAC
Shares within three days after the first tender of consideration (which tender
occurred on the date Shareholder executed and delivered to FTAC assignments of
the respective capital stock or partnership interests assigned to FTAC pursuant
to paragraph 3 of this Agreement).
(vi) Shareholder understands that FTAC will place a
legend on the certificates evidencing the FTAC Shares stating that the FTAC
Shares have not been registered under the Act and setting forth or referring to
the restrictions on the transferability and sale of the FTAC Shares as set forth
herein.
12.2 OPTIONS. Each Optionee hereby repeats and restates the
representations and warranties set forth in Section 12.1 with respect to the
securities being acquired by such Optionee in connection with the exercise of
his Option.
13. SALES IN THE IPO.
13.1 Shareholders understand and agree that if the
underwriters exercise their over-allotment option in the IPO, each of the
Shareholders will receive the opportunity to sell a portion of his FTAC Shares
in the IPO. The number of shares which may be sold by each Shareholder shall be
determined on a pro-rata basis, based on Shareholders' relative ownership
interests in the total
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<PAGE>
FTAC Shares outstanding. Each Shareholder electing to sell shares in the IPO
shall sign such agreements, certificates and other documents as may be
reasonably requested by the underwriters or FTAC's counsel in order to sell
shares in the IPO.
13.2 To the extent any Optionee sells FTAC Shares in the IPO,
and such Optionee is indebted to any of the corporations or partnerships listed
in the Recitals hereto for the exercise price payable pursuant to his Option,
FTAC shall be authorized to apply such Optionee's proceeds from the sale of his
FTAC Shares to the payment of all amounts due under the Option. Each Optionee
shall sign such assignments, certificates and other documents as may be
reasonably requested by counsel for FTAC to give effect to the foregoing
provisions.
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made herein shall survive the execution of this Agreement and the
consummation of transactions contemplated herein.
15. ISSUANCE OF ADDITIONAL FTAC SHARES. The Shareholders acknowledge
and agree that in connection with the acquisitions of Bill Graham Ford Co.,
Seminole Ford, Inc. and Cook-Whitehead Ford, Inc. FTAC has agreed to issue
shares of its Common Stock having a value (based on the final IPO price) equal
to approximately $2,300,000, $5,520,000, and $1,000,000, respectively. Such FTAC
Shares shall be in addition to the FTAC Shares listed in Schedule "A" hereto and
shall dilute the interests of all Shareholders on a pro rata basis.
16. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding on, and
inure to the benefit of, the parties hereto and their respective personal
representatives, heirs, spouses, beneficiaries, successors and permitted
assigns. No party to this Agreement may assign its rights or obligations
hereunder without prior written consent of all other parties hereto.
17. COMPLETE AGREEMENT; MODIFICATION. This Agreement and the related
documents attached hereto as Schedules or Exhibits constitute the complete
understanding between the parties with respect to the subject matter hereof.
Neither this Agreement nor any such related document may be amended or modified
except by written instrument executed by the parties hereto.
18. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida. In the event any legal or
equitable action arising under the Agreement, the parties hereto agree that the
jurisdiction and venue of such action shall lie exclusively in the state courts
of Florida, located in Orange County, Florida or the United States District
Court for the Middle District of Florida, Orlando Division, and the parties
specifically waive any other jurisdiction and venue.
19. FURTHER ACTIONS. Each party to this Agreement shall take such
further actions, and execute, file, record, publish and deliver such additional
certificates, instruments, agreements or other documents, as the other party or
parties may from time to time reasonably request, in order to effectuate the
transfers contemplated hereby, or otherwise accomplish the purposes of this
Agreement.
-11-
<PAGE>
20. COUNTERPARTS. This Agreement (i) may be executed in several
counterparts, each of which shall be deemed in original, but all of which shall
constitute only one instrument; and (ii) shall be deemed to have been validly
accepted by a party by transmitting a signed signature page to FTAC or its
counsel by telecopier or any other means permitted by law.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first provided above.
MEALEY HOLDINGS, INC., a Florida
corporation
By:
------------------------------------------
Donald C. Mealey, President
FIRST TEAM MANAGEMENT, INC., a Florida
corporation
By:
------------------------------------------
Donald C. Mealey, President
TALLAHASSEE AUTO GROUP, INC.
By:
------------------------------------------
Richard L. Higginbotham, President
DON MEALEY IMPORTS, INC., a Florida
corporation
By:
------------------------------------------
Donald C. Mealey, President
COLONIAL IMPORTS, INC., a Florida
corporation
By:
------------------------------------------
Donald C. Mealey, President
-13-
<PAGE>
DON MEALEY INFINITI, INC., a Florida
corporation
By:
------------------------------------------
Donald C. Mealey, President
DON MEALEY CHEVROLET, INC., a Florida
corporation
By:
------------------------------------------
Donald C. Mealey, President
CHEVROLET WORLD, INC., a Florida
corporation, d/b/a WORLD CHEVROLET/GEO
By:
------------------------------------------
Donald C. Mealey, Vice President
DON MEALEY OLDSMOBILE, INC., a Florida
corporation
By:
------------------------------------------
Donald C. Mealey, President
FIRST TEAM CADILLAC-OLDSMOBILE,
INC., a Florida corporation
By:
------------------------------------------
Donald C. Mealey, President
-14-
<PAGE>
SERRA INVESTMENTS, INC.
By:
------------------------------------------
Albert M. Serra, President
FIRST TEAM IMPORTS, LTD., a Florida limited
partnership, d/b/a DON MEALEY ACURA, by its
general partner, First Team Management, Inc.
By:
------------------------------------------
Donald C. Mealey, President
COLONIAL IMPORTS, LTD., a Florida limited
partnership, d/b/a DON MEALEY MITSUBISHI, by its
general partner, First Team Management, Inc.
By:
------------------------------------------
Donald C. Mealey, President
FIRST TEAM CADILLAC-OLDSMOBILE, LTD., a Florida
limited partnership, d/b/a DON MEALEY
CADILLAC-OLDSMOBILE, by its general partner,
First Team Management, Inc.
By:
------------------------------------------
Donald C. Mealey, President
-15-
<PAGE>
FIRST TEAM INFINITI, LTD, a Florida limited
partnership, d/b/a DON MEALEY INFINITI, by its
general partner, First Team Management, Inc.
By:
------------------------------------------
Donald C. Mealey, President
FIRST TEAM FORD, LTD., a Florida limited
partnership, d/b/a DON MEALEY'S SEMINOLE FORD,
by its general partner, First Team Management,
Inc.
By:
------------------------------------------
Donald C. Mealey, President
---------------------------------------------
DONALD C. MEALEY
---------------------------------------------
W. WARNER PEACOCK
---------------------------------------------
H. CARVER REEVES
---------------------------------------------
THOMAS M. DOWNING
---------------------------------------------
WHITNEY S. GILMAN
---------------------------------------------
PETER L. WILSON
---------------------------------------------
M. DOUGLAS ETHERIDGE
-16-
<PAGE>
---------------------------------------------
CLARENCE O. KEARCE
---------------------------------------------
KEVIN C. MEALEY
---------------------------------------------
ROBERT G. MEALEY
---------------------------------------------
JAY DONALD MEALEY
---------------------------------------------
MARK D. MEALEY
---------------------------------------------
DONALD C. MEALEY TRUST FOR JAY
DONALD MEALEY
By:
------------------------------------------
Jay Donald Mealey, as Co-Trustee
and by:
--------------------------------------
Elizabeth Janet Mealey, as Co-Trustee
DONALD C. MEALEY TRUST FOR ROBERT
GLEN MEALEY
By:
------------------------------------------
Robert Glen Mealey, as Co-Trustee
and by:
-------------------------------------
Elizabeth Janet Mealey, as Co-Trustee
-17-
<PAGE>
DONALD C. MEALEY TRUST FOR MARK
DAVID MEALEY
By:
------------------------------------------
Mark David Mealey, as Co-Trustee
and by:__________________________________
------------------------------------------
Elizabeth Janet Mealey, as Co-Trustee
DONALD C. MEALEY TRUST FOR KEVIN
CHARLES MEALEY
By:
------------------------------------------
Kevin Charles Mealey, as Co-Trustee
and by:
------------------------------------------
Elizabeth Janet Mealey, as Co-Trustee
HIGGINBOTHAM FAMILY LIMITED
PARTNERSHIP, L.P.
By:
------------------------------------------
Richard L. Higginbotham, General Partner
-18-
<PAGE>
SCHEDULE "A"
TO REORGANIZATION AGREEMENT
FTAC SHAREHOLDER NUMBER OF FTAC
- ---------------- SHARES
------
Thomas M. Downing 50,000
M. Douglas Etheridge 75,000
Whitney S. Gilman 50,000
Higginbotham Family Limited Partnership, L.P. 290,000
Clarence O. Kearce 254,000
Donald C. Mealey* 2,700,301
W. Warner Peacock 254,000
H. Carver Reeves 40,000
Serra Investments, Inc. 340,000
Peter L. Wilson 50,000
* Includes shares issued to Donald C. Mealey and to Donald C. Mealey Trust for
Jay Donald Mealey, Donald C. Mealey Trust for Robert Glen Mealey, Donald C.
Mealey Trust for Mark David Mealey, Donald C. Mealey Trust for Kevin Charles
Mealey, Kevin C. Mealey, Robert G. Mealey, Jay Donald Mealey and Mark D.
Mealy.
-19-
<PAGE>
SCHEDULE "B"
TO REORGANIZATION AGREEMENT
First Team Imports, Ltd.
Colonial Imports, Ltd.
First Team Cadillac-Oldsmobile, Ltd.
First Team Infiniti, Ltd.
First Team Ford, Ltd.
First Team Ford of Manatee, Ltd.
-20-
EXHIBIT 2.2
CONTRACT FOR SALE
AGREEMENT made this 6th day of June, 1997, between COOK-WHITEHEAD FORD,
INC. ("Corporation"), CHARLES WHITEHEAD ("Shareholder") and MEALEY ACQUISITIONS,
INC., or its assigns ("Buyer").
The parties have reached an understanding with respect to the sale and
purchase of all of the issued and outstanding common stock of Corporation (the
"Stock"), and the obligations of Corporation, Shareholder and Buyer in
connection therewith.
IT IS THEREFORE AGREED:
1. PURCHASE PRICE. The Shareholder agrees to sell, and the Buyer agrees
to purchase, all of the Stock and as consideration therefor to pay Eight Million
Dollars ($8,000,000.00) plus the FIFO net book value (as such term is used in
the retail automobile sales business) of the Corporation as reflected in the
Closing Date Balance Sheet (as defined below) subject to adjustment as provided
below in Paragraph 3, to be paid as follows:
(a) One Hundred Thousand Dollars ($100,000.00) shall be paid as a
deposit in Trust to Shutts & Bowen LLP, to be held pursuant to the
terms of this Agreement.
(b) Four Million Nine Hundred Thousand Dollars ($4,900,000.00) plus
the deposit shall be paid in cash (to the Shareholder) upon the
Closing; and
(c) A promissory note (in the form attached as EXHIBIT "A") in the
amount of the balance of the purchase price shall be delivered to
the Shareholder upon the Closing. The promissory note shall bear
interest at the prime rate of interest of SunTrust Banks, Orlando,
Florida, and the note shall be due and payable in a lump sum on the
earlier of (i) the date of an Initial Public Offering (IPO) of an
affiliate of the Buyer, or (ii) one (1) year from the Closing Date.
In the event an IPO occurs within one (1) year of the Closing Date,
One Million Dollars ($1,000,000.00) of the principal amount of the
note shall, at the Buyer's election, be payable in unregistered
stock of the IPO entity on the effective date of the IPO, bearing
the restrictive legend customarily placed on securities that have
not been registered under applicable state and federal securities
laws and the balance of the note, together with all accrued unpaid
interest thereon, shall be paid in cash to the Shareholder. If
requested by Shareholder, Buyer shall provide a letter of credit or
equivalent security acceptable to Shareholder as security for the
amount of the promissory note, and Buyer agrees to execute all
appropriate security documents, including without limitation, a
security agreement and financing statement to evidence the security
given to the Shareholder; provided,
1
<PAGE>
however no additional security shall be required in the event Buyer
provides a letter of credit.
2. EARNEST MONEY. Buyer has paid herewith to Shutts & Bowen, L.L.P, as
Escrow Agent, an earnest money deposit in the sum of One Hundred Thousand
Dollars ($100,000.00) in connection with the transaction contemplated hereby.
The earnest money shall be held pursuant to an Escrow Deposit Agreement (in the
form attached as EXHIBIT "B") and invested in a non-interest or interest bearing
account pending its disposition in accordance with the terms of this Agreement.
3. CONDITIONS. (a) The purchase price for the Stock set forth in
Paragraph 1 above is based on the FIFO net book value of the Corporation, which
Shareholder represents to the Buyer will be Two Million Eight Hundred Thousand
Dollars ($2,800,000) as of the Closing. The Buyer may cause to be taken a
physical inventory of the assets of the Corporation prior to Closing, and Buyer
and Shareholder shall agree upon a balance sheet as of the date of Closing (the
"Closing Date Balance Sheet"). The purchase price shall be adjusted upwards by
the amount by which the FIFO net book value of the Corporation as determined in
the Closing Date Balance Sheet is greater than Two Million Eight Hundred
Thousand Dollars ($2,800,000) and adjusted downwards by the amount by which the
FIFO net book value of the Corporation as determined in the Closing Date Balance
Sheet is less than Two Million Eight Hundred Thousand Dollars ($2,800,000).
(b) In determining the FIFO net book value of the Corporation for
purposes of the Closing Date Balance Sheet, Generally Accepted Accounting
Principles, consistently applied shall be utilized by the parties. In the event
the Buyer and Shareholder cannot agree on the Closing Date Balance Sheet, they
shall each choose a certified public accountant to whom they shall submit the
items in dispute for a determination by said accountant(s) which shall be
binding on Shareholder and Buyer. If the two accountants so selected cannot
agree and the difference exceeds $100,000, they shall select a third certified
public accountant whose decision shall be final. For purposes of this Agreement
the following methods of valuation shall be deemed to be in accordance with
Generally Accepted Accounting Principles for the purpose of determining the
amounts to be reflected on the Closing Date Balance Sheet:
(1) PARTS, ACCESSORIES, AND MISCELLANEOUS SUPPLIES. All the new,
genuine, original, unopened, current and unused Ford factory parts and
accessories which could be returned to the manufacturer by the
Corporation shall be valued at a price as defined in subparagraph (A)
below. Damaged or obsolete parts shall not be required to be included
in the valuation and if any such parts are excluded they shall be
distributed to the Shareholder. The Corporation's miscellaneous service
supplies and inventories shall be valued at the Corporation's cost of
such items. Said items shall appear on an inventory list prepared by
Buyer and Corporation prior to the Closing Date. The inventory list
shall be incorporated herein and made a part hereof the same as if
fully set forth herein and designated as SCHEDULE "1".
(A) Buyer and Corporation shall determine the value for the
parts referenced in Paragraph (1) above, per an inventory at prices
which shall be determined by the most current Manufacturer's Parts
Catalog Price prior to Closing. Buyer may include in the valuation
any parts and inventories not required to be
2
<PAGE>
purchased by Paragraph 1 as shall be determined by good faith
negotiations between Buyer and Shareholder. Shareholder agrees that
no additions or deletions shall be made in such stocks except in
the ordinary course of Corporation's business, and further, to keep
adequate records of such additions and deletions, which records
shall be made available to Buyer for review and verification upon
reasonable request. Buyer and Shareholder shall each pay for
one-half (1/2) of the cost of the inventory if an independent
inventory service is engaged by the parties to complete the
physical inventory.
(2) NEW VEHICLES. The 1997 and later years new and warrantable Ford
vehicle inventory and up to five (5) Ford demonstrator vehicles shall
be valued at a price equal to the sum of Corporation's original factory
invoice cost plus the cost of dealer installed items and less any
rebates, holdbacks (including supplemental holdback or year end
carryover allowances), incentive payments (including incentives and
advertising allowances) paid or payable to Corporation prior to the
Closing by the manufacturer for any reason except interest credit
support with respect to these vehicles or pre-delivery inspection
credits received if the work is not performed as of Closing. For the
purpose of the foregoing provisions, the cost of dealer installed items
shall be equal to the Corporation's actual cost of the installed item
plus labor charges for installation computed at the charge customarily
placed on Corporation's vehicle inventory records.
(A) It is further agreed that in the event any vehicle
referred to in this paragraph shall have been damaged prior to the
Closing, Corporation shall have repaired such vehicle to the
satisfaction of Buyer, or in the event any such vehicle has not
been repaired, Corporation and Buyer shall agree on the cost to
recover such repairs, which cost shall be deducted from the value
referred to herein. In the event Corporation and Buyer cannot agree
on the cost of repairs, Buyer shall have no obligation to include
in the valuation any such vehicle or vehicles and Shareholder shall
be provided title to such specific vehicles. Further, Buyer may
include in the valuation in connection with the determination of
the purchase price, 1996 new Ford and any warrantable demonstrator
Ford vehicles (in excess of five (5) vehicles) at such actual cash
price for each vehicle as shall be determined by good faith
negotiations between Buyer and Corporation. In the event of a
failure of the parties to agree on such vehicle values, Buyer may
elect not to include in the valuation such specific vehicles, in
which case Shareholder shall be provided title to such specific
vehicles. Any new vehicle with over 200 miles on the odometer shall
be considered a demonstrator vehicle. The new and demonstrator
automobiles to be valued pursuant to this paragraph shall be listed
in SCHEDULE "2"-NEW AND DEMONSTRATOR INVENTORY to be prepared by
Corporation and Buyer prior to the Closing and initialed by them at
the Closing. Said Exhibit shall show the value of each vehicle
computed as set forth above.
3
<PAGE>
(3) USED VEHICLES. The valuation of Corporation's used
vehicle inventory as of the Closing shall be at such actual cash
wholesale value for each vehicle as shall be determined by good
faith negotiations between Buyer and Shareholder. In the event of a
failure to agree on the aggregate of the entire used vehicle
inventory, none of the used vehicles shall be included in such
inventory, and Shareholder shall be provided title to all used
vehicles. The used automobiles to be valued pursuant to this
paragraph shall be listed in SCHEDULE "3"-USED VEHICLES INVENTORY
to be prepared by Corporation and Buyer prior to the Closing and
initialed by them at the Closing. Said Exhibit shall show the
agreed valuation price of each vehicle.
4. EXAMINATION OF RECORDS. For a period of 30 days after the execution
of this Agreement, Corporation will allow the Buyer, its counsel and other
representatives of Buyer full access during normal business hours, or such other
reasonable times, to all the books, tax returns, both federal, state and local,
records, files, documents, assets, properties, contracts and agreements of the
Corporation, and Corporation shall furnish the Buyer, its officers and
representatives with all information concerning the affairs of such Corporation
which may be reasonably requested. The Buyer agrees that it will use its best
efforts to prevent its review of the foregoing materials from causing any
disruption of the business of the Corporation. The Buyer shall exercise its
general rights under this provision to ascertain that the business is generally
as represented by the financial statement of the Corporation dated March 31,
1997, which has been furnished to Buyer. The Buyer may, on or before thirty (30)
days from the date of this Agreement, cancel this Agreement if the results of
the Buyer's investigation reveal material discrepancies from that represented in
the financial statements and in such event the earnest money deposit paid
herewith shall be returned to the Buyer.
5. FAILURE TO CONSUMMATE SALE. In the event the Buyer fails to
consummate the purchase of the Stock from the Shareholder for any reason except
that described in Paragraph 4 or the failure of a condition precedent as set
forth in Paragraph 11, the earnest money deposit paid this date shall be
forfeited and shall be paid to the Shareholder as liquidated damages. In the
event the Shareholder fails to consummate the sale of the Stock for any reason
except the default of Buyer under this Agreement, the Buyer may require specific
performance of this Agreement by the Corporation and Shareholder in any court of
competent jurisdiction, in addition to any other rights or remedies which Buyer
may have at law or in equity.
6. CLOSING. The closing of the sale shall take place at the offices of
the Corporation in Panama City, Florida, or such other place mutually agreed by
the parties on or before forty-five (45) days after the date of execution
hereof, unless extended by the mutual written agreement of Buyer and
Shareholder. At the Closing, Shareholder shall deliver to the Buyer, free and
clear of all liens, encumbrances and restrictions, an assignment of the Stock,
an updated title commitment reflecting no changes from that provided in
Paragraph 11(c) below, the Shareholder's resignation as Ford Dealer-Operators,
if requested, and such other documents as required by this Agreement. Upon such
delivery, the Buyer shall deliver to the Shareholder, a certified or cashier's
check payable to the order of the Shareholder or a wire transfer of funds fully
completed to an account and bank as directed by the Shareholder for the total
purchase price, less the amount of the earnest money deposit, together with
interest thereon, previously paid hereunder, and less the face amount of the
promissory note, and increased or decreased, as applicable, by the amount of any
adjustments as provided in Paragraph 3.
4
<PAGE>
7. REPRESENTATIONS AND WARRANTIES. The Corporation and Shareholder,
jointly and severally, represent and warrant as follows:
(a) ORGANIZATION AND STANDING OF CORPORATION. The Corporation is
duly organized, validly existing and in good standing under the laws of the
State of Florida. Copies of the Corporation's Articles of Incorporation and all
amendments thereof to date, certified by the Secretary of State of Florida, and
of the Corporation's Bylaws as amended to date, certified by the Corporation's
Secretary, shall be delivered to the Buyer, and are complete and correct as of
the date of this Agreement.
(b) OWNERSHIP. Shareholder is the owner, free and clear of any
liens, restrictions, encumbrances or rights of others, of all of the Stock.
Shareholder has full right and authority to transfer said Stock to the Buyer,
and there are no other shares of the Corporation owned or claimed to be owned by
any other person or entity.
(c) FINANCIAL STATEMENTS. Corporation has delivered to Buyer a copy
of the financial statements of the Corporation as of March 31, 1997, a copy of
which is attached as EXHIBIT "C" which present a true and complete statement of
the Corporation's financial condition as of that date and an accurate
representation of the results of the Corporation's operations for the period
indicated and an accurate description of the Corporation's assets, fixed or
otherwise. The financial statements have been prepared in accordance with
Generally Accepted Accounting Principles consistently applied, and which are to
be consistently applied through and including the Closing, except for the
reserves reflected on such financial statements which are not in accord with
Generally Accepted Accounting Principles and which shall be eliminated prior to
Closing. All assets so described are correct and will remain so until Closing,
except as might be affected by normal business operations of the Corporation.
(d) ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
reflected or reserved against in the March 31, 1997 financial statements, the
Corporation had no material liabilities of any nature, whether accrued,
absolute, contingent, or otherwise, including tax liabilities due or to become
due and arising out of transactions entered into or any state of facts existing
prior thereto. Corporation warrants that there are no material liabilities of
any nature or any material amount not fully reflected or reserved against in
said statements. Further, all liabilities of the Corporation shall be current as
of the date of Closing and reserved for in the Closing Date Balance Sheet. For
purposes of this Agreement, the term material shall refer to any individual
liability of $2,000.00 or more, or aggregate liabilities of the Corporation in
excess of $10,000.00 or more.
(e) ABSENCE OF CERTAIN CHANGES. Except as set forth in EXHIBIT "D",
from March 31, 1997, and continuing through the date of Closing, the Corporation
further represents that there has not been (i) any material change in the
Corporation's financial condition, assets, liabilities or business, other than
changes in the ordinary course of business, none of which have been materially
adverse; (ii) any material damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the Corporation's properties or
business; (iii) any direct or indirect redemption, purchase or other acquisition
of any such shares; or (iv) any labor strike of the
5
<PAGE>
Corporation by its employees, or any event or condition of any character,
materially and adversely affecting the Corporation's business or prospects.
(f) TITLE TO PROPERTIES. The Corporation has good and marketable title
to all of its properties and assets, real and personal, including those
reflected in the balance sheet of March 31, 1997 [except those sold or otherwise
disposed of in the ordinary course of business], subject to no security
interests, mortgage, pledge, lien, encumbrance or charge, except for liens shown
on the Balance Sheet as securing specified liabilities set forth therein (with
respect to which no default exists).
(g) CONDITION OF PROPERTY. All of Corporation's buildings, improvements
and equipment are in good operating condition and repair as of the date hereof
and shall be as of the date of Closing, shall be in conformity with all
applicable ordinances and regulations, and environmental, building, zoning,
occupational safety and other laws. Buyer shall have the right at any time prior
to Closing to inspect such equipment and ascertain its condition. Such equipment
is all the equipment necessary for the operation of the Corporation's business
in accordance with Ford Motor Company dealer guidelines, and all equipment
currently used in the Corporation's business is owned or leased by Corporation.
(h) ACCOUNTS RECEIVABLE. (i) Corporation shall deliver to Buyer a true
and complete list, certified by Corporation, of the Corporation's accounts
receivable within ten (10) days of the date of Closing. Following the Closing,
if any of such accounts receivable, or any accounts receivable arising between
the date of such listing and the Closing are not paid in full on or before 90
days after their due date, Shareholder shall reimburse the Corporation for all
such uncollected receivables in excess of the debt reserve, set forth on the
Closing Date Balance Sheet.
(ii) Buyer shall cause diligent effort to be made to collect all
such receivables, including where necessary, filing of appropriate notices and
liens under applicable Florida and federal law. Buyer shall, at Shareholder's
request, periodically furnish Shareholder with a schedule of unpaid accounts
receivable from transactions occurring prior to the Closing Date more than
ninety (90) days past due, setting forth each debtor's name, address and account
balance, and shall furnish, at Shareholder's request, a schedule setting forth
the action being taken to collect any such accounts receivable. Collection
procedures and any costs thereof shall be borne by the Corporation and deducted
from any proceeds, shall be agreed upon by Buyer and Shareholder prior to any
litigation or Corporation shall not be obligated to undertake any such actions.
Upon payment by Shareholder as aforesaid, Buyer shall cause such accounts to be
assigned to Shareholder.
(i) REAL ESTATE.
(i) Corporation has good, indefeasible and marketable title in
fee simple to the real estate owned by the Corporation (the "Property'), free
and clear of all liens, encumbrances,
6
<PAGE>
covenants and conditions, save and except taxes and assessments for the year
1997 and subsequent years and except for such mortgage or liens showing on the
Corporation's financial statements. Such title will be insured by a title
insurance company of recognized financial responsibility authorized to do
business in the State of Florida, at regular rates and without exception, except
for easements which benefit the Property.
(ii) There are no persons other than Corporation having any
right to occupy the Property.
(iii) For a period of 30 days after the date hereof,
Corporation represents that Buyer shall have the right to have the said
foundation, roof, electrical systems, air conditioning and heating systems,
plumbing and sprinkler systems, if any, examined by persons or entities licensed
under Florida law to ascertain whether or not the same or any part thereof have
been damaged or are defective in any material manner.
(iv) No rents or leases have been assigned, hypothecated or
pledged.
(v) Corporation has received no notice of any violation of law
or ordinances, orders, requirements or regulations of any federal, state, county
and municipal or other governmental or quasi-governmental department, agency or
authority relating to the Property or the use and operation thereof; and
Corporation has no reason to believe that any such notice has been, may or will
be sent or entered. To the best of Corporation's knowledge, Corporation has
complied with, and the Property and the use and operation thereof is in
compliance with, all laws, ordinances, orders, requirements, or regulations of
any federal, state, county and municipal or other governmental or
quasi-governmental department, agency or authority relating to the Property or
the use and operation thereof.
(vi) There are no oil burners and oil hot water heaters or
other fuel burning devices installed or in use on the Property.
(vii) All water, sewer, gas, electric, telephone and drainage
facilities and all other utilities and public or quasi-public improvements upon
or adjacent to the Property required by law or for the normal operation of the
improvements on the Property are installed, are connected under valid permits,
are in good working order, are adequate to serve the Property and are fully paid
for, and neither the Property nor the owner thereof has any further obligation
to pay any charge for or with respect to such public or quasi-public
improvements except general real estate taxes and usage charges. There are no
existing facts or conditions known to Shareholder which could result in the
termination of any utility service to the Property. Shareholder further
represents and warrants that neither Shareholder, Corporation nor their agents
or affiliates have received any notice from any utility company or public or
quasi-public organization which would indicate that any of the aforementioned
statements with respect to the utility services for the Property are incorrect.
(viii) No asbestos-containing materials are or were installed
in any improvements on the real property at any time, and the improvements on
the property contain no
7
<PAGE>
asbestos-containing materials except as disclosed in the environmental report
previously obtained by Corporation and disclosed to Buyer.
(ix) Except as disclosed on EXHIBIT "E", the Corporation has
not received any request for information, notice of claim, demand or other
notification that it is or may be potentially responsible with respect to any
investigation or clean-up of hazardous, toxic or polluting substances; except in
accordance with applicable regulations, the Corporation has not treated, stored
for more than ninety (90) days, recycled or disposed of any hazardous, toxic or
polluting substances on the Property, and to the best of Corporation's
knowledge, no other person has treated or stored for more than ninety (90) days,
substances on any such property; no PCB's, asbestos or urea formaldehyde
insulation is present at any property owned or leased by and of the Corporation;
and there are no underground storage tanks, active or abandoned, on the
Property.
(x) To the best of its knowledge, the Corporation has complied
with and is not in violation of any federal, state or local law, regulation,
permit, provision or ordinance relating to the generation, storage,
transportation, treatment or disposal of hazardous, toxic or polluting
substances; has obtained and adhered to all necessary permits and other
approvals necessary to store, dispose, and otherwise handle hazardous, toxic and
polluting substances; has reported, to the extent required by federal, state and
local law, all past and present sites where hazardous, toxic or polluting
substances, if any, from the Corporation have been treated, stored or disposed.
To the best of its knowledge, the Corporation has not transported any hazardous,
toxic or polluting substances or arranged for the transportation of such
substances to any location which is listed or proposed for listing under the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended ("CERCLA"), the Resource Conservation and Recovery Act, as amended,
("RCRA"), or the Clean Water Act, as amended, ("CWA") or which is the subject of
federal, state or local enforcement actions or other investigations which may
lead to claims against the Corporation for clean-up costs, remedial work,
damages to natural resources or for personal injury claims, including, but not
limited to, claims under CERCLA, RCRA or the CWA which could lead to a claim
being made against Buyer or Corporation.
(j) WORKING CAPITAL. The Corporation shall have sufficient Working
Capital, as defined by Ford Motor Company standards applicable to the
Corporation, on the date of this Agreement and continuing through the date of
Closing, to meet the most recent requirements of Ford Motor Company prior to the
date of this Agreement.
(k) CONTRACTS. The Corporation has no contract or commitment
extending beyond the Closing Date, or involving payment by the Corporation of
more than $20,000.00 in the aggregate, except those listed on the attached
EXHIBIT "F" which is made a part hereof. True and complete copies of all listed
contracts have been delivered to the Buyer. The Corporation has complied with
all the material provisions of all such contracts and commitments to which it is
a party, and is not in default under any of them nor will the execution of this
Agreement result in a default under any of such contracts.
(l) TAX RETURNS. From the date hereof, and up to and including the
Closing, the Corporation has paid or will timely pay when due all due and
payable income, social security,
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withholding, sales, use, unemployment insurance and other taxes to all city,
state and federal governments, and has paid or will timely pay, all due and
payable premiums in satisfaction of their statutory obligations for workers'
compensation insurance coverage. The Corporation has duly filed all federal,
state and other tax returns required to be filed by it. All taxes, assessments
and other governmental charges at any time known by the Corporation prior to the
date hereof, to be due from or upon the Corporation or any of its income,
property or assets have been duly paid, and no extensions for the time of
payment have been requested. The Corporation has paid, or provided in its books,
accruals or reserves adequate for the payment of all federal, state and other
income, franchise and other tax liabilities relating to any actions taken by
Corporation through the date of Closing. Shareholder hereby warrants and
indemnifies Buyer or Corporation as to any future tax deficiencies, penalties
and interest of Corporation not otherwise reserved for, relating to any
transaction or event taking place prior to the Closing.
(m) DIRECTOR AND OFFICERS; COMPENSATION; BANKS. The Corporation
shall deliver to the Buyer within ten (10) days of the date of this Agreement a
true and complete list, as of the date of this Agreement, certified by the
Corporation's treasurer, showing: (i) the names of all the Corporation's
directors and officers; (ii) the names and title of all persons whose are
employed by the Corporation together with a statement of the full amount
presently paid or payable to each such person for services rendered; (iii) the
name of each bank in which the Corporation has an account or safe deposit box,
and the names of all persons authorized to draw thereon, or to have access
thereto; and (iv) the names of all persons holding powers of attorney from the
Corporation and a summary statement of the terms thereof.
(n) LITIGATION. Except as disclosed on EXHIBIT "G" for suits of a
character incident to the normal conduct of the Corporation's business and
involving not more than $2,500.00 in the aggregate, there is no litigation or
proceeding pending, or to the Corporation's knowledge threatened, against or
relating to the Corporation, its properties or business, nor does the
Corporation know or have reasonable grounds to know of any basis for any such
action, or of any governmental investigation relative to the Corporation, its
properties or business.
(o) LEASES, CONTRACTS AND LICENSES. Corporation represents and
warrants that the transfer of the Stock in accordance with the terms of this
Agreement will not constitute a prohibited assignment or transfer of any of the
licenses, leases or contracts of the Corporation, and that all of the foregoing
will remain in full force and effect without acceleration as a result of this
transaction. Notwithstanding the foregoing, the parties acknowledge and agree
that Ford Motor Company is required to acknowledge and consent to the Buyer as
an acceptable owner of the Corporation together with its shareholders.
(p) DISCLOSURE. To the best of the knowledge of the Corporation
and/or Shareholder, after due investigation, no representation or warranty by
the Corporation and/or Shareholder in this Agreement, nor any statement or
certificate furnished or to be furnished to the Buyer pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading.
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(q) LABOR MATTERS. Within the last three (3) years, Corporation has
not been the subject of any union activity or labor dispute, nor has there been
any strike of any kind called, or threatened to be called against Corporation
and, to the best of its knowledge, Corporation has not violated any applicable
federal or state law or regulation relating to labor or labor practices, and is
not a party to any collective bargaining agreement.
(r) PROFIT SHARING AND BENEFIT PLANS. Except as disclosed on EXHIBIT
"H", there are no employee benefit plans and agreements maintained by
Corporation for the benefit of its shareholders, officers, directors or
employees. There are no contributions or payments due with respect to such plans
or agreements, nor will any such contributions or payments be due or required to
be paid on or prior to the Closing Date. To the best of its knowledge,
Corporation is in compliance in all respects with the presently applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). To the best of its knowledge, no event which constitutes a reportable
event as defined in Section 4043 of ERISA has occurred and is continuing with
respect to any plan covered by ERISA. To the best of its knowledge, there would
be no liability of Corporation under Subtitle D of Title IV of ERISA if any plan
were terminated as of the Closing Date, and Corporation has not incurred any
withdrawal liability to any multi-employer plan and does not have any contingent
withdrawal liability to any multi-employer plan under ERISA, as amended by the
Multi-employer Pension Plan Amendments Act of 1980.
(s) DEALER AGREEMENT. No default presently exists under the
Corporation's Dealer Agreement with Ford Motor Company and Corporation is in
good standing under such Dealer Agreement. Neither the Corporation or
Shareholder has any knowledge of a material change in Ford Motor Company
marketing strategy in its area or the granting of any additional Ford dealership
points, which are not already open and operating, within a fifty (50) mile
radius of Bay County, Florida.
(t) GUARANTEES. Corporation is not a guarantor, surety, endorser or
accommodation party for any third party, or otherwise obligated for the debt of
any person except as reflected in the March 31, 1997 Financial Statements.
8. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Shareholder and the Corporation as follows:
(a) INCORPORATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida.
(b) AUTHORIZATION. Buyer has full legal right and corporate power to
enter into and deliver this Agreement and to consummate the transactions set
forth herein and to perform all the terms and conditions hereof to be performed
by it. This Agreement has been duly executed and delivered by Buyer and is a
legal, valid and binding obligation of Buyer enforceable in accordance with its
terms, except as limited by applicable bankruptcy, moratorium, insolvency, or
other laws affecting generally the rights of the creditors or by principals of
equity. The execution and delivery of this Agreement by Buyer and the
performance by Buyer of the transactions contemplated herein have been duly and
validly authorized by all requisite corporate action of Buyer.
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(c) BROKERS AND FINDERS. No broker or finder has acted for Buyer in
connection with this Agreement or the transactions contemplated by this
Agreement and, no broker or finder is entitled to any brokerage or finder's fee
or to any commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of Buyer.
(d) CONSENTS AND APPROVALS. Neither the execution and deliver by
Buyer of this Agreement, nor the consummation by Buyer of the transactions
contemplated hereby, nor compliance by Buyer with any of the provisions hereof
will (i) violate or conflict with any provision of the Certificate of
Incorporation or Bylaws of Buyer, (ii) result in a violation of any order, writ,
injunction, decree, judgment, ruling, law, rule, or regulation of any court or
governmental authority, applicable to Buyer, (iii) result in the breach of any
note, bond, mortgage, indenture, deed of trust, trust, license, franchise,
permit, contract, agreement or other instrument or commitment or obligation of
Buyer, or (iv) require any consent, approval, authorization of, or notice to, or
declaration, filing or registration with, any governmental or regulatory
authority or any other Person, except for such consents, approvals,
authorizations, notices, declarations, filings or registrations which have been
obtained, given or made, as the case may be, and which are unconditional and in
full force and effect.
(e) LITIGATION. There are no claims, actions, suits, inquiries,
investigations or proceeding pending, or to the best of the knowledge of Buyer
threatened or imminent, against Buyer which question or challenge the validity
of this Agreement or any action taken or to be taken by Buyer pursuant hereto
(other than any such claim, action, suit, inquiry, investigation or proceeding
to which the Shareholder or their affiliates are a party or otherwise involved)
before or by any court or governmental body.
(f) NO MISREPRESENTATION OR OMISSION. No representation or warranty
by the Buyer in this paragraph, or in any SCHEDULE, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained therein not misleading.
9. CONDUCT OF BUSINESS PENDING CLOSING. The Shareholder and Corporation
covenant that, pending the Closing:
(a) The Corporation's business will be conducted only in the
ordinary course and there shall be no acceleration of payment of any contract or
change in rate of compensation payable to any employee in the form of a bonus or
otherwise, other than commitments previously disclosed to Buyer in writing.
(b) No change will be made in the Corporation's Articles of
Incorporation or Bylaws, except as may be first approved in writing by the
Buyer.
(c) No change will be made in the Corporation's authorized or issued
corporate
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shares.
(d) No contract or commitment will be entered into by or on behalf
of the Corporation, except normal commitments for the purchase of inventory,
parts and supplies, without the Buyer's written approval.
(e) No change will be made affecting the personnel, or banking or
safe deposit arrangements of the Corporation without the Buyer's written
approval.
(f) Except as otherwise requested by the Buyer, the Shareholder will
cause the Corporation to use its best efforts (without making any commitment on
the Buyer's behalf) to preserve the Corporation's business organization intact;
to keep available to the Corporation the services of its present employees; and
to preserve for the Corporation the goodwill of its suppliers, customers, and
others having business relations with the Corporation.
(g) All debts will be paid as they become due.
(h) No contract right of the Corporation will be waived without
Buyer's written approval.
(i) No uninsured material physical damage for loss will occur to the
assets of the Corporation.
(j) No obligations except current liabilities under contracts
entered into the ordinary course of business will be incurred without Buyer's
written approval.
10. CORPORATION PERSONNEL. Except as to the Shareholder or as otherwise
is provided in the Shareholder's Employment Agreement or as may be required by
law, the Buyer shall have no obligation to employ Corporation's personnel after
the Closing.
11. CONDITIONS PRECEDENT. All obligations of the Buyer under this
Agreement, are, at its option, subject to the fulfillment, prior to or at the
Closing, of each of the following conditions:
(a) FORD MOTOR COMPANY APPROVAL. Approval of the transaction by Ford
Division of Ford Motor Company of the Buyer or its designee as the
Dealer/Operator. The parties agree to use their best efforts to obtain such
approval.
(b) FINANCING. Corporation shall have obtained floor-plan financing
in an amount sufficient to permit the Corporation to operate a Ford Dealership
on terms as may be prevailing at the time of Closing. Buyer shall use reasonable
efforts to cause the Corporation to obtain such financing, and the Letter of
Credit and other funds referenced in Paragraph 1 above.
(c) TITLE BINDER.
(i) Not later than twenty (20) days after the execution of this
Agreement, Buyer shall obtain at Shareholder's expense a title insurance binder
(ALTA Form B) issued by a company reasonably acceptable to Buyer, agreeing to
insure title in the Property with respect to a fee
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simple interest in Corporation's present facility in an amount of not less than
One Million Dollars ($1,000,000.00), together with copies of all exceptions to
title. Other than taxes for the year 1997 and subsequent years, Buyer shall have
the unqualified right to approve all exceptions and matters of title, which
shall in all respects be satisfactory to Buyer.
(ii) Within ten (10) days after receipt of the binder, Buyer's
counsel shall notify Corporation's counsel in writing of any matters in the
binder which are unacceptable. Corporation shall then have twenty(20) days to
cure defects or otherwise satisfy Buyer's concerns or to notify Buyer that the
alleged defects cannot be cured by the exercise of reasonable diligence and/or
the expenditure of not more than $100,000.00. If Corporation so notifies Buyer,
Buyer shall have ten (10) days to cancel this Agreement and receive a refund of
the earnest money deposit and all accrued interest or to waive the alleged
defects and close.
(d) HART-SCOTT-RODINO ANTITRUST ACT. All applicable waiting periods
related to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act") shall have expired.
(e) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
Corporation's and Shareholder's representations and warranties contained in this
Agreement shall be true in all material
respects at the time of Closing.
(f) PERFORMANCE. The Corporation shall have performed and complied
with all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing.
(g) OFFICER'S CERTIFICATE. The Corporation has delivered to the
Buyer a certificate of the Corporation's president and treasurer, certified by
the Corporation's secretary, dated the Closing Date, certifying to the
fulfillment of the conditions specified in subparagraphs (b) and (c) of this
paragraph.
(h) OPINION OF CORPORATION'S COUNSEL. The Corporation shall have
delivered to the Buyer an opinion of the Corporation's counsel, Jack G.
Williams, 502 Harmon Avenue, Panama City, Florida 32401, dated the Closing Date,
that the Corporation's corporate existence, good standing, and authorized and
issued stock are as stated in subparagraphs (a) and (b) of paragraph 7; and
that, except as may be specified by such counsel, he does not know or have any
reasonable grounds to know of any litigation, proceeding, or governmental
investigation pending or threatened against, or relating to, the Corporation,
its properties, or business.
(i) HAZARDOUS WASTE INSPECTION. Within five (5) days of the date of
full execution hereof, Buyer shall request a hazardous waste report (the
"Report") from a registered environmental engineer to be delivered to Buyer. If
the Report discloses that the Property or underlying ground water is
contaminated with any hazardous or toxic substances, wastes, materials,
pollutants or contaminants, Buyer shall have the right to terminate this
Agreement and receive a refund of the Deposit. In the event that Buyer elects to
terminate this Agreement, said election to terminate shall be of no force and
effect if Corporation, within seven (7) days of receipt of Buyer's termination
notice, notifies Buyer that it shall remove the hazardous substances from the
said property at its sole
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cost and expense. If Corporation elects to remove the hazardous substances it
shall be obligated to remove the hazardous substances from the contaminated area
in accordance with applicable statutes, rules, ordinances and regulations which
govern clean up of hazardous substances. In the event of an election by
Corporation to clean up the Property, Corporation must provide Buyer with a
certificate from a registered environmental engineer which states that any and
all substances which have contaminated the Property or the underlying ground
water have been removed in accordance with all applicable regulations.
12. INDEMNIFICATION. The Shareholder shall indemnify and hold harmless
the Corporation and the Buyer, at all times after the date of Closing of this
Agreement, against and in respect of:
(a) UNDISCLOSED LIABILITIES. All material liabilities of the
Corporation of any nature, whether accrued, absolute, contingent, or otherwise,
existing at Closing or thereafter arising out of facts or transactions existing
or taking place prior to Closing, to the extent not reflected or reserved
against in full in the Corporation's Closing Date Balance Sheet, including,
without limitation, any tax liabilities to the extent not so reflected or
reserved against, accrued in respect of, or measured by the Corporation's income
for any period prior to Closing, or arising out of transactions entered into, or
any state of facts existing, prior to such date;
(b) INTERIM LIABILITIES. All material liabilities of, or claims
against, the Corporation arising out of the conduct of the Corporation's
business between March 31, 1997, and the Closing otherwise than in ordinary
course, or arising out of any presently existing contract or commitment of the
character described in subparagraph (k) of paragraph 7 and not listed therein,
or arising out of any contract or commitment entered into or made by the
Corporation between the date hereof and the Closing except as permitted by the
provisions of subparagraph (d) of paragraph 7 and not reflected on the Closing
Date Balance Sheet;
(c) MISREPRESENTATION. Any damage or deficiency resulting from any
material misrepresentation, breach of warranty, or nonfulfillment of any
agreement on the part of the Corporation and/or Shareholder under this
Agreement, or from any misrepresentation in or omission from any certificate or
other instrument furnished or to be furnished to the Buyer hereunder; and
(d) INCIDENTAL EXPENSES. All actions, suits, proceedings, demands,
assessments, judgment, costs, attorneys' fees (including appellate and
bankruptcy proceedings), and expenses incident to any of the foregoing.
(e) CLAIMS AGAINST THE SHAREHOLDER.
(1) In the event that Buyer seeks recourse to satisfy an
indemnification obligation of Shareholder to Buyer pursuant to Paragraph 12 of
this Agreement, Buyer shall submit to Shareholder a written statement (an
"Indemnification Claim") conforming to the provisions of this Paragraph 12(e).
Each Indemnification Claim:
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(i) shall set forth the matter as to which indemnification is
sought by Buyer, and the basis for Shareholder's indemnification
obligation pursuant to Paragraph 12 of this Agreement, and
(ii) shall set forth the total amount of losses, liabilities,
damages, cost and expenses suffered by Buyer with respect to such
matter (or if such total amount is not then capable of precise
determination, Buyer's good faith estimate of such total amount). The
total of the specified losses, liabilities, damages, costs and
expenses, or the total good faith estimate of such losses, liabilities,
costs and expenses as referred to herein shall constitute the "total
amount claimed" pursuant to such Indemnification Claim.
(2) Notice of all Indemnification Claims hereunder shall be given
within five (5) years of the Closing Date. Any Indemnification Claim as to which
notice is not given within such five year period shall not be effective under
this Agreement.
(3) In the event Shareholder reasonably objects, in good faith, in
whole or in part to any Indemnification Claim, Shareholder shall within fifteen
(15) calendar days after notice of an Indemnification Claim is given, deliver to
the Buyer a written statement (an "Objection") setting forth in reasonable
detail the basis of such objection, and the portion of the total amount claimed
by Buyer pursuant to such Indemnification Claim which Shareholder disputes (the
"Disputed Portion").
(4) PAYMENT OF INDEMNIFICATION CLAIMS. The Shareholder shall make
payments to the Buyer as follows:
(A) to Buyer of any portion of the Indemnification Claim that
is not disputed by Shareholder; or
(B) to Buyer pursuant to an Arbitrator's Final Order ordering
the Shareholder to make such payment; or
(C) to Buyer, in the total amount claimed pursuant to an
Indemnification Claim if Shareholder has not filed with Buyer an
Objection to such Indemnification Claim within the 15 day period set
forth in paragraph (e)(2) above.
(5) DISPUTES.
(i) Shareholder and Buyer agree to use their reasonable best
efforts to resolve by good faith negotiation any and all disputes
relating to an Indemnification Claim.
(ii) In the event that Buyer has made an Indemnification Claim
and Shareholder has delivered a timely Objection thereto, and if
Shareholder and Buyer are unable to resolve such dispute in accordance
with paragraph (5)(i) above within 10 calendar days after delivery of
Shareholder's Objection to such Indemnification Claim, then such
dispute shall be referred to arbitration for final determination. Such
arbitration shall be resolved
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before a single arbitrator in Florida in accordance with the commercial
arbitration rules of the American Arbitration Association as then in
effect. If Buyer and Shareholder cannot within 15 calendar days after
the delivery of the Objection agree upon the selection of a single
arbitrator, counsel for Shareholder shall select the arbitrator. The
arbitrator shall allow Buyer and Shareholder to conduct reasonable
discovery pursuant to the Federal Rules of Civil Procedure. The costs
of arbitration shall be borne equally by Buyer and Shareholder except
as the arbitrator may otherwise direct. The decision of the arbitrator
(the "Arbitrator's Final Order") shall be binding on the parties to
this Agreement and may be entered by any party in any court of
competent jurisdiction. The determination of which party is the
prevailing party in any arbitration shall be at the discretion of the
arbitrator.
(f) In the event that all payables of Buyer to Shareholder have
been paid and the factory conducts any warranty or other type audit resulting in
factory charge backs relating to Shareholder's operation of the Business, then
Shareholder shall pay or reimburse Buyer for the amount of such charge backs
subject to Shareholder's opportunity to review and have same justified.
13. INDEMNIFICATION. The Buyer shall indemnify and hold harmless the
Shareholder, at all times after the date of Closing of this Agreement, against
and in respect of:
(a) UNDISCLOSED LIABILITIES. All material liabilities of the
Corporation of any nature, whether accrued, absolute, contingent, or otherwise,
existing at Closing or thereafter arising out of facts or transactions taking
place after the Closing, including any tax liabilities, accrued in respect of,
or measured by the Corporation's income for any period after Closing, or arising
out of transactions entered into, or any state of facts existing, after such
date;
(b) MISREPRESENTATION. Any damage or deficiency resulting from any
material misrepresentation, breach of warranty, or nonfulfillment of any
agreement on the part of the Buyer under this Agreement, or from any
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished to the Shareholder hereunder; and
(c) INCIDENTAL EXPENSES. All actions, suits, proceedings, demands,
assessments, judgment, costs, attorneys' fees (including appellate and
bankruptcy proceedings), and expenses incident to any of the foregoing.
(d) CLAIMS AGAINST THE BUYER.
(1) In the event that Shareholder seeks recourse to satisfy an
indemnification obligation of Buyer to Shareholder pursuant to Paragraph 13 of
this Agreement, Shareholder shall submit to Buyer a written statement (an
"Indemnification Claim") conforming to the provisions of this Paragraph 13(d).
Each Indemnification Claim:
(i) shall set forth the matter as to which indemnification
is sought by Shareholder, and the basis for Buyer's indemnification
obligation pursuant to Paragraph 13 of this Agreement, and
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(ii) shall set forth the total amount of losses,
liabilities, damages, cost and expenses suffered by Shareholder with
respect to such matter (or if such total amount is not then capable of
precise determination, Shareholder's good faith estimate of such total
amount). The total of the specified losses, liabilities, damages, costs
and expenses, or the total good faith estimate of such losses,
liabilities, costs and expenses as referred to herein shall constitute
the "total amount claimed" pursuant to such Indemnification Claim.
(2) Notice of all Indemnification Claims hereunder shall be
given within five (5) years of the Closing Date. Any Indemnification Claim as to
which notice is not given within such five year period shall not be effective
under this Agreement.
(3) In the event Buyer reasonably objects, in good faith, in
whole or in part to any Indemnification Claim, Buyer shall within fifteen (15)
calendar days after notice of an Indemnification Claim is given, deliver to the
Shareholder a written statement (an "Objection") setting forth in reasonable
detail the basis of such objection, and the portion of the total amount claimed
by Shareholder pursuant to such Indemnification Claim which Buyer disputes (the
"Disputed Portion").
(4) PAYMENT OF INDEMNIFICATION CLAIMS. The Buyer shall make
payments to the Shareholder as follows:
(A) to Shareholder of any portion of the Indemnification
Claim that is not disputed by Buyer; or
(B) to Shareholder pursuant to an Arbitrator's Final Order
ordering the Buyer to make such payment; or
(C) to Shareholder, in the total amount claimed pursuant to
an Indemnification Claim if Buyer has not filed with Shareholder an
Objection to such Indemnification Claim within the 15 day period set
forth in paragraph (d)(2) above.
(5) DISPUTES.
(i) Buyer and Shareholder agree to use their reasonable
best efforts to resolve by good faith negotiation any and all disputes
relating to an Indemnification Claim.
(ii) In the event that Shareholder has made an
Indemnification Claim and Buyer has delivered a timely Objection
thereto, and if Buyer and Shareholder are unable to resolve such
dispute in accordance with paragraph (5)(i) above within 10 calendar
days after delivery of Buyer's Objection to such Indemnification Claim,
then such dispute shall be referred to arbitration for final
determination. Such arbitration shall be resolved before a single
arbitrator in Florida in accordance with the commercial arbitration
rules of the American Arbitration Association as then in effect. If
Shareholder and Buyer cannot within 15 calendar days after the delivery
of the Objection agree upon the selection of a single arbitrator,
counsel for Buyer shall select the arbitrator. The arbitrator shall
allow Shareholder
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and Buyer to conduct reasonable discovery pursuant to the Federal Rules
of Civil Procedure. The costs of arbitration shall be borne equally by
Shareholder and Buyer except as the arbitrator may otherwise direct.
The decision of the arbitrator (the "Arbitrator's Final Order") shall
be binding on the parties to this Agreement and may be entered by any
party in any court of competent jurisdiction. The determination of
which party is the prevailing party in any arbitration shall be at the
discretion of the arbitrator.
14. HSR ACT FILINGS. To the extent such filings have not been completed
prior to the execution of this Agreement, Buyer shall, in cooperation with the
Corporation and Shareholder, file or cause to be filed any reports or
notifications that may be required to be filed under the HSR Act, with the
Federal Trade Commission and the Antitrust Division of the Department of
Justice, and Corporation and Shareholder shall furnish to the others all such
information in their possession as may be necessary for the completion of the
reports or notifications to be filed. Prior to making any communication, written
or oral, with the Federal Trade Commission, the Antitrust Division of the
Federal Department of Justice or any other governmental agency or authority or
members of their respective staffs with respect to this Agreement or the
transactions contemplated hereby, the parties shall consult with each other.
Buyer shall assist Shareholder with the preparation of the filing and be
responsible for up to Five Thousand Dollars ($5,000.00) of Shareholder and
Corporation's fees and costs associated with this filing. Buyer shall use its
best efforts to obtain from the applicable governmental agency early termination
of the waiting period related to the H.S.R. Act filing.
15. BROKERAGE. The Corporation and Buyer each represent and warrant to
the other that except for Shareholder's agreement with NCM Associates, Inc., all
negotiations relative to this Agreement have been carried on by them directly
with each other, without the intervention of any person, and each party shall
indemnify the other and hold it harmless against and in respect of any claim for
brokerage or other commissions relative to this Agreement, or to the
transactions contemplated hereby, and also in respect of all expenses of any
character incurred by such party in connection with this Agreement or such
transactions.
16. NON-COMPETITION AGREEMENT AND CONSULTING CONTRACT. The Buyer
recognizes that the Shareholder, through his tenure as owner and operator of the
Corporation and other dealerships has developed a valuable expertise in all
phases of new automobile sales, service and financing, particularly in the Bay
County area. An agreement not to compete (a non-competition agreement) shall be
executed by the Shareholder providing that Shareholder shall not compete with
the Corporation in all automotive related businesses within a radius of one
hundred (100) miles of Bay County, Florida, for a period of five (5) years from
the date of Closing. A Consulting Agreement shall provide for Shareholder to be
a participant in Corporation's health plan and provide consulting services as
defined therein including attending Department Head meetings for the Corporation
when in the Bay County area. The consulting and non-competition agreement shall
be in the form acceptable to Shareholder and Buyer to be attached hereto as
EXHIBIT "I."
17. TAX ELECTIONS. (a) The parties agree that upon completion of this
transaction Corporation may file an election under Section 338 (h) (10) of the
Internal Revenue Code to treat the sale hereunder as if the Corporation had sold
all of its assets. Buyer agrees to be responsible for payment of any incremental
taxes associated with any such Section 338 election.
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(b) The parties agree to allocate the taxable income or loss of the
Corporation as if the Corporation's taxable year consisted of two (2) taxable
years, the first of which ends on the date of the Closing, and the parties will
file the appropriate election provided for under Section 1377 of the Internal
Revenue Code.
18. NATURE AND SURVIVAL OF REPRESENTATIONS. All statements contained in
any certificate or other instrument delivered by or on behalf of the Corporation
and\or Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, shall be deemed representations and warranties by the
Corporation and/or Shareholder hereunder. All representations, warranties,
indemnitees, covenants, and agreements made by the Corporation and Shareholder
in this Agreement, or pursuant hereto, shall be deemed joint and several, except
as otherwise expressly stated, and shall survive the Closing and any
investigation conducted in connection with this Agreement for a period of five
(5) years.
19. POST OFFICE BOX, TELEPHONE NUMBER AND PERSONAL ITEMS. The
Corporation's post office box number, P. O. Box ______, and telephone number
904-784-0400, shall remain the property of the Corporation. The Buyer agrees to
turn over to Shareholder all mail of a purely personal nature to Shareholder on
a daily basis or as otherwise requested by Shareholder. Shareholder shall be
entitled to retain Shareholder's personal office items and awards.
20. CLAIMS. Following the Closing, Shareholder shall have no claims
against or be due any sums from Corporation except as otherwise provided
pursuant to the terms of this Agreement and any related agreements. Nothing set
forth in this Agreement shall prohibit or restrain the Shareholder or
Corporation from engaging in financial activities or transaction between them
prior to the Closing Date, including, without limitation, repayment of debt due
to the Shareholder, payment of salary, bonus, and other compensation due to
Shareholder, payment of rent, and payment of dividends of current or accumulated
income of the Corporation.
21. BENEFIT. This Agreement shall be binding upon, and inure to the
benefit of, the respective legal representatives of the Shareholder, and the
successors and assigns of the Buyer. Without limiting the foregoing, the
Shareholder's rights hereunder may be enforced by it in its own name. In the
event that the Buyer causes the assets and business of the Corporation to be
transferred to some other corporation, the rights of the Buyer hereunder may be
enforced by such other corporation in its own name. Without the written consent
of the Shareholder, no such assignment may be made by the Corporation prior to
the payment in full of the promissory note.
22. ENFORCEMENT. This Contract may be enforced by a specific
performance action by the Buyer if the Shareholder, without just cause, refuses
to close this Agreement in addition to any other remedy Buyer may have at law or
in equity.
23. CONSTRUCTION. This Agreement shall be governed by the laws of the
State of Florida.
24. NOTICES. All notes, requests, demands, and other communications
hereunder shall be in writing, and shall be deemed to have been duly given if
delivered or mailed, first class postage prepaid, or delivered by overnight
courier, if to Corporation or Shareholder, at
19
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___________________________ with a copy to Stephen A. Bodzin, Esq., Bodzin and
Golub, P.C., Suite 329, 1156 - 15th Street, N.W., Washington, D.C. 20005, or at
such other address as either of them may have furnished to the Buyer in writing,
or, if to the Buyer, 350 S. Lake Destiny Dr., #200, Orlando, Florida 32810, with
a copy to: J. Gregory Humphries, Esq., Shutts & Bowen, L.L.P., 20 North Orange
Ave., Suite 1000, Orlando, FL 32801-4626 or at such other addresses as Buyer may
have furnished to Corporation in writing.
25. EXPENSES. Each of the parties shall bear all expenses incurred by
it in connection with this Agreement and in the consummation of the transactions
contemplated hereby and in preparation thereof.
26. ATTORNEYS' FEES. In the event it becomes necessary for either party
to enforce the terms of this Agreement, the prevailing party shall be entitled,
in addition to such damages or other relief as may be granted, to recover
reasonable attorneys' fees and costs, such attorneys' fees to include those
incurred on any appeal.
27. COOPERATION. Shareholder is an authorized Ford "Dealer" and agrees
to cooperate in assisting Buyer to obtain approval of Buyer as a Ford
Dealer-Operator. Corporation agrees to retain at the Closing all of its rights
and interest in any Ford parts returns privileges.
28. DEMONSTRATORS. Shareholder shall be entitled to two (2)
demonstrators for his use for five (5) years from the date of Closing as further
set forth in the Consulting Agreement. The vehicles shall be provided as set
forth in the Consulting Agreement.
29. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto and supersedes and cancels any prior agreements,
representations, warranties, or communications, whether oral or written, among
the parties hereto relating to the transactions contemplated hereby or the
subject matter herein. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an agreement in
writing signed by the party against whom or which the enforcement of such
change, waiver, discharge or termination is sought. The parties acknowledge that
they have entered into a letter of intent dated April 30, 1997, which outlines
the terms of this Agreement. The letter of intent requires the parties to act in
good faith and to take certain actions with specified periods of time. The
parties agree that nothing herein contained shall modify or alter the time
periods or other provisions of the letter of intent not otherwise provided for
herein.
Executed the day and year first above written.
Signed in the presence of: CORPORATION:
- ---------------------------------- COOK-WHITEHEAD FORD, INC.
Print Name:
------------------------
By:
- ---------------------------------- ----------------------
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Print Name: Name:
---------------------- --------------------
Title:
--------------------
SHAREHOLDER:
- --------------------------------
Print Name:
--------------------- -------------------------
CHARLES WHITEHEAD
- --------------------------------
Print Name:
--------------------- BUYER:
MEALEY ACQUISITIONS, INC.
- --------------------------------
Print Name:
----------------------
By:
- -------------------------------- ----------------------
Print Name: DONALD C. MEALEY,
---------------------- President
21
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EXHIBIT "A"
Promissory Note
22
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EXHIBIT "B"
Escrow Deposit Agreement
23
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EXHIBIT "C"
Financial Statements of the Corporation
24
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EXHIBIT "D"
Material Change in Corporation's Financial Condition
25
<PAGE>
EXHIBIT "E"
Notice of Hazardous, Toxic or Polluting Substances
26
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EXHIBIT "F"
List of Contracts
27
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EXHIBIT "G"
Litigation
28
<PAGE>
EXHIBIT "H"
Profit Sharing and Benefit Plans
29
<PAGE>
EXHIBIT "I"
Non-Competition Agreement and Consulting Contract
30
<PAGE>
SCHEDULE "1"
Parts, Accessories and Miscellaneous Supplies
31
<PAGE>
SCHEDULE "2"
New and Demonstrator Inventory
32
<PAGE>
SCHEDULE "3"
Used Vehicles Inventory
33
EXHIBIT 2.3.1
CONTRACT FOR SALE
AGREEMENT made this 10th day of April, 1997, between BILL GRAHAM FORD,
INC. ("Seller") and MEALEY ACQUISITIONS, INC., or its assigns ("Buyer").
The parties have reached an understanding with respect to the sale and
purchase of Forty-Nine Percent (49%) the outstanding Class B partnership
interests (the "Partnership Interests") of a Florida limited partnership to be
formed by Seller (the "Partnership") engaged in the operation of a Ford
dealership in Manatee County, Florida (the "Seller") and the obligations of
Seller and Buyer in connection therewith.
IT IS THEREFORE AGREED:
1. PURCHASE PRICE. The Seller agrees to sell and the Buyer agrees to
buy, forty-nine percent (49%) of the Class B limited partnership interests of
the Partnership (the "Partnership Interests") and as consideration therefor to
pay Four Million Six Hundred Fifty-Five Thousand and No/100 Dollars
($4,655,000.00) subject to adjustment as provided below in Section 3, to be paid
in cash, by cashiers' check made payable to the order of Seller or wire transfer
to the account of Seller at closing.
2. EARNEST MONEY. Buyer has paid herewith to Shutts & Bowen, L.L.P, as
Escrow Agent, earnest money in the sum of Twenty-Five Thousand Dollars
($25,000.00) in connection with the transaction contemplated hereby. The earnest
money shall be invested in a non-interest bearing account pending its
disposition in accordance with the terms of this Agreement.
3. CONDITIONS. This purchase price for the Partnership Interests set
forth in Section 1 above is based on the net worth of the Partnership, which
Seller represents to the Buyer will be Two Million Five Hundred Twenty-Nine
Thousand, Six Hundred Eighty-Three and No/100 Dollars ($2,529,683.00) after
contribution of the assets of the Seller contemplated pursuant to Section 6 of
this Agreement. The Buyer may cause to be taken a physical inventory of the
assets of the Partnership prior to Closing and Buyer and Seller shall arrive at
a balance sheet as of the date of Closing, including the assets and liabilities
transferred to the Partnership (but excluding the contribution to be made by the
General Partner and to be adjusted further by excluding balance sheet accounts
numbered 1700-1705, 1710, 1715, 2500 and 2510) (the "Closing Date Balance
Sheet"). The purchase price shall be adjusted upwards by fifty percent (50%) of
the amount by which the net worth of the Partnership as determined in the
Closing Date Balance Sheet is greater than Two Million Five Hundred Twenty-Nine
Thousand, Six Hundred Eighty-Three and No/100 Dollars ($2,529,683.00) and
adjusted downwards by fifty percent (50%) of the amount by which the net worth
of the Partnership as determined in the Closing Date Balance Sheet is less than
Two Million
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Five Hundred Twenty-Nine Thousand, Six Hundred Eighty-Three and No/100 Dollars
($2,529,683.00).
In determining the net worth of the Partnership, Generally Accepted
Accounting Principles, consistently applied shall be utilized by Buyer and
Seller. In the event the Buyer and Seller cannot agree on the Closing Date
Balance Sheet, they shall each choose a certified public accountant to whom they
shall submit the items in dispute for a determination by said accountant(s)
which shall be binding on Seller and Buyer. For purposes of this Agreement the
following methods of valuation shall be deemed to be in accordance with
Generally Accepted Accounting Principles for the purpose of determining the
correctness of the Closing Date Balance Sheet:
(a) PARTS, ACCESSORIES, AND MISCELLANEOUS SUPPLIES.
(i) Buyer shall value all the new, genuine, original,
unopened, current and unused Ford factory parts and accessories which
could be returned to the manufacturer by the Partnership for the price
as defined in subparagraph (A) below. Buyer shall not be required to
include in the valuation damaged or obsolete parts. Buyer may also, at
its option, include in the valuation Seller's miscellaneous service
supplies and inventories at Seller's cost of such items. Said items
shall appear on an inventory list prepared by Buyer and Seller near the
Closing date. The inventory list is to be incorporated herein and made
a part hereof the same as if fully set forth herein and designated as
SCHEDULE "1".
(A) Buyer and Seller shall determine the
value for the parts referenced in paragraph (i) above, per an
inventory at prices which shall be determined by the most
current Manufacturer's Parts Catalog Price. Buyer may include
in the valuation any parts and inventories not required to be
purchased by paragraph 1 as shall be determined by good faith
negotiations between Buyer and Seller. Seller agrees that no
additions or deletions shall be made in such stocks except in
the ordinary course of business, and further, to keep adequate
records of such additions and deletions, which records shall
be made available to Buyer for review and verification upon
reasonable request. Buyer and Seller shall each pay for
one-half (1/2) of the cost of the inventory if an independent
inventory service is engaged by the parties.
(ii) NEW VEHICLES.
(A) The 1997 and later years new and
warrantable Ford vehicle inventory will be valued at a price
equal to the sum of Seller's original factory invoice cost
plus the cost of dealer installed items and less any rebates,
holdbacks (including supplemental holdback or year end
carryover allowances), incentive payments (including finance
incentives and advertising allowances) given Seller by the
manufacturer for any reason with respect to these vehicles or
pre-delivery inspection credits received if the work is not
performed as of Closing.
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For the purpose of the foregoing provisions, the cost of
dealer installed items shall be equal to the Seller's actual
cost of the installed item plus labor charges for installation
computed at a mutually agreed upon mark-up from Seller's
sub-let and internal costs, but in no event greater than the
charge customarily placed on Seller's vehicle inventory
records.
(B) It is further agreed that in the event
any vehicles referred to in this paragraph shall have been
damaged prior to the Closing, Seller shall have repaired such
vehicle to the satisfaction of Buyer, or in the event any such
vehicles have not been repaired, Seller and Buyer shall agree
on the cost to recover such repairs, which cost shall be
deducted from the price referred to herein. In the event
Seller and Buyer cannot agree on the cost of repairs, Buyer
shall have no obligation to include in the valuation any such
vehicle or vehicles and Seller shall retain title to such
specific vehicles. Further, Buyer may include in the valuation
in connection with the determination of the purchase price,
1996 new Ford and any warrantable demonstrator Ford vehicles
at such actual cash price for each vehicle as shall be
determined by good faith negotiations between Buyer and
Seller. In the event of a failure to agree on vehicle prices,
Buyer may elect not to include in the valuation such specific
vehicles, in which case Seller shall retain title to such
specific vehicles. Any new vehicle with over 200 miles on the
odometer shall be considered a demonstrator vehicle. The new
and demonstrator automobiles to be purchased pursuant to this
section shall be listed in SCHEDULE "2"-NEW AND DEMONSTRATOR
INVENTORY to be prepared by Seller and Buyer prior to the
Closing and initialed by them at the Closing. Said Exhibit
shall show the purchase price of each vehicle computed as set
forth above.
(iii) USED VEHICLES. Buyer may include in the
valuation Seller's used vehicle inventory as of the Closing at such
actual cash wholesale value for each vehicle as shall be determined by
good faith negotiations between Buyer and Seller. In the event of a
failure to agree on vehicle prices, Buyer may elect not to include in
the valuation all or any of such vehicles, in which case, Seller shall
retain title to such vehicles as Buyer elects not to so include. The
used automobiles to be purchased pursuant to this section shall be
listed in SCHEDULE "3"-USED VEHICLES PURCHASED to be prepared by Seller
and Buyer prior to the Closing and initialed by them at the Closing.
Said Exhibit shall show the agreed valuation price of each vehicle.
4. EXAMINATION OF RECORDS. After the execution of this Agreement,
Seller will allow the Buyer, its counsel and other representatives full access
during normal business hours, or such other reasonable times, to all the books,
tax returns, both federal, state and local, records, files, documents, assets,
properties, contracts and agreements of Seller and Seller and shall furnish the
Buyer, its officers and representatives with all information concerning the
affairs of such companies which may be reasonably requested. The Buyer agrees
that it will use its best efforts to prevent its review of the foregoing
materials from causing any disruption of the business of the Seller. The Buyer
shall exercise its general rights under this provision to ascertain that the
business is generally as
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represented by the financial statement dated December 31, 1996. The Buyer may,
on or before thirty (30) days from the date of this Agreement, cancel this
Agreement if the results of the Buyer's investigation reveal material
discrepancies from that represented in the financial statements and the earnest
money paid herewith shall be returned to the Buyer.
5. FAILURE TO CONSUMMATE SALE. In the event the Buyer fails to
consummate the purchase of the Partnership Interests from the Seller for any
reason except that described in Paragraph 4 or the failure of a condition
precedent as set forth in Paragraph 11, the earnest money paid this date shall
be forfeited and shall be retained by the Seller as liquidated damages. In the
event the Seller fails to consummate the sale of the Partnership Interests or
transfer of its assets to the Partnership for any reason except the default of
Buyer under this Agreement, the Buyer may require specific performance of this
Agreement by the Seller in any court of competent jurisdiction, in addition to
any other rights or remedies which Buyer may have at law or in equity.
6. FORMATION OF PARTNERSHIP. Prior to the Closing the Seller shall
contribute all of the assets (including intangibles) of Seller, subject to
liabilities set forth on the Closing Date Balance Sheet to the Partnership in
exchange for all of the limited partnership interests representing ninety-nine
percent (99%) of the total partnership interests (the "Partnership Interests").
The general partner of the Partnership shall be First Team Management, Inc.
which shall own one percent (1%) of the total Partnership Interests in exchange
for the payment of Ninety-Five Thousand and No/100 Dollars ($95,000.00) subject
to adjustment proportionately with the purchase price of the assets being sold
hereunder together with an amount representing one percent (1%) of the value as
finally determined of the Class A Partnership Interests. The Partnership shall
be formed in accordance with the provisions of the Partnership Agreement
attached hereto as EXHIBIT "A".
7. CLOSING. The closing of the sale shall take place at the offices of
Shutts & Bowen, L.L.P., 20 North Orange Ave., Suite 1000; Orlando, Florida
32801, or such other place mutually agreed by the parties on or before ninety
(90) days after the date of execution hereof, unless extended by the mutual
agreement of Buyer and Seller. At the Closing, Seller shall deliver to the
Buyer, free and clear of all liens, encumbrances and restrictions, an assignment
of the Partnership Interests, an updated title commitment reflecting no changes
from that provided in Paragraph 11 below, the Seller's resignation as Ford
Dealer-Operators and such other documents as required by this Agreement. Upon
such delivery, the Buyer shall deliver to the Seller, a certified or cashier's
check payable to the order of the Seller or a wire transfer of funds fully
completed to an account and bank as directed by the Seller for the total
purchase price, less the amount of the earnest money, together with interest
thereon, previously paid hereunder, and subject to any adjustments as provided
in Paragraph 3.
8. REPRESENTATIONS AND WARRANTIES. The Seller represents and warrants
as follows:
(a) ORGANIZATION AND STANDING OF SELLER. The Seller is duly
organized, validly existing and in good standing under the laws of the State of
Florida. Copies of the Seller's Articles of Incorporation and all amendments
thereof to date, certified by the Secretary of State of Florida,
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and of the Seller's Bylaws as amended to date, certified by the Seller's
Secretary, shall be delivered to the Buyer, and are complete and correct as of
the date of this Agreement.
(b) OWNERSHIP. Seller represents and warrants that it is the
owner, free and clear of any liens, restrictions, encumbrances or rights of
others, of all of the Partnership Interests. Seller has full right and authority
to transfer said Partnership Interests to the Buyer. John V. Verner, Jr., Edward
Graham and Edward M. Verner each are or will be the owners of one hundred
percent (100%) of the outstanding capital stock of the Seller, and there are no
other shares of the Seller owned or claimed by any other person or entity.
(c) FINANCIAL STATEMENTS. Seller has delivered to Buyer a copy
of the financial statements for the Seller as of December 31, 1996, a copy of
which is attached as EXHIBIT "B" which present a true and complete statement of
the Seller's condition as of that date and an accurate representation of the
results of the Seller's operations for the period indicated and an accurate and
complete list of the Seller's assets, fixed or otherwise. The financial
statements have been prepared in accordance with Generally Accepted Accounting
Principles consistently applied, and which are to be consistently applied
through and including the Closing, except as set forth on EXHIBIT "B-1". All
other assets so listed are correct and will remain so until Closing, except as
might be affected by normal business operations of the Seller.
(d) ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
reflected or reserved against in the December 31, 1996 financial statement, the
Seller had no material liabilities of any nature, whether accrued, absolute,
contingent, or otherwise, including tax liabilities due or to become due and
arising out of transactions entered into or any state of facts existing prior
thereto. Seller warrants that there are no material liabilities of any nature or
any material amount not fully reflected or reserved against in said statement.
Further, all liabilities of the Seller shall be current as of the date of
Closing and reserved for in the Closing Date Balance Sheet. For purposes of this
Agreement, the term material shall refer to any individual liability of $500.00
or more, or aggregate liabilities of the Seller in excess of $10,000.00 or more.
(e) ABSENCE OF CERTAIN CHANGES. Except as set forth in EXHIBIT
"C", from December 31, 1996 and continuing through the date of Closing, the
Seller further represents that there has not been (i) any material change in the
Seller's financial condition, assets, liabilities or business, other than
changes in the ordinary course of business, none of which have been materially
adverse; (ii) any material damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the Seller's properties or
business; (iii) any declaration, or setting aside, or payment of any dividend or
other distribution in respect to the Seller's shares, or any direct or indirect
redemption, purchase or other acquisition of any such shares; or (iv) any labor
strike of the Seller by its employees, or any event or condition of any
character, materially and adversely affecting the Seller's business or
prospects.
(f) TITLE TO PROPERTIES. The Seller has good and marketable
title to all of its properties and assets, real and personal, including those
reflected in the balance sheet of December 31, 1996 [except those sold or
otherwise disposed of in the ordinary course of business], subject to
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no security interests, mortgage, pledge, lien, encumbrance or charge, except for
liens shown on the Balance Sheet as securing specified liabilities set forth
therein (with respect to which no default exists).
(g) CONDITION OF EQUIPMENT. All of Seller's equipment is in
good operating condition and repair as of the date hereof and shall be as of the
date of Closing, shall be in conformity with all applicable ordinances and
regulations, and environmental, building, zoning, occupational safety and other
laws, provided Seller makes no warranty with respect to such equipment's
condition after Closing. Buyer shall have the right at any time prior to Closing
to inspect such equipment and ascertain its condition. Such equipment is all the
equipment necessary for the operation of the Seller's business in accordance
with Ford Motor Company dealer guidelines, and all equipment currently used in
the Seller's business is owned by Seller.
(h) ACCOUNTS RECEIVABLE. Seller shall deliver to Buyer a true
and complete list, certified by Seller, of the Seller's accounts receivable
within ten (10) days of the date of this Agreement. Following the Closing, if
any of such accounts receivable, or any accounts receivable arising between the
date of such listing and the Closing are not paid in full on or before 90 days
after their due date, Seller shall reimburse the Partnership for all such
uncollected receivables in excess of the debt reserve, set forth on the Closing
Date Balance Sheet.
Partnership shall cause diligent effort to be made to collect
all such receivables, including where necessary, filing of appropriate notices
and liens under applicable Florida and federal law. Partnership shall, at
Seller's request, periodically furnish Seller with a schedule of unpaid accounts
receivable more than ninety (90) days past due, setting forth each debtor's
name, address and account balance, and shall furnish, at Seller's request, a
schedule setting forth the action being taken to collect any such accounts
receivable. Collection procedures and any costs thereof to be borne by the
Partnership and deducted from any proceeds, shall be agreed upon by Buyer and
Seller prior to any litigation or Buyer shall not be obligated to undertake any
such actions. Upon payment by Seller as aforesaid, Buyer shall cause such
accounts to be assigned to Seller.
(i) INTENTIONALLY DELETED.
(j) WORKING CAPITAL. The Seller and the Partnership (after
contribution of the assets to the Partnership) shall have sufficient Working
Capital, as defined by Ford Motor Company, on the date of this Agreement and
continuing through the date of Closing, to meet the recommended requirements.
This provision shall not be construed to prevent Seller from distributing cash
in excess of the required working capital to its shareholders.
(k) REAL PROPERTY; HAZARDOUS WASTE. Except as disclosed on
EXHIBIT "D", there are no pollutants, contaminants, petroleum products or
by-products, asbestos or other substances, whether hazardous or not, on or
beneath the surface of any of the Seller's property including leasehold estates,
which Seller, or any other person or entity has placed, caused or allowed to be
placed upon the Seller's property, and which have caused or may cause any
investigation by any
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agency or instrumentality of government, which are or may be on the Seller's
property in violation of any law or regulation of any local, state or federal
government or which are or may be a nuisance or health threat to occupants of
the Seller's property or other residents of the area and no person, firm or
other legal entity has any right or option whatsoever to acquire the property or
any portion or portions thereof or any interest or interests therein.
(l) CONTRACTS. The Seller has no contract or commitment
extending beyond April 1, 1996, or involving payment by the Seller of more than
$1,000.00 in the aggregate, except those listed on the attached EXHIBIT "E"
which is made a part hereof. True and complete copies of all listed contracts
have been delivered to the Buyer. The Seller has complied with all the
provisions of all such contracts and commitments to which it is a party, and is
not in default under any of them nor will the execution of this Agreement result
in a default under any of such contracts.
(m) TAX RETURNS. Both now and up to and including the Closing,
the Seller has paid all due and payable income, social security, withholding,
sales, use, unemployment insurance and other taxes to all city, state and
federal governments, and have paid all due and payable premiums in satisfaction
of their statutory obligations for workers' compensation insurance coverage. The
Seller has duly filed all federal, state and other tax returns required to be
filed. All taxes, assessments and other governmental charges at any time known
by the Seller to be due from or upon the Seller or any of its income, property
or assets have been duly paid, and no extensions for the time of payment have
been requested. The Seller has paid, or set upon its books, accruals or reserves
adequate for the payment of all federal, state and other income, franchise and
other tax liabilities relating to any actions taken by Seller through the date
of Closing. Seller hereby warrants and indemnifies Buyer or Partnership as to
any future tax deficiencies, penalties and interest of Seller not otherwise
reserved for, relating to any transaction or event taking place prior to the
Closing.
(n) DIRECTOR AND OFFICERS; COMPENSATION; BANKS. The Seller
shall deliver to the Buyer within ten (10) days of the date of this Agreement a
true and complete list, as of the date of this Agreement, certified by the
Seller's treasurer, showing: (i) the names of all the Seller's directors and
officers; (ii) the names and title of all persons whose are employed by the
Seller together with a statement of the full amount presently paid or payable to
each such person for services rendered; (iii) the name of each bank in which the
Seller has an account or safe deposit box, and the names of all persons
authorized to draw thereon, or to have access thereto; and (iv) the names of all
persons holding powers of attorney from the Seller and a summary statement of
the terms thereof.
(o) LITIGATION. Except as disclosed on EXHIBIT "F" for suits
of a character incident to the normal conduct of the Seller's business and
involving not more than $2,500.00 in the aggregate, there is no litigation or
proceeding pending, or to the Seller's knowledge threatened, against or relating
to the Seller, its properties or business, nor does the Seller know or have
reasonable grounds to know of any basis for any such action, or of any
governmental investigation relative to the Seller, its properties or business.
(p) LEASE, CONTRACTS AND LICENSES. Seller represents and
warrants that the transfer of the Partnership Interests in accordance with the
terms of this Agreement will not constitute a
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prohibited assignment or transfer of any of the licenses, leases or contracts of
the Seller, and that all of the foregoing will remain in full force and effect
without acceleration as a result of this transaction. However, it is
acknowledged that Ford Motor Company is required to acknowledge the Partnership
as an acceptable owner together with its partners, both general and limited.
(q) DISCLOSURE. No representation or warranty by the Seller in
this Agreement, nor any statement or certificate furnished or to be furnished to
the Buyer pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
(r) LABOR MATTERS. Within the last three (3) years, Seller has
not been the subject of any union activity or labor dispute, nor has there been
any strike of any kind called, or threatened to be called against Seller and,
Seller has not violated any applicable federal or state law or regulation
relating to labor or labor practices, and is not a party to any collective
bargaining agreement.
(s) PROFIT SHARING AND BENEFIT PLANS. Except as disclosed on
EXHIBIT "G", there are no employee benefit plans and agreements maintained by
Seller for the benefit of its shareholders, officers, directors or employees.
There are no contributions or payments due with respect to such plans or
agreements, nor will any such contributions or payments be due or required to be
paid on or prior to the Closing Date. Seller is in compliance in all respects
with the presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). No event which constitutes a
reportable event as defined in Section 4043 of ERISA has occurred and is
continuing with respect to any plan covered by ERISA. There would be no
liability of any of Seller under Subtitle D of Title IV of ERISA if any plan
were terminated as of the Closing Date and Seller has not incurred any
withdrawal liability to any multi-employer plan and does not have any contingent
withdrawal liability to any multi-employer plan under ERISA, as amended by the
Multi-employer Pension Plan Amendments Act of 1980.
(t) DEALER AGREEMENT. No default presently exists under the
Seller's Dealer Agreement with Ford Motor Company and Seller is in good standing
under such Dealer Agreement. Seller has no knowledge of a change in Ford Motor
Company marketing strategy in its area (except the proposed relocation of
Seller) or the granting of any additional Ford dealership points, which are not
already open and operating, within a twenty (20) mile radius of Manatee County,
Florida.
(u) GUARANTEES. Seller is not a guarantor, surety, endorser or
accommodation party for any third party, or otherwise obligated for the debt of
any person except as reflected in the December 31, 1996 Financial Statements.
(v) CHARGE-BACKS. Any charge-backs or claims on credit life,
disability, finance reserve or extended warranty policies sold by Seller or any
affiliated entity prior to the Closing Date shall be the liability of the
Partnership and the Partnership shall pay same. The Seller represents that all
of such policies and contracts have been entered into in the ordinary course of
business on terms
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consistent with those prevailing in the industry and in accordance with
regulatory requirements. Buyer and Seller both agree not to cause the bulk
termination of any of such policies sold by Seller to its customers.
9. CONDUCT OF BUSINESS PENDING CLOSING. The Seller covenants
that, pending the closing:
(a) The Seller's business will be conducted only in the
ordinary course and there shall be no acceleration of payment of any contract or
change in rate of compensation payable to any employee in the form of a bonus or
otherwise, other than commitments previously disclosed to Buyer in writing.
(b) No change will be made in the Seller's Articles of
Incorporation or Bylaws, except as may be first approved in writing by the
Buyer.
(c) No change will be made in the Seller's authorized or
issued corporate shares.
(d) No contract or commitment will be entered into by or on
behalf of the Seller, except normal commitments for the purchase of inventory,
parts and supplies, without the Buyer's written approval.
(e) No change will be made affecting the personnel, or banking
or safe deposit arrangements of the Seller without the Buyer's written approval.
(f) Except as otherwise requested by the Buyer, the Seller
will cause the Seller to use its best efforts (without making any commitment on
the Buyer's behalf) to preserve the Seller's business organization intact; to
keep available to the Seller the services of its present employees; and to
preserve for the Seller the goodwill of its suppliers, customers, and others
having business relations with the Seller.
(g) All debts will be paid as they become due.
(h) No contract right of the Seller will be waived without
Buyer's written approval.
(i) No uninsured material physical damage for loss will occur
to the assets of the Seller.
(j) No obligations except current liabilities under contracts
entered into the ordinary course of business will be incurred without Buyer's
written approval.
(k) The Seller will not suffer any strike or labor dispute.
10. SELLER PERSONNEL. The Buyer (or the Partnership) shall have no
obligation to employ Seller's personnel after the Closing.
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11. CONDITIONS PRECEDENT. All obligations of the Buyer under this
Agreement, are, at its option, subject to the fulfillment, prior to or at the
closing, of each of the following conditions:
(a) FORD MOTOR COMPANY APPROVAL. Approval of the transaction
by Ford Division of Ford Motor Company of the Buyer or its designee as the
Dealer/Operator.
(b) FINANCING. Partnership shall have obtained floor-plan
financing in an amount sufficient to permit the Partnership to operate a Ford
Dealership on terms as may be prevailing at the time of Closing and conditions
as may be satisfactory to Buyer. Buyer shall use reasonable efforts to cause the
Partnership to obtain such financing.
(c) AGREEMENT. Buyer shall have closed on the transaction
contemplated by the Agreement For Purchase and Sale of Class A Partnership
Interests between the parties dated as of even date herewith.
(d) PARTNERSHIP FORMATION. Seller shall have completed the
transfer of the Assets of Seller to the Partnership in form acceptable to Buyer.
(e) HART-SCOTT-RODINO ANTITRUST ACT. All applicable waiting
periods related to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR" Act") shall have expired.
(f) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
Seller's representations and warranties contained in this Agreement shall be
true at the time of closing.
(g) PERFORMANCE. The Seller shall have performed and complied
with all agreements and conditions required by this Agreement to be performed or
complied with by them prior to or at the Closing.
(h) OFFICER'S CERTIFICATE. The Seller has delivered to the
Buyer a certificate of the Seller's president and treasurer, certified by the
Seller's secretary, dated the closing date, certifying to the fulfillment of the
conditions specified in subparagraphs (b) and (c) of this paragraph.
(i) OPINION OF SELLER'S COUNSEL. The Seller shall have
delivered to the Buyer an opinion of the Seller's counsel, Robert S. Trinkle,
Esq., of Trinkle, Redman, Swanson, Byrd & Coton, P.A., P. O. Drawer TT, Plant
City, Florida 33564, dated the closing date, that the Seller's corporate
existence, good standing, and authorized and issued stock are as stated in
subparagraphs (a) and (b) of paragraph 8; that the Seller has good and
marketable title to all its property and assets as set forth in subparagraph (i)
of paragraph 8; and that, except as may be specified by such counsel, they do
not know or have any reasonable grounds to know of any litigation, proceeding,
or governmental investigation pending or threatened against, or relating to, the
Seller, its properties, or business.
(j) HAZARDOUS WASTE INSPECTION. As of the date of full
execution hereof, Buyer shall have requested a hazardous waste report (the
"Report") from a registered environmental
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engineer to be delivered to Buyer. If the Report discloses that the property
subject to the Lease or underlying ground water is contaminated with any
hazardous or toxic substances, wastes, materials, pollutants or contaminants,
Buyer shall have the right to terminate this Agreement and receive a refund of
the Deposit. In the event that Buyer elects to terminate this Agreement, said
election to terminate shall be of no force and effect if Seller, within seven
(7) days of receipt of Buyer's termination notice, notifies Buyer that it shall
remove the hazardous substances from the said property at its sole cost and
expense. If Seller elects to remove the hazardous substances it shall be
obligated to remove the hazardous substances from the contaminated area in
accordance with applicable statutes, rules, ordinances and regulations which
govern clean up of hazardous substances. In the event of an election by Seller
to clean up the Property, Seller must provide Buyer with a certificate from a
registered environmental engineer which states that any and all substances which
have contaminated the Property or the underlying ground water have been removed
in accordance with all applicable regulations. Purchaser acknowledges receipt
from Seller of certain environmental reports with respect to the Dealership.
12. INDEMNIFICATION. The Seller shall indemnify and hold harmless the
Partnership and the Buyer, at all times after the date of this Agreement,
against and in respect of:
(a) UNDISCLOSED LIABILITIES. All material liabilities of the
Seller of any nature, whether accrued, absolute, contingent, or otherwise,
existing at Closing or thereafter arising out of facts or transactions existing
or taking place prior to Closing, to the extent not reflected or reserved
against in full in the Seller's Closing Date Balance Sheet, including, without
limitation, any tax liabilities to the extent not so reflected or reserved
against, accrued in respect of, or measured by the Seller's income for any
period prior to Closing, or arising out of transactions entered into, or any
state of facts existing, prior to such date;
(b) INTERIM LIABILITIES. All material liabilities of, or
claims against, the Seller arising out of the conduct of the Seller's business
between December 31, 1996 and the Closing otherwise than in ordinary course, or
arising out of any presently existing contract or commitment of the character
described in subparagraph (L) of paragraph 8 and not listed therein, or arising
out of any contract or commitment entered into or made by the Seller between the
date hereof and the Closing except as permitted by the provisions of
subparagraph (E) of paragraph 8 and not reflected on the Closing Date Balance
Sheet;
(c) MISREPRESENTATION. Any damage or deficiency resulting from
any misrepresentation, breach of warranty, or nonfulfillment of any agreement on
the part of the Seller under this Agreement, or from any misrepresentation in or
omission from any certificate or other instrument furnished or to be furnished
to the Buyer hereunder; and
(d) INCIDENTAL EXPENSES. All actions, suits, proceedings,
demands, assessments, judgment, costs, attorneys' fees (including appellate and
bankruptcy proceedings), and expenses incident to any of the foregoing.
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The Seller shall reimburse the Partnership or the Buyer, on
demand for any payment made or required to be made by the Partnership or the
Buyer at any time after Closing, in respect of any liability or claim to which
the foregoing indemnity relates.
(e) In the event of any damages arising from any of the
aforesaid matters, and as part of the indemnification, Buyer may set off against
any amounts owed by Buyer to Seller any damages sustained by it. In the event
said damages exceed such sums, Seller shall pay directly to Buyer the difference
between the damages sustained and the unpaid balance.
(f) In the event of Buyer becoming aware of facts which could
give rise to a claim entitling Buyer to set-off, before Buyer exercises this
right of set-off the Buyer must first:
(i) Notify Seller promptly upon the receipt by Buyer
of a written statement of facts that, if not corrected, would in its
judgment constitute a breach in this Agreement.
(ii) Upon the occurrence of an event which could give
rise to the Buyer making a claim for set-off, the Seller shall within
thirty (30) days (unless a shorter period is required to prevent Buyer
from suffering damage, loss or liability) after the receipt of written
notice from Buyer, (i) satisfy or take steps that will satisfy such
obligations, and pay such amount, or make adequate (in the reasonable
opinion of Buyer) provisions to reimburse Buyer for any loss incurred
or that may be incurred by Buyer as a result of the damages or (ii)
notify Buyer that it denies or disputes the alleged occurrence of such
damages giving rise to the claim for set-off asserted in the notice. If
within such thirty (30) day period Seller has, with respect to Buyer's
claim for set-off, failed to take the action required to be taken,
Buyer has the right, but not the duty to satisfy all or part of any
obligation with respect to such damages in the manner that in its sole
reasonable judgment is proper, and thereupon will be entitled to a
set-off against sums due to Seller from Buyer.
(iii) If Seller intends to defend a claim Seller
shall defend same at its own expense. Seller shall assume defense of
the claim unless Buyer reasonably objects because it has legal defenses
that Seller would not have. Seller may, at its own expense, defend the
claim in Buyer's name with their own counsel if they give notice of
their intention to do so within thirty (30) days of receiving notice of
the claim from Buyer. Buyer may participate in any action conducted by
Seller.
(iv) Regardless of whether either Seller or Buyer
choose to defend or participate in the defense of a claim, each shall
cooperate upon the other's reasonable request in the other's defense of
the claim. Such cooperation shall include furnishing records,
information and testimony and attending conferences, discovery
proceedings, hearings, trials and appeals, provided that the attendance
and participation of Buyer in such process shall be at Seller's sole
cost and expense if requested by Seller.
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(v) Unless Seller has failed to perform its
obligations under subparagraph (ii) of this Section, Buyer shall not
settle any claim for which it will claim a right of set-off from Seller
without Seller's consent, which shall not be unreasonably withheld.
Buyer shall notify Seller of any firm settlement offer for any such
claim. If Seller desires to accept the offer, it shall tender the
amount of the settlement together with all other amounts due.
(g) In the event that all payables of Buyer to Seller have been paid
and the factory conducts any warranty or other type audit resulting in factory
charge backs relating to Seller's operation of the Business, then Seller shall
pay or reimburse Buyer for the amount of such charge backs subject to Seller's
opportunity to review and have same justified.
13. HSR ACT FILINGS. To the extent such filings have not been completed
prior to the execution of this Agreement, each party shall, in cooperation with
the other parties, file or cause to be filed any reports or notifications that
may be required to be filed by it under the HSR Act, with the Federal Trade
Commission and the Antitrust Division of the Department of Justice, and shall
furnish to the others all such information in its possession as may be necessary
for the completion of the reports or notifications to be filed by the other.
Prior to making any communication, written or oral, with the Federal Trade
Commission, the Antitrust Division of the Federal Department of Justice or any
other governmental agency or authority or members of their respective staffs
with respect to this Agreement or the transactions contemplated hereby, the
Seller shall consult with Buyer. Filing fees shall be paid by Buyer.
14. BROKERAGE. The Seller and Buyer each represent and warrant to the
other that all negotiations relative to this Agreement have been carried on by
them directly with each other, without the intervention of any person, and each
party shall indemnify the other and hold it harmless against and in respect of
any claim for brokerage or other commissions relative to this Agreement,
or to the transactions contemplated hereby, and also in respect of all expenses
of any character incurred by such party in connection with this Agreement or
such transactions.
15. NON-COMPETITION AGREEMENT AND CONSULTING CONTRACT. The Buyer
recognizes that the Seller, Edward Graham, John V. Verner, Jr. and Edward M.
Verner, through their tenure as owner and operator of the Seller and other
dealerships has developed a valuable expertise in all phases of new automobile
sales, service and financing, particularly in the Manatee County area. An
agreement not to compete (a non-competition agreement) shall be executed by the
Seller, Edward Graham, John V. Verner, Jr. and Edward M. Verner, providing that
Seller, Edward Graham, John V. Verner, Jr. and Edward M. Verner shall not
compete within a radius of fifty (50) miles of Manatee County for a period of
three (3) years from the date of Closing. The non-competition agreement shall be
in the form acceptable to Seller and Buyer to be attached hereto as EXHIBIT "H."
16. NATURE AND SURVIVAL OF REPRESENTATIONS. All statements contained in
any certificate or other instrument delivered by or on behalf of the Seller
pursuant hereto, or in connection with the transactions contemplated hereby,
shall be deemed representations and warranties by the Seller hereunder. All
representations, warranties, and agreements made by the Seller in this
Agreement,
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<PAGE>
or pursuant hereto, shall be deemed joint and several, except as
otherwise expressly stated, and shall survive the Closing and any investigation
conducted in connection with this Agreement for a period of three (3) years.
17. POST OFFICE BOX AND TELEPHONE NUMBER. The Seller's post office box
number, P. O. Box ______, and telephone number _____________, shall be the
property of the Partnership. The Partnership agrees to turn over to Seller all
mail of a purely personal nature to Seller on a daily basis or as otherwise
requested by Seller.
18. CLAIMS. Following Closing, Seller shall have no claims against or
be due any sums from Partnership except as otherwise provided pursuant to the
terms of this Agreement and any related agreements.
19. BENEFIT. This Agreement shall be binding upon, and inure to the
benefit of, the respective legal representatives of the Seller, and the
successors and assigns of the Buyer. Without limiting the foregoing, the
Seller's rights hereunder may be enforced by it in its own name. In the event
that the Buyer causes the assets and business of the Seller to be transferred to
some other corporation, the rights of the Buyer of the Seller hereunder may be
enforced by such other corporation in its own name.
20. ENFORCEMENT. This Contract may be enforced by a specific
performance action by the Buyer if the Seller, without just cause, refuses to
complete this Agreement in addition to any other remedy Buyer may have at law or
in equity.
21. CONSTRUCTION. This Agreement shall be governed by the laws of the
State of Florida.
22. NOTICES. All notes, requests, demands, and other communications
hereunder shall be in writing, and shall be deemed to have been duly given if
delivered or mailed, first class postage prepaid, if to Seller, at P. O. Drawer
HH, Plant City, Florida 33564, with a copy to Robert S. Trinkle, Esq., Trinkle,
Redman, Swanson, Byrd & Coton, P.A., P. O. Drawer TT, Plant City, Florida 33564,
or at such other address as either of them may have furnished to the Buyer in
writing, or, if to the Buyer, 350 S. Lake Destiny Dr., #200, Orlando, Florida
32810, with a copy to: J. Gregory Humphries, Esquire, Shutts & Bowen, L.L.P., 20
North Orange Ave., Suite 1000, Orlando, FL 32801-4626 or at such other addresses
as Buyer may have furnished to Seller in writing.
23. EXPENSES. Each of the parties shall bear all expenses incurred by
it in connection with this Agreement and in the consummation of the transactions
contemplated hereby and in preparation thereof.
24. ATTORNEYS' FEES. In the event it becomes necessary for either party
to enforce the terms of this Agreement, the prevailing party shall be entitled,
in addition to such damages or other relief as may be granted, to recover
reasonable attorneys' fees and costs, such attorneys' fees to include those
incurred on any appeal.
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<PAGE>
25. COOPERATION. Seller is an authorized Ford "Dealer" and agrees to
cooperate in assisting Buyer to obtain approval of the Partnership as a Ford
Dealer-Operator. Seller agrees to assign to the Partnership at the Closing all
of its rights and interest in any Ford parts returns privileges. Seller shall
assign to the Partnership the balance as of the date of closing allocable to
Seller in connection with any advertising cooperative or association.
26. DEMONSTRATORS. Seller shall be entitled to three demonstrators for
the use of John Verner, James Verner and Edward Verner for five (5) years from
the date of Closing. The vehicles shall be provided as mutually agreed by the
parties , subject to availability.
27. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto and supersedes and cancels any prior agreements,
representations, warranties, or communications, whether oral or written, among
the parties hereto relating to the transactions contemplated hereby or the
subject matter herein. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an agreement in
writing signed by the party against whom or which the enforcement of such
change, waiver, discharge or termination is sought.
Executed the day and year first above written.
Signed in the presence of: SELLER:
BILL GRAHAM FORD, INC.
____________________________
Print Name:_________________
____________________________ By:_____________________________
Print Name:_________________ Name:___________________________
Title:__________________________
Executed by the undersigned solely for purposes of agreeing to the provisions of
the non-compete agreement referenced in Section 14:
____________________________________
Print Name:_________________________
____________________________________
Print Name:_________________________
____________________________
____________________________________ EDWARD GRAHAM
Print Name:_________________________
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<PAGE>
____________________________________ ___________________________
Print Name:_________________________ JOHN V. VERNER, JR.
____________________________________
Print Name:_________________________
____________________________________ ___________________________
Print Name:_________________________ EDWARD M. VERNER
BUYER:
MEALEY ACQUISITIONS, INC.
____________________________________
Print Name:_________________________
By:________________________
____________________________________ W. Warner Peacock,
Print Name:_________________________ Vice President
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ESCROW PROVISION
The undersigned ("Escrow Agent") hereby agrees to hold and disburse the
Deposit hereinabove described in accordance with the foregoing Agreement, upon
condition, however, that if Seller and Buyer shall disagree as to the manner in
which the Deposit is to be disbursed, or if the Deposit shall become the subject
of a controversy between Seller and Buyer, the undersigned, without liability or
obligation to either Seller or Buyer, may pay the Deposit into the Registry of
the Circuit Court of the Ninth Judicial Circuit of Florida, in and for Orange
County, and commence an interpleader action in that Court with regard to the
Deposit.
ESCROW AGENT:
Shutts & Bowen, L.L.P.
By:_________________________________
J. Gregory Humphries, Esq.
Seller and Buyer hereby agree to the above conditions and furthermore
Seller agrees to hold Escrow Agent harmless from any and all claims, demands,
injuries and damages arising out of or in connection with its duties hereunder
as Escrow Agent.
BUYER:
MEALEY ACQUISITIONS, INC.
By: _______________________________
Its:___________________________
350 South Lake Destiny Drive
Suite 200
Orlando, Florida 32810
(Address)
SELLER:
BILL GRAHAM FORD, INC.
By: _______________________________
Its:
_______________________________
_______________________________
(Address)
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AGREEMENT FOR PURCHASE AND SALE OF
CLASS A PARTNERSHIP INTEREST
THIS AGREEMENT, made this _______ day of _____________, 1997, by and
between BILL GRAHAM FORD, INC., Bradenton, Florida _________ (the "Seller"), and
MEALEY ACQUISITIONS, INC. OR ITS ASSIGNS, 350 S. Lake Destiny Dr., Orlando, FL
32810, a Florida corporation, (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Seller desires to sell to the Purchaser and the Purchaser
desires to purchase from the Seller all of the Class A Partnership Interests of
First Team Ford of Manatee, Ltd. (the "Partnership"), a limited partnership to
be formed, which Partnership shall own all rights, privileges, easements and
appurtenances thereto, and described in Exhibit "1" attached hereto ("Land") and
the improvements thereon, located in Manatee County, Florida, including the Ford
dealership facility, other buildings and related facilities ("Building"), (The
Land and Building shall be collectively referred to as the "Property"); and
WHEREAS, in connection with this Agreement, Purchaser and Seller have
entered into a Contract for Sale dated as of even date herewith in connection
with the sale of the Ford motor vehicle franchise operated from the Property and
its related assets (the "Contract").
NOW, THEREFORE, for and in consideration of the premises and the terms,
covenants and conditions contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. AGREEMENT TO PURCHASE AND SELL. Subject to the terms and
conditions hereinafter set forth, the Seller in consideration of the payment of
the Purchase Price (as hereinafter defined) agrees to contribute, transfer and
convey to the Partnership all of the Seller's right, title and interest in the
following:
(a) the Land and the Building;
(b) to the extent of Seller's interest therein, any
strips and gores adjoining or adjacent to the Land and any land lying in the bed
of any street or avenue, open or proposed, in front of or adjoining the Land,
any award made or to be made in lieu thereof, and any unpaid award for damage to
the Land or the Building and improvements thereon by reason of a change of grade
of any street or avenue and the Seller shall execute and deliver to the
Purchaser, at Closing, or thereafter, on demand, all proper instruments for the
conveyance of such title and the assignment and collection of any such award;
and
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<PAGE>
The Purchaser, in consideration of the performance of the
agreements of the Seller and in reliance upon the representations and warranties
of the Seller herein contained, agrees to purchase and pay for the Property as
hereinafter provided.
2. PURCHASE PRICE. The purchase price for all of the Class A
Partnership Interests shall be Three Million Dollars ($3,000,000.00). The total
purchase price payable hereunder shall be subject to such prorations and
adjustments as provided for herein. The Purchase Price shall be paid by (i) the
pay-off of the existing mortgage in an amount not to exceed Two Hundred
Ninety-Seven Thousand, Four Hundred Eighty-Five Dollars ($297,485.00); (ii) the
assumption of the amount due the shareholders of Seller in an amount not to
exceed One Million Three Hundred Forty-Five Thousand Dollars ($1,345,000.00),
both of which shall be paid at closing; and (iii) the balance in cash at Closing
to be wired into the account of Seller as it may designate.
This Agreement, the Purchase Price and Purchaser's obligations
hereunder are contingent upon the contingencies set forth in Paragraphs 4 and 11
of the Contract in addition to the contingencies set forth herein, and a closing
under this Agreement shall be contingent upon a closing under the Contract.
3. CLOSING. Subject to the Feasibility Study, the curative periods
of Paragraphs 4 and 12 and all conditions herein, the sale of the Partnership
Interests shall be closed and the deed for the Property delivered to the
Partnership on or contemporaneously with the closing of the Contract ("Closing
Date"). This sale and purchase shall be closed at the offices of Purchaser's
counsel or at such other location acceptable to the parties hereto.
4. TITLE INSURANCE. Seller, at Seller's expense (but not to exceed
minimum promulgated rate), shall obtain an ALTA Extended Form Owner's Title
Insurance Policy (1987 Revised 4/6/90) ("Policy") unqualified, on the Property
in the amount of $3,000,000.00; such Policy to be purchased from and issued by a
title insurance company reasonably acceptable to ("Title Company") to the
Partnership. A written commitment or binder for said insurance ("Binder"),
together with legible copies of all instruments and documents affecting title to
the Property as shown on said Binder, shall be delivered to Purchaser no later
than thirty (30) days from the date of expiration of the Contingency.
In the event the Binder for such a Policy shows any exceptions
to title unacceptable to Purchaser, other than the Permitted Exceptions set
forth on Exhibit "3", Purchaser shall notify Seller or its attorney within
fifteen (15) days after receipt of such Binder specifying the defects which
exist with respect to the title. Seller shall have a period of thirty (30) days
after receipt of such notice within which to cure any defects in title to the
satisfaction of the attorney for Purchaser and so that the Policy will be
written without such defect, and subject to the other terms and provisions of
this Agreement, the sale of the Property shall be closed within ten (10) days
after written proof of the successful completion of such curing being provided
to Purchaser and its attorney; provided, however, no such closing shall be
earlier than the date of closing as hereinabove provided. Seller agrees to
proceed immediately and diligently to cure such defects in title for which it
has received notice hereunder. If Seller fails to cure the defects within the
time provided, Purchaser may, at its option, either (i) terminate this Agreement
and thereupon all rights and liabilities arising hereunder
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<PAGE>
shall terminate, or (ii) waive all conditions in this Paragraph 4 and, subject
to all the other terms and provisions of this Agreement, close this transaction
in the same manner as if no such defect or defects had been found.
This Agreement and Purchaser's obligation hereunder, including,
but not limited to payment of the Purchase Price, is contingent upon the Seller
being able to deliver to the Partnership good title to the Property free and
clear of all claims, liens, and encumbrances other than the Permitted Exceptions
set forth on Exhibit "3" and to the Purchaser title to the Class A Partnership
Interest free and clear of all claims, liens and encumbrances.
5. EXPENSES. Each of the parties shall bear all expenses incurred
by it in connection with this Agreement and in the consummation of the
transaction contemplated hereby and in preparation thereof. Seller shall pay all
of the costs of transferring the Property to the Partnership.
6. REAL ESTATE TAXES, ASSESSMENTS AND PRORATIONS. Seller
warrants all due and unpaid real estate taxes and intangible taxes on the
Property have been paid or will be paid prior to the Closing Date. Real estate
taxes on the Property which are not due and payable for the year of Closing
shall be prorated as of the Closing Date and delivery of possession.
7. CONVEYANCE. Upon payment of the Purchase Price, Seller shall
convey the Partnership Interests to Purchaser or Purchaser's nominee or assignee
by assignment and the Property to the Partnership by Statutory General Warranty
Deed free and clear of all liens and encumbrances except for items shown as
Permitted Exceptions in Exhibit "3".
8. POSSESSION AND FEASIBILITY STUDY. Seller agrees to deliver
absolute and exclusive occupancy and possession of the Property to the
Partnership on the date of Closing. Purchaser, for a period of thirty (30) days
from the date of this Agreement shall have the right to conduct a Feasibility
Study ("Feasibility Study") for the use of the Property as Purchaser deems
advisable, including but not limited to (i) having the zoning laws and other
laws or ordinances and requirements affecting the Property and its use thereof
examined or reviewed by Purchaser's representative, (ii) entering the Property
to examine it, as Purchaser deems necessary, and (iii) reviewing the financial
records for the Property. Seller agrees that Purchaser, its employees, agents
and engineers may enter upon the Property or any portion thereof at all times
during the term of this Agreement and do all things Purchaser deems necessary in
connection with the Feasibility Study.
At any time prior to the expiration of the Feasibility Study
period, Purchaser for any reason may elect to terminate this Agreement by
written notice to Seller and Purchaser shall thereupon receive a full refund of
any Deposit with interest paid under this Agreement or the Contract.
9. REMEDIES UPON DEFAULT. If Purchaser fails or refuses to close
under this Agreement, without just cause, and Seller is not in default under any
of the terms and provisions of this Agreement and all of the conditions
precedent and contingencies to Closing contained herein have been met, any
Deposit paid by Purchaser hereunder or under the Contract shall be retained by
Seller as full and final settlement of any and all claims hereunder.
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<PAGE>
If Seller fails or refuses to perform this Agreement for the
sale of the Property, Purchaser may either, at its sole option (i) demand a
return of its Deposit and all amounts previously paid hereunder and upon such
demand the Deposit with interest shall be returned to Purchaser and thereupon
all rights and liabilities arising hereunder shall terminate, or (ii) sue Seller
for specific performance of this Agreement.
10. BROKERAGE. Seller represents to Purchaser that there are no
real estate brokers, finders or other persons or entities that are entitled to a
real estate commission, finder's fee or other fee. Seller agrees to defend,
indemnify and hold Purchaser harmless against any person or entity claiming a
real estate commission or fee in connection with this sale by, through or under
Seller, including all costs and reasonable attorneys' fees expended by Purchaser
in the defense of any such claim.
Purchaser represents to Seller that there are no real estate
brokers, finders or other persons or entities that are entitled to a real estate
commission, finder's fee or other fee through Purchaser. Purchaser agrees to
defend, indemnify and hold harmless Seller against any person or entity claiming
a real estate commission or fee in connection with this sale by, through or
under Purchaser, including all costs and reasonable attorneys' fees expended by
Seller in the defense of any such claim.
11. RISK OF LOSS. Until the transfer of title of the Property to
the Partnership, the risk of loss or damage to the Property shall be borne by
Seller.
12. SURVEY, PLANS, SPECIFICATIONS. Seller, upon Purchaser's
request, will permit Purchaser to inspect and copy any existing surveys, plans,
specifications, building and/or construction guarantees and warranties Seller
has on the Property. Purchaser may obtain, at Purchaser's expense, a Survey
("Survey") of the Property prepared by a licensed Florida surveyor ("Surveyor")
containing the legal description of the Property and a Certificate by the
Surveyor satisfactory to the Purchaser. If the Survey shows any encroachment on
the Property or that improvements currently located or intended to be located on
the Property in fact encroach on the land of others, or violate any of the
Agreement covenants (other than Permitted Exceptions on Exhibit "3"), the same
shall be a title defect under Paragraph 4 above, shall be treated as such and
shall be subject to the same curative period.
Seller shall deliver to Purchaser at Closing any and all
architectural drawings, plans and specifications, interior design layouts and
any other documentation ("Plans") relating to the Property in Seller's
possession or reasonably available to Seller. All Plans and the existing surveys
shall be the property of the Purchaser after the Closing Date.
13. NATURE OF TITLE. Title to the Property shall be in fee
simple and shall include all buildings and improvements of any kind and
description now erected or placed thereon, if any, all tenements, hereditaments,
easements, rights-of-way, appurtenances, passages, water rights, water courses,
riparian rights, drainage rights and other rights, liberties and privileges
thereon or in any way now or hereafter appertaining, including all of the right,
title and interest of Seller in and to all public and private streets, roads,
avenues, alleys, passageways (before and after vacation thereof) in front of or
abutting the Property or any portion thereof.
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14. CONDEMNATION. If at any time prior to the recording of the
Warranty Deed, the Property or any portion thereof is taken by eminent domain or
if any preliminary steps in any such taking occur, Purchaser may, at its option,
within ten (10) business days after receipt of written notice of such fact from
Seller, terminate this Agreement and the Deposit and all amounts previously paid
hereunder shall be returned to Purchaser upon demand and thereupon all rights
and liabilities arising hereunder shall terminate. Seller shall promptly notify
Purchaser in writing of any such taking by eminent domain and all steps
preliminary thereto as soon as the same shall occur. If Purchaser does not elect
to so terminate this Agreement, the same shall remain in full force and effect
and Seller shall in such event turn over or credit to Purchaser at the Closing
all monies received by Seller by reason of such taking, and Seller shall assign
to Purchaser all their right, title and interest in and to any awards that may
be made for such taking and any additional money that may be payable thereunder.
15. WARRANTIES AND REPRESENTATIONS. Seller makes the following
representations and warranties to Purchaser and the Partnership in connection
with the Property, each of which is and shall be fully performed and true as of
both the date hereof and the Closing Date. Notwithstanding the foregoing, Seller
shall be liable for any damages incurred by Purchaser resulting from the
representations and warranties not being true, complete and accurate as of the
Closing Date regardless of when such damage occurs. Seller shall also be liable
for any fraud or misrepresentation generally or in regard to the following
representations and warranties:
(a) Seller has good, indefeasible and marketable title in fee
simple to the Property, free and clear of all liens, encumbrances, covenants and
conditions, save and except taxes and assessments for the year 1997 and
subsequent years and Permitted Exceptions shown on Exhibit "3". Such title will
be insured by a title insurance company of recognized financial responsibility
authorized to do business in the State of Florida, at regular rates and without
exception, other than Permitted Exceptions.
(b) There are no persons other than Seller having any right to
occupy the Property.
(c) Seller represents that Purchaser shall have the right prior
to Closing to have the said foundation, roof, electrical systems, air
conditioning and heating systems, plumbing and sprinkler systems examined by
persons or entities licensed under Florida law to ascertain whether or not the
same or any part thereof have been damaged or are defective in any manner.
(d) No rents or leases have been assigned, hypothecated or
pledged.
(e) Seller has received no notice of any violation of law or
ordinances, orders, requirements or regulations of any federal, state, county
and municipal or other governmental or quasi-governmental department, agency or
authority relating to the Property or the use and operation thereof; and Seller
has no reason to believe that any such notice has been, may or will be sent or
entered. To the best of Seller's knowledge, Seller has complied with, and the
Property and the use and operation thereof is in compliance with, all laws,
ordinances, orders, requirements, or regulations of any federal, state, county
and municipal or other governmental or quasi-governmental department,
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agency or authority relating to the Property or the use and operation thereof.
(f) There are no oil burners and oil hot water heaters or other
fuel burning devices installed or in use on the Property.
(g) A Comprehensive Liability or Umbrella Insurance policy is
currently in effect covering the Property and Seller shall keep such insurance
in effect to the Closing Date. A copy of all existing insurance policies shall
be delivered to Purchaser no later than ten (10) days from the date of this
Agreement.
(h) To the best of Seller's knowledge, all certificates of
occupancy, licenses, certificates and permits (collectively the "Permits")
issued by any governmental or quasi-governmental agency or authority or any
board of fire underwriters (or similar organization or institution) for or in
connection with the use, occupancy and operation of the Property are in
possession of Seller; the use, occupancy and operation of all or any portion of
the Property does not violate any of the Permits; no additional certificates of
occupancy, licenses, certificates or permits are required for the use, occupancy
or operation of the Property, all of the Permits are in full force and effect.
Copies of all Permits shall be made available to Purchaser for inspection no
later than ten (10) days from the date of this Agreement.
(i) To the best of Seller's knowledge, all public utilities
(including, without limitation, electric, gas, water, telephone and sanitary
sewerage) required for the operation of the Property enter the land and Building
through lands as to which valid public or private easements exist, which
easements will inure to the benefit of the Purchaser; and the deed required to
be delivered in accordance with provisions of Paragraph 7 above is the only
instrument necessary to convey to the Purchaser free access to and the right to
use and continue to use such public utilities and the conduit supplying the
same. To the best of Seller's knowledge, all roads, driveways and access ways
bounding the Land and Building are either (i) public roads, or (ii) private
easements which will inure to the benefit of the Purchaser. Seller has good,
indefeasible and marketable title to the private (as opposed to public)
easements referred to in this paragraph (j), free and clear of liens,
encumbrances, covenants and conditions, or Seller shall acquire and convey all
necessary easements or such title to such private (as opposed to public)
easements to the satisfaction of Purchaser's counsel before Closing which will
be insured by a title company of recognized financial responsibility authorized
to do business in the State of Florida, at regular rates and without exception.
If Seller does not have or acquire title, as provided in this Paragraph, before
Closing, Purchaser shall have the right to terminate this Agreement and received
a full refund of the Deposit and all payments previously made hereunder.
(j) From the date hereof to the Closing Date or earlier
termination of this Agreement, Seller shall not, without the prior written
consent of Purchaser, (i) enter into any contract, lease or any transaction in
respect to or affecting the Property; (ii) remove from the Property any of the
fixtures thereon, except in the normal and ordinary course of business and
provided that adequate replacements therefor are made; (iii) sell, encumber or
grant any interest in the Property or any part thereof in any form or any manner
whatsoever; or (iv) otherwise perform or knowingly permit any act which will
diminish or otherwise adversely affect the condition of the
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Property, expenses, revenue, cash flow or other matters that may affect the
economic value of the Property and Purchaser's interest under this Agreement or
in the Property or which will prevent Seller's full performance of its
obligations hereunder between the date of this Agreement and the Closing Date.
(k) From the date hereof to the Closing Date or earlier
termination of this Agreement, Seller shall be responsible and cause any other
party in possession of the Property: (i) to maintain the Property free from
waste and neglect and in good order and repair and keep and perform or cause to
be performed all obligations of the Property owner or its agents under
applicable federal, state, county and municipal laws, ordinances, regulations,
orders and directives; and (ii) refrain from taking or omitting to take any
action which would result in breach of any of the representations and warranties
set forth in this Paragraph 15. Subject to Closing, on the Closing Date, Seller
shall tender possession of the Property to Purchaser in the same condition the
Property was in when last inspected by Purchaser during the Feasibility Period
less ordinary wear and tear.
(l) The information included in the Exhibits hereto and the
documents to be delivered to Purchaser are and shall be true, correct and
complete in all material respects, and the same do not and shall not omit any
material information required to make the submission thereof misleading and
incomplete.
(m) Other than the Seller there is no person in possession or
occupancy of the Property or any part thereof nor are there any persons who have
possessory rights in respect to the Property or any part thereof and as of
Closing, there shall be no person in possession or occupancy of the Property and
no possessory rights therein expressly including Seller.
(n) There are no defects or inadequacies in the Property which
would adversely affect the insurability of the same or cause the imposition of
extraordinary premiums therefor or create or be likely to create a hazard,
excessive maintenance cost or material operating deficiencies. Neither Seller
nor any agent or affiliate of Seller has received any notice from any insurer or
board of fire underwriters requesting the performance of any repairs,
alterations or other work or change in operating procedures relating to the
Building which has not been fully complied with.
(o) There is no existing or pending (nor have Seller or any
agent or affiliate of Seller received any notice with respect to the following):
(i) condemnation of any part of the Property; (ii) widening, change of grade or
limitation on use of streets abutting the Property; (iii) special tax or
assessment to be levied against the Property; (iv) change in the zoning
classification of the Property; or (v) change in the tax assessment of the
Property other than the 1996 assessed value for the Property, with respect to
the Property or any part thereof which has not been disclosed in writing to
Purchaser.
(p) All water, sewer, gas, electric, telephone and drainage
facilities and all other utilities and public or quasi-public improvements upon
or adjacent to the Property required by law or for the normal operation of the
improvements on the Property are installed, are connected under valid permits,
are in good working order, are adequate to serve the Property and are fully paid
for, and neither the Property nor the owner thereof has any further obligation
to pay any charge for or
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with respect to such public or quasi-public improvements except general real
estate taxes and usage charges. There are no existing facts or conditions known
to Seller which could result in the termination of any utility service to the
Property. Seller further represents and warrants that neither Seller nor
Seller's agents or affiliates have received any notice from any utility company
or public or quasi-public organization which would indicate that any of the
aforementioned statements with respect to the utility services for the Property
are incorrect.
(q) Seller shall not enter into any new lease, tenancy or
contract affecting the Building without the prior written consent of the
Purchaser, or as specifically provided for herein, and in such case any
agreement with respect to which such consent is requested shall be in form and
substance reasonably satisfactory to the Purchaser.
(r) The Seller shall maintain or cause all services in
connection with the Property in its current condition to be maintained as
presently maintained until the Closing Date.
(s) The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated, and compliance with the
terms of this Agreement shall not conflict with or, with or without notice or
passage of time, result in breach of any of the terms or provisions of, or
constitute a default under, any instrument or agreement to which the Seller or
Shareholder is or are a party or by which the Seller or Shareholder is bound or
under any applicable regulation of any governmental agency, or judgment, order
or decree of any court having jurisdiction over the Seller or its
representatives.
(t) That there is no litigation or other proceeding pending, or,
to the knowledge of the Seller threatened against or relating to the Property or
any part thereof against the Seller which might affect the Property, nor does
Seller know of or have reasonable grounds to know of any basis for such action,
including, without limitation, condemnation or eminent domain proceedings.
(u) Seller has the full right and authority to execute this
Agreement and to undertake all action, including the execution of the Warranty
Deed, which is required by Seller; and the individuals signing this Agreement
and all closing documents as the designated officers or agents of Seller are
duly authorized to do so; and the execution of this Agreement by such individual
is binding upon Seller and enforceable in accordance with its terms and that
Seller shall, at least ten (10) days prior to the Closing, deliver to Purchaser
or Purchaser's attorney a copy of such evidence of authority as Purchaser and/or
Title Company may reasonably require.
(v) That Seller has no knowledge of any facts which will impair
the value of the Property or prevent Purchaser from utilizing the Property for
its Intended Use (as defined in Paragraph 16 hereafter).
(w) There are no agreements or other commitments which would
have been contractually entered into with any governmental, administrative or
quasi-governmental body or agency affecting or binding on the Property in any
manner except as set forth on Exhibit "3", Permitted Exceptions.
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<PAGE>
(x) That Seller has not made any or submitted any application
for the creation or annexation to "Special Assessment District" which may affect
the development of the Property.
(y) The Property is not subject to a mortgage or other
encumbrance on title except the mortgage to _________________ and the Property
shall be released in full from such mortgage or encumbrance at or prior to
Closing. Seller shall obtain or cause the holder of said mortgage or encumbrance
to release any lien, encumbrance or mortgage at or prior to Closing.
(z) All payments for any utilities supplied to the Property are
or will be paid in full prior to the date of Closing for the period up to the
date of Closing.
(aa) Except as disclosed in the asbestos survey delivered to
Purchaser, No asbestos-containing materials are or were installed in any
improvements on the real property at any time, and the improvements on the
property contain no asbestos-containing materials except as disclosed in the
environmental report previously obtained by Seller and disclosed to Purchaser.
(bb) The Seller has not received any request for information,
notice of claim, demand or other notification that it is or may be potentially
responsible with respect to any investigation or clean-up of hazardous, toxic or
polluting substances; except in accordance with applicable regulations, the
Seller has not treated, stored for more than ninety (90) days, recycled or
disposed of any hazardous, toxic or polluting substances on the Property, and to
the best of Seller's knowledge, no other person has treated or stored for more
than ninety (90) days, substances on any such property; no PCB's, asbestos
(except as disclosed to Purchaser with respect to asbestos tile and insulation
materials) or urea formaldehyde insulation is present at any property owned or
leased by and of the Seller; and there are no underground storage tanks, active
or abandoned, on the Property.
To the best of its knowledge, the Seller has complied with and
is not in violation of any federal, state or local law, regulation, permit,
provision or ordinance relating to the generation, storage, transportation,
treatment or disposal of hazardous, toxic or polluting substances; have obtained
and adhered to all necessary permits and other approvals necessary to store,
dispose, and otherwise handle hazardous, toxic and polluting substances; have
reported, to the extent required by federal, state and local law, all past and
present sites where hazardous, toxic or polluting substances, if any, from the
Seller have been treated, stored or disposed. To the best of its knowledge and
except as disclosed in the environmental reports previously delivered to
Purchaser, the Seller has not transported any hazardous, toxic or polluting
substances or arranged for the transportation of such substances to any location
which is listed or proposed for listing under the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended ("CERCLA") the
Resource Conservation and Recovery Act, as amended, ("RCRA"), or the Clean Water
Act, as amended, ("CWA") or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims against any
of the Seller for clean-up costs, remedial work, damages to natural resources or
for personal injury claims, including, but not limited to, claims under CERCLA,
RCRA or the CWA which could lead to a claim being made against Purchaser or
Partnership. The Seller shall at Closing assign to Purchaser any representation
and warranty it may have received from its predecessors in interest with respect
to the matters set forth herein.
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<PAGE>
(cc) That Seller will take or cause to be taken all action
necessary to cause the representations and warranties and agreements of Seller
as contained in this Paragraph 15 to remain true and correct in all respects
from the date of this Agreement through the Closing Date; and will refrain from
taking any action or causing any action to be taken which could cause any
representation, warranty or agreement of Seller to become incorrect or untrue at
any time during such period.
16. INTENDED USE OF THE PROPERTY. Purchaser has advised Seller
that the Partnership intends to use the Property as a new car franchised
automobile dealership for a sales, service and body shop facility ("Intended
Use").
17. CONDITIONS AND CONTINGENCIES TO CLOSING. The obligations of
Purchaser under this Agreement are subject to and contingent upon the
satisfaction and completion of each and all of the following conditions (in
addition to those referenced in Paragraph 2 above) or written waiver of
conditions by Purchaser without which Purchaser shall not be obligated to close
hereunder and Purchaser shall have the right to terminate this Agreement:
(a) The determination by Purchaser, in its sole judgment, within
thirty (30) days of the date of the expiration of this Agreement, that the
Feasibility Study is satisfactory and the Property is suitable for the
Partnership's Intended Use; and
(b) The Survey is satisfactory to Purchaser or its counsel and
an engineer, construction expert or other expert of Purchaser's choice has
inspected the building and foundation of the structure on the Property to
Purchaser's satisfaction; and
(c) All representations and warranties of Seller as herein
provided with respect to the Property must be true and correct as of the
Effective Date of this Agreement and as of the date of Closing, and Seller
shall, prior to the date of Closing, have complied with, abided by and performed
all agreements of Seller with respect to the Property as set forth in this
Agreement; and
(d) Seller's title to the Property must be as agreed hereunder
at the time of Closing; and
(e) Seller shall deliver or cause the following to be delivered
to the Purchaser at the Closing:
(i) An assignment of Class A Partnership Interests in
form reasonably acceptable to Purchaser;
(ii) An assignment of those Permits which are
transferrable ("Assigned Permits") to the extent that such Permits, and any
renewals thereof, are in effect at the time of Closing, duly executed by Seller;
(iii) A certificate of the Seller and dated as of the
Closing Date, certifying
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that all of the representations and warranties of the Seller contained in this
Agreement are true and correct on and as of the Closing Date with the same force
and effect as if made on and as of the Closing Date, and that the Seller has
fully performed on or prior to the Closing Date all of the obligations of the
Seller contained in this Agreement;
(iv) Notice of transfer of the Property to
Partnership to any government authorities requiring notices upon the sale or
transfer of title to the Property;
(v) The originals or copies of any real property tax
bills for the Property and Building for the then current fiscal year and, if
requested, the originals or copies of any current water, sewer and utility bills
which are in Seller's custody or control;
(vi) All Plans and existing surveys for the Building
in the possession of the Seller;
(vii) Lien and Possession Affidavit in form
acceptable to the title company and Purchaser's attorney sufficient to remove
standard printed exceptions to title in the policy regarding (i) unrecorded
matters (except general real estate taxes not yet due and payable), (ii) parties
in possession, (iii) survey, if appropriate survey is provided by Purchaser, and
(iv) mechanic's liens;
(viii) Statutory General Warranty Deed free and clear
of all liens and encumbrances except for the Permitted Exceptions shown on
Exhibit "3";
(ix) Affidavit establishing Seller is not "foreign
persons" in compliance with Section 1445 of the Internal Revenue Code of 1986,
as amended;
(x) Closing Statement in form and substance
satisfactory to Purchaser and Purchaser's counsel;
(xi) Such other documents as may be reasonably
required to carry out the intent of the parties hereunder.
(f) An applicable governmental body revises or imposes new
fire safety standards or requirements prior to the Closing Date, Seller shall
notify Purchaser of such new requirements in a timely manner. If Purchaser does
not wish to comply with such requirements, Purchaser shall have the right to
terminate this Agreement and receive a full refund of the Deposit and all
payments previously made hereunder.
In the event any or all of the foregoing have not been
fulfilled, accomplished and satisfied, then Purchaser, at its option, shall have
the right to either (i) terminate this Agreement and upon such termination the
Deposit shall be returned to Purchaser and thereupon all rights and liabilities
arising hereunder shall terminate, (ii) waive any or all of the conditions and
proceed with the Closing, or (iii) extend the Closing date hereunder, but no
later than one hundred eighty (180) days from the date of this Agreement.
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<PAGE>
18. NOTICES. Any notice or demand given hereunder shall be in
writing and shall be (i) delivered by hand, or (ii) delivered through the United
States mail, postage prepaid, certified, return receipt requested, or (iii)
delivered through or by Federal Express, Express Mail, UPS, Purolator or other
expedited mail or package service, addressed to the parties at the addresses
shown on the first page of this Agreement. Any notice or demand that may be
given hereunder shall be deemed complete (i) upon depositing any such notice or
demand in the United States mail with proper postage affixed thereof, certified,
return receipt requested, or (ii) upon depositing any such notice or demand with
Federal Express, Express Mail, Airborne, UPS, or other expedited mail or package
delivery, or (iii) upon hand delivery to the appropriate address as herein
provided. Any party hereto may change said address by notice in writing to the
other parties in the manner herein provided.
19. ATTORNEY'S FEES AND COSTS. In the event of any litigation
arising out of this Agreement, the prevailing party shall be entitled to recover
all costs incurred in connection with such litigation, including reasonable
attorneys' fees, whether in preparation for, at trial, or on appeal.
20. SURVIVAL. Any provision of this Agreement which by its
nature and effect is required to be observed, kept or performed after Closing
shall survive the Closing and shall not be merged therein but shall remain
binding upon and for the benefit of the parties hereto and their respective
successors and assigns until fully observed, kept or performed; provided,
however the representations and warranties set forth herein shall not survive
the Closing except for items 15a and bb.
21. APPORTIONMENT AND RELATED MATTERS.
(a) All items shall be apportioned between the Seller and the
Partnership as of midnight on the Closing Date except as otherwise specifically
provided for herein.
(b) The Seller shall notify the utility companies furnishing
such services that the billing thereof to the Seller shall be discontinued on
the day preceding Closing, in which event, the Partnership shall make
arrangements to have such billing charged to the Partnership commencing with the
day of Closing and the Seller shall pay all charges billed with respect to such
utilities through the Closing Date. Seller shall transfer or cause all utility
deposits, bonds or other similar amounts to be transferred to Purchaser at
Closing and Purchaser shall reimburse Seller for same;
(c) Any additional closing adjustments shall be determined
jointly by representatives of the Seller and the Purchaser.
(f) The provisions of this Paragraph 21 shall survive the
Closing hereunder.
22. MISCELLANEOUS.
(a) This Agreement constitutes the entire agreement of the
parties hereto and supersedes any prior understandings, or written or oral
agreements between the parties respecting the terms of this Agreement. No
agreements, unless incorporated in this Agreement, shall be binding upon the
parties hereto.
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(b) Purchaser may not assign this Agreement and Purchaser's
rights hereunder without the consent of Seller except to a related or affiliated
individual or company of Purchaser.
(c) In computing any period of time prescribed by the terms of
this Agreement, the day from which the designated period of time begins to run
shall not be included. The last day of the period so computed shall be included
unless it is a Saturday, Sunday, legal holiday (i.e., not a "Business Day"), in
which event the period shall run until the end of the next day which is a
Business Day. In the event any day on which any act is to be performed by Seller
or Purchaser under the terms of this Agreement is not a Business Day, the time
for the performance by Seller to Purchaser of any such act shall be extended to
the next day which is a Business Day.
(d) This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument; and any party or signatory hereto may execute this Agreement by
signing any such counterpart.
(e) Waiver of performance or satisfaction of any condition,
covenant, requirement, obligation or warranty must be in writing signed by the
parties so waiving.
(f) This Agreement and the interpretation and enforcement of
the same shall be governed by and construed in accordance with the laws of the
State of Florida. Venue and jurisdiction for any action hereunder shall be taken
in a court of competent jurisdiction located in Manatee County, Florida.
(g) This Agreement shall be binding upon and its benefits and
advantages shall inure to the successors and assigns of the parties hereto.
Whenever used herein the singular number shall include the plural, the plural
the singular, and the use of any gender shall include all genders.
(h) No amendment, modification or alteration of the terms of
this Agreement shall be binding unless such amendment, modification or
alteration is in writing, dated subsequent to the date hereof, and duly executed
by the parties hereto.
EXECUTED ON March _____, 1997.
Signed, sealed and delivered SELLER:
in the presence of:
BILL GRAHAM FORD, INC.
_____________________________________ By:___________________________
_____________________________________ Its: _________________________
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PURCHASER:
MEALEY ACQUISITIONS, INC.,
Or Its Assigns
By:___________________________
Its: _________________________
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EXHIBIT 2.3.3
CONTRACT FOR SALE
AGREEMENT made this 9th day of June, 1997, between BILL GRAHAM FORD
CO. ("Corporation"), EDWARD GRAHAM, JOHN V. VERNER, and EDWARD VERNER
("Shareholders") and MEALEY HOLDINGS, INC., or its assigns ("Buyer").
The parties have reached an understanding with respect to the sale and
purchase of One Hundred Percent (100%) of the outstanding stock of Corporation
(the "Stock") and the obligations of Corporation, Shareholders and Buyer in
connection therewith.
IT IS THEREFORE AGREED:
1. PURCHASE PRICE. The Shareholders agree to sell and the Buyer agrees
to purchase, One Hundred Percent (100%) of the Stock and as consideration
therefor to pay Four Million Seven Hundred Forty-Nine Thousand Dollars
($4,749,000.00) plus 50% of any increase and less 50% of any decrease in the net
book value as reflected in the Closing Date Balance Sheet (as defined below), to
be paid as follows:
(a) Cash in the amount of Two Million Three Hundred Thirty-Four
Thousand Dollars ($2,334,000.00).
(b) Buyer shall receive that number of unregistered common shares
of First Team Automotive Corp., a Delaware corporation ("FTAC")
determined in accordance with the following:
$2,415,000 # of shares of FTAC
__________ = to Shareholders
("IPO Shares")
per share price
received by
FTAC in its
initial public
offering
(c) The balance of the purchase price shall be paid in cash upon
the closing by Buyer in the event of an upwards adjustment or by
the Shareholders in the event of a downward adjustment.
2. CONDITIONS. This purchase price for the Stock set forth in Section 1
above is based on the net worth of the Corporation, which Shareholders represent
to the Buyer will be ___________________________ Dollars ($__________). The
Buyer shall determine the net worth
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<PAGE>
of the Corporation prior to Closing and Buyer and Shareholders shall arrive at a
balance sheet as of the date of Closing (the "Closing Date Balance Sheet"). The
purchase price shall be adjusted upwards by fifty percent (50%) of the amount by
which the net worth of the Corporation as determined in the Closing Date Balance
Sheet is greater than __________________________ Dollars ($___________) and
adjusted downwards by fifty percent (50%) of the amount by which the net worth
of the Corporation as determined in the Closing Date Balance Sheet is less than
___________________________ Dollars ($___________).
In determining the net worth of the Corporation, Generally Accepted
Accounting Principles, consistently applied shall be utilized by Buyer and
Corporation. In the event the Buyer and Corporation cannot agree on the Closing
Date Balance Sheet, they shall each choose a certified public accountant to whom
they shall submit the items in dispute for a determination by said accountant(s)
which shall be binding on Corporation and Buyer. For purposes of this Agreement
the assets of the limited partnership interest owned by the Corporation shall be
valued on a FIFO basis to determine the correctness of the Closing Date Balance
Sheet.
3. EXAMINATION OF RECORDS. After the execution of this Agreement,
Corporation will allow the Buyer, its counsel and other representatives full
access during normal business hours, or such other reasonable times, to all the
books, tax returns, both federal, state and local, records, files, documents,
assets, properties, contracts and agreements of Corporation and Corporation
shall furnish the Buyer, its officers and representatives with all information
concerning its affairs which may be reasonably requested. The Buyer agrees that
it will use its best efforts to prevent its review of the foregoing materials
from causing any disruption of the business of the Corporation. The Buyer shall
exercise its general rights under this provision to ascertain that the business
is generally as represented by the financial statement dated March 31, 1997. The
Buyer may, on or before thirty (30) days from the date of this Agreement, cancel
this Agreement if the results of the Buyer's investigation reveal material
discrepancies from that represented in the financial statements.
4. FAILURE TO CONSUMMATE SALE. In the event the Buyer fails to
consummate the purchase of the Stock from the Shareholders for any reason except
that described in Paragraph 3 or the failure of a condition precedent as set
forth in Paragraph 10, the Shareholders may require specific performance of this
Agreement. In the event the Shareholders fail to consummate the sale of the
Stock for any reason except the default of Buyer under this Agreement, the Buyer
may require specific performance of this Agreement by the Shareholders in any
court of competent jurisdiction, in addition to any other rights or remedies
which Buyer may have at law or in equity.
5. CLOSING. The closing of the sale shall take place at the offices of
Shutts & Bowen, L.L.P., 20 North Orange Ave., Suite 1000; Orlando, Florida
32801, or such other place mutually agreed by the parties contemporaneously with
the initial public offering of FTAC, unless extended by the mutual agreement of
Buyer and Shareholders. At the Closing, Shareholders shall deliver to the Buyer,
free and clear of all liens, encumbrances and restrictions, an assignment of the
Stock, and such other documents as required by this Agreement. Upon such
delivery, Buyer shall deliver to the Shareholders, a certified or cashier's
check payable to the order of the Shareholders for the cash
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portion of the purchase price, subject to any adjustments as provided in
Paragraph 2 and Buyer shall also deliver the IPO shares.
6. REPRESENTATIONS AND WARRANTIES. The Shareholders represent and
warrant as follows:
(a) ORGANIZATION AND STANDING OF CORPORATION. The Corporation is
duly organized, validly existing and in good standing under the laws of the
State of Florida. Copies of the Corporation's Articles of Incorporation and all
amendments thereof to date, certified by the Secretary of State of Florida, and
of the Corporation's Bylaws as amended to date, certified by the Corporation's
Secretary, shall be delivered to the Buyer, and are complete and correct as of
the date of this Agreement.
(b) OWNERSHIP. Shareholders are the owners, free and clear of any
liens, restrictions, encumbrances or rights of others, of all of the Stock.
Shareholders have full right and authority to transfer said Stock to the Buyer,
and there are no other shares of the Corporation owned or claimed by any other
person or entity. Shareholders own the Stock as follows:
# OF SHARES
John V. Verner ___________
Edward Verner ___________
Edward Graham ___________
(c) FINANCIAL STATEMENTS. Corporation has delivered to Buyer a
copy of the financial statements for the Corporation as of March 31, 1997, a
copy of which is attached as EXHIBIT "A" which present a true and complete
statement of the Corporation's condition as of that date and an accurate
representation of the results of the Corporation's operations for the period
indicated and an accurate and complete list of the Corporation's assets, fixed
or otherwise. The financial statements have been prepared in accordance with
Generally Accepted Accounting Principles consistently applied, and which are to
be consistently applied through and including the Closing. All other assets so
listed are correct and will remain so until Closing, except as might be affected
by normal business operations of the Corporation.
(d) ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
reflected or reserved against in the March 31, 1997 financial statement, the
Corporation had no material liabilities of any nature, whether accrued,
absolute, contingent, or otherwise, including tax liabilities due or to become
due and arising out of transactions entered into or any state of facts existing
prior thereto. Corporation warrants that there are no material liabilities of
any nature or any material amount not fully reflected or reserved against in
said statement. Further, all liabilities of the Corporation shall be current as
of the date of Closing and reserved for in the Closing Date Balance Sheet. For
purposes of this Agreement, the term material shall refer to any individual
liability of $250.00 or more, or aggregate liabilities of the Corporation in
excess of $2,500.00 or more.
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(e) ABSENCE OF CERTAIN CHANGES. Except as set forth in EXHIBIT "B",
from March 31, 1997 and continuing through the date of Closing, there has not
been (i) any material change in the Corporation's financial condition, assets,
liabilities or business, other than changes in the ordinary course of business,
none of which have been materially adverse; (ii) any material damage,
destruction or loss, whether or not covered by insurance, materially and
adversely affecting the Corporation's properties or business; (iii) any
declaration, or setting aside, or payment of any dividend or other distribution
in respect to the Corporation's shares, or any direct or indirect redemption,
purchase or other acquisition of any such shares; or (iv) any labor strike of
the Corporation by its employees, or any event or condition of any character,
materially and adversely affecting the Corporation's business or prospects.
(f) TITLE TO PROPERTIES. The Corporation has good and marketable
title to all of its properties and assets, real and personal, including those
reflected in the balance sheet of March 31, 1997 [except those sold or otherwise
disposed of in the ordinary course of business], subject to no security
interests, mortgage, pledge, lien, encumbrance or charge, except for liens shown
on the Balance Sheet as securing specified liabilities set forth therein (with
respect to which no default exists).
(g) Except as disclosed on EXHIBIT "C", the Corporation has not
received any request for information, notice of claim, demand or other
notification that it is or may be potentially responsible with respect to any
investigation or clean-up of hazardous, toxic or polluting substances; except in
accordance with applicable regulations, the Corporation has not treated, stored
for more than ninety (90) days, recycled or disposed of any hazardous, toxic or
polluting substances on any of its property, and to the best of Corporaton's
knowledge, no other person has treated or stored for more than ninety (90) days,
substances on any such property; no PCB's, asbestos or urea formaldehyde
insulation is present at any property owned or leased by and of the Corporation;
and there are no underground storage tanks, active or abandoned, on any of its
property.
To the best of its knowledge, the Corporation has complied
with and is not in violation of any federal, state or local law, regulation,
permit, provision or ordinance relating to the generation, storage,
transportation, treatment or disposal of hazardous, toxic or polluting
substances; have obtained and adhered to all necessary permits and other
approvals necessary to store, dispose, and otherwise handle hazardous, toxic and
polluting substances; have reported, to the extent required by federal, state
and local law, all past and present sites where hazardous, toxic or polluting
substances, if any, from the Corporation have been treated, stored or disposed.
To the best of its knowledge, the Corporation has not transported any hazardous,
toxic or polluting substances or arranged for the transportation of such
substances to any location which is listed or proposed for listing under the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended ("CERCLA") the Resource Conservation and Recovery Act, as amended,
("RCRA"), or the Clean Water Act, as amended, ("CWA") or which is the subject of
federal, state or local enforcement actions or other investigations which may
lead to claims against any of the Seller for clean-up costs, remedial work,
damages to natural resources or for personal injury claims, including, but not
limited to, claims under CERCLA, RCRA or the CWA which could lead to a claim
being made against Buyer or Corporation.
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(h) CONTRACTS. The Corporation has no contract or commitment
extending beyond March 31, 1997, or involving payment by the Corporation of more
than $1,000.00 in the aggregate, except those listed on the attached EXHIBIT "D"
which is made a part hereof. True and complete copies of all listed contracts
have been delivered to the Buyer. The Corporation has complied with all the
provisions of all such contracts and commitments to which it is a party, and is
not in default under any of them nor will the execution of this Agreement result
in a default under any of such contracts.
(i) TAX RETURNS. Both now and up to and including the Closing, the
Corporation has paid all due and payable income, social security, withholding,
sales, use, unemployment insurance and other taxes to all city, state and
federal governments, and have paid all due and payable premiums in satisfaction
of their statutory obligations for workers' compensation insurance coverage. The
Corporation has duly filed all federal, state and other tax returns required to
be filed. All taxes, assessments and other governmental charges at any time
known by the Corporation to be due from or upon the Corporation or any of its
income, property or assets have been duly paid, and no extensions for the time
of payment have been requested. The Corporation has paid, or set upon its books,
accruals or reserves adequate for the payment of all federal, state and other
income, franchise and other tax liabilities relating to any actions taken by
Corporation through the date of Closing. Shareholders hereby indemnify Buyer or
Corporation as to any future tax deficiencies, penalties and interest of
Corporation not otherwise reserved for, relating to any transaction or event
taking place prior to the Closing.
(j) DIRECTOR AND OFFICERS; COMPENSATION; BANKS. The Corporation
shall deliver to the Buyer within ten (10) days of the date of this Agreement a
true and complete list, as of the date of this Agreement, certified by the
Corporation's treasurer, showing: (i) the names of all the Corporation's
directors and officers; (ii) the names and title of all persons whose are
employed by the Corporation together with a statement of the full amount
presently paid or payable to each such person for services rendered; (iii) the
name of each bank in which the Corporation has an account or safe deposit box,
and the names of all persons authorized to draw thereon, or to have access
thereto; and (iv) the names of all persons holding powers of attorney from the
Corporation and a summary statement of the terms thereof.
(k) LITIGATION. Except as disclosed on EXHIBIT "E" for suits of a
character incident to the normal conduct of the Corporation's business and
involving not more than $1,000.00 in the aggregate, there is no litigation or
proceeding pending, or to the Corporation's knowledge threatened, against or
relating to the Corporation, its properties or business, nor does the
Corporation know or have reasonable grounds to know of any basis for any such
action, or of any governmental investigation relative to the Corporation, its
properties or business.
(l) LEASE, CONTRACTS AND LICENSES. Corporation represents and
warrants that the transfer of the Stock in accordance with the terms of this
Agreement will not constitute a prohibited assignment or transfer of any of the
licenses, leases or contracts of the Corporation, and that all of the foregoing
will remain in full force and effect without acceleration as a result of this
transaction.
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(m) DISCLOSURE. No representation or warranty by the Corporation
and/or Shareholders in this Agreement, nor any statement or certificate
furnished or to be furnished to the Buyer pursuant hereto, or in connection with
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
(n) PROFIT SHARING AND BENEFIT PLANS. Except as disclosed on
EXHIBIT "F", there are no employee benefit plans and agreements maintained by
Corporation for the benefit of its Shareholders, officers, directors or
employees. There are no contributions or payments due with respect to such plans
or agreements, nor will any such contributions or payments be due or required to
be paid on or prior to the Closing Date. Corporation is in compliance in all
respects with the presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). No event which constitutes a
reportable event as defined in Section 4043 of ERISA has occurred and is
continuing with respect to any plan covered by ERISA. There would be no
liability of any of Corporation under Subtitle D of Title IV of ERISA if any
plan were terminated as of the Closing Date and Corporation has not incurred any
withdrawal liability to any multi-employer plan and does not have any contingent
withdrawal liability to any multi-employer plan under ERISA, as amended by the
Multi-employer Pension Plan Amendments Act of 1980.
(o) GUARANTEES. Corporation is not a guarantor, surety, endorser or
accommodation party for any third party, or otherwise obligated for the debt of
any person except as reflected in the March 31, 1997 Financial Statements.
7. CONDUCT OF BUSINESS PENDING CLOSING. The Shareholders and
Corporation covenant that, pending the closing:
(a) The Corporation's business will be conducted only in the
ordinary course and there shall be no acceleration of payment of any contract or
change in rate of compensation payable to any employee in the form of a bonus or
otherwise, other than commitments previously disclosed to Buyer in writing.
(b) No change will be made in the Corporation's Articles of
Incorporation or Bylaws, except as may be first approved in writing by the
Buyer.
(c) No change will be made in the Corporation's authorized or
issued corporate shares.
(d) No contract or commitment will be entered into by or on behalf
of the Corporation, except normal commitments in the ordinary course of
business, without the Buyer's written approval.
(e) No change will be made affecting the personnel, or banking or
safe deposit arrangements of the Corporation without the Buyer's written
approval.
(f) All debts will be paid as they become due.
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(g) No contract right of the Corporation will be waived without
Buyer's written approval.
(h) No obligations except current liabilities under contracts
entered into the ordinary course of business will be incurred without Buyer's
written approval.
8. CORPORATION PERSONNEL. The Buyer shall have no obligation to employ
Corporation's personnel, if any, after the Closing.
9. CONDITIONS PRECEDENT. All obligations of the Buyer and Shareholders
under this Agreement, are, at its option, subject to the fulfillment, prior to
or at the closing, of each of the following conditions:
(a) FORD MOTOR COMPANY APPROVAL. Approval of the transaction by
Ford Division of Ford Motor Company of the transfer of the Stock to Buyer.
(b) COMPLETION OF IPO. Completion of an initial public offering of
FTAC on or before November 15, 1997.
(c) HART-SCOTT-RODINO ANTITRUST ACT. All applicable waiting periods
related to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR"
Act") shall have expired.
(d) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
Shareholders' representations and warranties contained in this Agreement shall
be true at the time of Closing.
(e) PERFORMANCE. The Shareholders shall have performed and complied
with all agreements and conditions required by this Agreement to be performed or
complied with by them prior to or at the Closing.
(f) OPINION OF SHAREHOLDERS' COUNSEL. The Corporation shall have
delivered to the Buyer an opinion of the Shareholders' counsel, Robert S.
Trinkle, Esq., Trinkle, Redman, Swanson, Byrd & Coton, P.A., 121 North Collins
St., Plant City, Florida 33564-9040, dated the closing date, that the
Corporation's corporate existence, good standing, and authorized and issued
stock are as stated in subparagraphs (a) and (b) of Paragraph 6; and that,
except as may be specified by such counsel, they do not know or have any
reasonable grounds to know of any litigation, proceeding, or governmental
investigation pending or threatened against, or relating to, the Corporation,
its properties, or business.
10. INDEMNIFICATION. The Shareholders shall indemnify and hold harmless
the Corporation and the Buyer, at all times after the date of this Agreement,
against and in respect of:
(a) UNDISCLOSED LIABILITIES. All material liabilities of the
Corporation of any nature, whether accrued, absolute, contingent, or otherwise,
existing at Closing or thereafter arising out of facts or transactions existing
or taking place prior to Closing, to the extent not reflected or reserved
against in full in the Corporation's Closing Date Balance Sheet, including,
without limitation, any tax
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liabilities to the extent not so reflected or reserved against, accrued in
respect of, or measured by the Corporation's income for any period prior to
Closing, or arising out of transactions entered into, or any state of facts
existing, prior to such date;
(b) INTERIM LIABILITIES. All material liabilities of, or claims
against, the Corporation arising out of the conduct of the Corporation's
business between March 31, 1997 and the Closing otherwise than in ordinary
course, or arising out of any presently existing contract or commitment of the
character described in subparagraph (h) of paragraph 6 and not listed therein,
or arising out of any contract or commitment entered into or made by the
Corporation between the date hereof and the Closing except as permitted by the
provisions of subparagraph (d) of paragraph 6 and not reflected on the Closing
Date Balance Sheet;
(c) MISREPRESENTATION. Any damage or deficiency resulting from any
misrepresentation, breach of warranty, or nonfulfillment of any agreement on the
part of the Corporation and/or Shareholders under this Agreement, or from any
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished to the Buyer hereunder; and
(d) INCIDENTAL EXPENSES. All actions, suits, proceedings, demands,
assessments, judgment, costs, attorneys' fees (including appellate and
bankruptcy proceedings), and expenses incident to any of the foregoing.
The Shareholders shall reimburse the Corporation or the Buyer, on
demand for any payment made or required to be made by the Corporation or the
Buyer at any time after Closing, in respect of any liability or claim to which
the foregoing indemnity relates. The maximum amount of this indemnity shall not
exceed the total purchase price.
11. HSR ACT FILINGS. To the extent such filings have not been completed
prior to the execution of this Agreement, each party shall, in cooperation with
the other parties, file or cause to be filed any reports or notifications that
may be required to be filed by it under the HSR Act, with the Federal Trade
Commission and the Antitrust Division of the Department of Justice, and shall
furnish to the others all such information in its possession as may be necessary
for the completion of the reports or notifications to be filed by the other.
Prior to making any communication, written or oral, with the Federal Trade
Commission, the Antitrust Division of the Federal Department of Justice or any
other governmental agency or authority or members of their respective staffs
with respect to this Agreement or the transactions contemplated hereby, the
Shareholders shall consult with Buyer.
12. BROKERAGE. The Shareholders and Buyer each represent and warrant to
the other that all negotiations relative to this Agreement have been carried on
by them directly with each other, without the intervention of any person, and
each party shall indemnify the other and hold it harmless against and in respect
of any claim for brokerage or other commissions relative to this Agreement, or
to the transactions contemplated hereby, and also in respect of all expenses of
any character incurred by such party in connection with this Agreement or such
transactions.
13. NATURE AND SURVIVAL OF REPRESENTATIONS. All statements contained in
any certificate or other instrument delivered by or on behalf of the Corporation
and/or Shareholders pursuant hereto,
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or in connection with the transactions contemplated hereby, shall be deemed
representations and warranties by the Corporation and/or Shareholders hereunder.
All representations, warranties, and agreements made by the Corporation and
Shareholders in this Agreement, or pursuant hereto, shall be deemed made pro
rata based on the Shareholders' ownership percentage in the Corporation
immediately prior to Closing, except as otherwise expressly stated, and shall
survive the Closing and any investigation conducted in connection with this
Agreement for a period of three (3) years.
14. CLAIMS. Following Closing, Shareholders shall have no claims
against or be due any sums from Corporation except as otherwise provided
pursuant to the terms of this Agreement and any related agreements.
15. BENEFIT. This Agreement shall be binding upon, and inure to the
benefit of, the respective legal representatives of the Shareholders, and the
successors and assigns of the Buyer. Without limiting the foregoing, the
Shareholders' rights hereunder may be enforced by it in its own name. In the
event that the Buyer causes the assets and business of the Corporation to be
transferred to some other corporation, the rights of the Buyer hereunder may be
enforced by such other corporation in its own name.
16. ENFORCEMENT. This Contract may be enforced by a specific
performance action by the Buyer if the Shareholders, without just cause, refuse
to complete this Agreement in addition to any other remedy Buyer may have at law
or in equity.
17. CONSTRUCTION. This Agreement shall be governed by the laws of the
State of Florida.
18. NOTICES. All notes, requests, demands, and other communications
hereunder shall be in writing, and shall be deemed to have been duly given if
delivered or mailed, first class postage prepaid, or delivered by overnight
courier, if to Corporation or Shareholders, at 300 W. Reynolds St., Plant City,
Florida 33566, with a copy to Robert S. Trinkle, Esq., Trinkle, Redman, Swanson,
Byrd & Coton, P.A., 121 North Collins St., Plant City, Florida 33564-9040, or at
such other address as either of them may have furnished to the Buyer in writing,
or, if to the Buyer, 350 S. Lake Destiny Dr., #200, Orlando, Florida 32810, with
a copy to: J. Gregory Humphries, Esq., Shutts & Bowen, L.L.P., 20 North Orange
Ave., Suite 1000, Orlando, FL 32801-4626, or at such other addresses as Buyer
may have furnished to Corporation in writing.
19. EXPENSES. Each of the parties shall bear all expenses incurred by
it in connection with this Agreement and in the consummation of the transactions
contemplated hereby and in preparation thereof.
20. ATTORNEYS' FEES. In the event it becomes necessary for either party
to enforce the terms of this Agreement, the prevailing party shall be entitled,
in addition to such damages or other relief as may be granted, to recover
reasonable attorneys' fees and costs, such attorneys' fees to include those
incurred on any appeal.
21. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto and supersedes and cancels any prior agreements,
representations, warranties, or
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communications, whether oral or written, among the parties hereto relating to
the transactions contemplated hereby or the subject matter herein. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an agreement in writing signed by the party
against whom or which the enforcement of such change, waiver, discharge or
termination is sought.
Executed the day and year first above written.
Signed in the presence of: CORPORATION:
BILL GRAHAM FORD CO.
- --------------------------------
Print Name:
---------------------
By:
- -------------------------------- -----------------------------
Print Name: Name:
--------------------- ---------------------------
Title:
--------------------------
SHAREHOLDERS:
- --------------------------------
Print Name:
---------------------
- -------------------------------- --------------------------------
Print Name: JOHN V. VERNER
---------------------
- --------------------------------
Print Name:
---------------------
- -------------------------------- --------------------------------
Print Name: EDWARD VERNER
---------------------
- --------------------------------
Print Name:
---------------------
- -------------------------------- -------------------------------
Print Name: EDWARD GRAHAM
---------------------
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BUYER:
MEALEY HOLDINGS, INC.
- --------------------------------
Print Name:
---------------------
By:
- -------------------------------- ---------------------------
Print Name: DONALD C. MEALEY,
--------------------- President
11
EXHIBIT 2.4
CONTRACT FOR SALE
AGREEMENT made this _______ day of April, 1997, between ROYAL JEEP
EAGLE, CHRYSLER-PLYMOUTH, INC. ("Seller"), and RAY TATUM ("Shareholder"), and
MEALEY ACQUISITIONS, INC., or its assigns ("Buyer").
The parties have reached an understanding with respect to the sale and
purchase of Fifty Percent (50%) the outstanding limited partnership interests
(the "Partnership Interests") of a Florida limited partnership to be formed by
Seller (the "Partnership") engaged in the operation of a Jeep-Eagle, Chrysler
Plymouth ("JECP") dealership in Orange County, Florida (the "Seller") and the
obligations of Seller and Buyer in connection therewith.
IT IS THEREFORE AGREED:
1. PURCHASE PRICE. The Seller agrees to sell and the Buyer agrees to
buy, fifty percent (50%) of the Partnership Interests of the Partnership (the
"Partnership Interests") and as consideration therefor to pay Two Million and
No/100 Dollars ($2,000,000.00) subject to adjustment as provided below in
Section 3, to be paid in cash, by cashiers' check made payable to the order of
Seller or wire transfer to the account of Seller at closing.
2. EARNEST MONEY. Buyer has paid herewith to Shutts & Bowen, L.L.P, as
Escrow Agent, earnest money in the sum of Twenty-Five Thousand Dollars
($25,000.00) and a letter of credit in the amount of One Hundred Fifty Thousand
Dollars ($150,000.00) in connection with the transaction contemplated hereby.
The earnest money shall be invested in a non-interest bearing account pending
its disposition in accordance with the terms of this Agreement.
3. CONDITIONS. This purchase price for the Partnership Interests set
forth in Section 1 above is based on the net worth on a FIFO basis of the
Partnership, which Seller represents to the Buyer will be Two Million Three
Hundred Twenty-Two Thousand Dollars ($2,322,000.00) after contribution of the
assets of the Seller contemplated pursuant to Section 6 of this Agreement. The
Buyer may cause to be taken a physical inventory of the assets of the
Partnership prior to Closing and Buyer and Seller shall arrive at a balance
sheet as of the date of Closing, including the assets and liabilities
transferred to the Partnership (but excluding the contribution to be made by the
General Partner and to be adjusted further by excluding balance sheet account
number 160 ) (the "Closing Date Balance Sheet"). The purchase price shall be
adjusted upwards by fifty-one percent (51%) of the amount by which the net worth
of the Partnership as determined in the Closing Date Balance Sheet is greater
than Two MillionThree HundredTwenty-Two Thousand Dollars ($2,322,000.00) and
adjusted downwards by fifty-one percent (51%) of the amount by which the net
worth of the Partnership as determined in the Closing Date Balance Sheet is less
than Two MillionThree HundredTwenty-Two Thousand Dollars ($2,322,000.00).
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In determining the net worth of the Partnership, Generally Accepted
Accounting Principles, consistently applied shall be utilized by Buyer and
Seller. In the event the Buyer and Seller cannot agree on the Closing Date
Balance Sheet, they shall each choose a certified public accountant to whom they
shall submit the items in dispute for a determination by said accountant(s)
which shall be binding on Seller and Buyer. For purposes of this Agreement the
following methods of valuation shall be deemed to be in accordance with
Generally Accepted Accounting Principles for the purpose of determining the
correctness of the Closing Date Balance Sheet:
(a) PARTS, ACCESSORIES, AND MISCELLANEOUS SUPPLIES.
(i) Buyer shall value all the new, genuine, original,
unopened, current and unused JECP factory parts and accessories which
could be returned to the manufacturer by the Partnership for the price
as defined in subparagraph (A) below. Buyer shall not be required to
include in the valuation damaged or obsolete parts. Buyer may also, at
its option, include in the valuation Seller's miscellaneous service
supplies and inventories at Seller's cost of such items. Said items
shall appear on an inventory list prepared by Buyer and Seller near the
Closing date. The inventory list is to be incorporated herein and made
a part hereof the same as if fully set forth herein and designated as
SCHEDULE "1".
(A) Buyer and Seller shall determine the
value for the parts referenced in paragraph (i) above, per an
inventory at prices which shall be determined by the most
current Manufacturer's Parts Catalog Price. Buyer may include
in the valuation any parts and inventories not required to be
purchased by paragraph 1 as shall be determined by good faith
negotiations between Buyer and Seller. Seller agrees that no
additions or deletions shall be made in such stocks except in
the ordinary course of business, and further, to keep adequate
records of such additions and deletions, which records shall
be made available to Buyer for review and verification upon
reasonable request. Buyer and Seller shall each pay for
one-half (1/2) of the cost of the inventory if an independent
inventory service is engaged by the parties.
(ii) NEW VEHICLES.
(A) The 1997 and later years new and
warrantable JECP vehicle inventory will be valued at a price
equal to the sum of Seller's original factory invoice cost
plus the cost of dealer installed items and less any rebates,
holdbacks (including supplemental holdback or year end
carryover allowances), incentive payments (including finance
incentives and advertising allowances) given Seller by the
manufacturer for any reason with respect to these vehicles or
pre-delivery inspection credits received if the work is not
performed as of Closing. Demonstrator vehicles set forth on
SCHEDULE 1-DEMO shall be purchased at the same price as new
vehicles less one percent (1%) of such value for each month or
portion thereof the vehicle has been in demonstrator service.
1996 new vehicles set forth on SCHEDULE 1-1996 shall be
purchased at the same price as new vehicles less six percent
(6%) of the invoice price. Any new vehicle with over 200 miles
on the odometer shall be scheduled on
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SCHEDULE 1-MILEAGE and shall be purchased at the same price as
new vehicles less thirty cents ($.30) per mile. Buyer shall
have no obligation to purchase any 1996 new vehicles or new
vehicles with over 200 miles on the odometer unless set forth
on such schedules.
For the purpose of the foregoing provisions, the cost of
dealer installed items shall be equal to the Seller's actual
cost of the installed item plus labor charges for installation
computed at a mutually agreed upon mark-up from Seller's
sub-let and internal costs, but in no event greater than the
charge customarily placed on Seller's vehicle inventory
records.
(B) It is further agreed that in the event
any vehicles referred to in this paragraph shall have been
damaged prior to the Closing, Seller shall have repaired such
vehicle to the satisfaction of Buyer, or in the event any such
vehicles have not been repaired, Seller and Buyer shall agree
on the cost to recover such repairs, which cost shall be
deducted from the price referred to herein. In the event
Seller and Buyer cannot agree on the cost of repairs, Buyer
shall have no obligation to include in the valuation any such
vehicle or vehicles and Seller shall retain title to such
specific vehicles. Further, Buyer may include in the valuation
in connection with the determination of the purchase price,
1996 new JECP not listed on attached SCHEDULE 1-96 and any
warrantable demonstrator JECP vehicles not identified on
attached SCHEDULE 1-DEMO at such actual cash price for each
vehicle as shall be determined by good faith negotiations
between Buyer and Seller. In the event of a failure to agree
on vehicle prices, Buyer may elect not to include in the
valuation such specific vehicles, in which case Seller shall
retain title to such specific vehicles. The new and
demonstrator automobiles to be purchased pursuant to this
section shall be listed in SCHEDULE "2"-NEW AND DEMONSTRATOR
INVENTORY to be prepared by Seller and Buyer prior to the
Closing and initialed by them at the Closing. Said Exhibit
shall show the purchase price of each vehicle computed as set
forth above.
(iii) USED VEHICLES. Buyer shall include in the
valuation Seller's used vehicle inventory as set forth in SCHEDULE 2 at
such actual cash wholesale value for each vehicle as shall be
determined by good faith negotiations between Buyer and Seller, in any
event to be not less in the aggregate than ninety percent (90%) of
Seller's inventory cost for such vehicles. The used automobiles to be
purchased pursuant to this section shall be listed in SCHEDULE "2"-USED
VEHICLES PURCHASED to be prepared by Seller and Buyer prior to the date
of this Agreement and supplemented as mutually agreed prior to the
Closing. Said Exhibit shall show the agreed valuation price of each
vehicle.
4. EXAMINATION OF RECORDS. After the execution of this Agreement,
Seller will allow the Buyer, its counsel and other representatives full access
during normal business hours, or such other reasonable times, to all the books,
tax returns, both federal, state and local, records, files, documents, assets,
properties, contracts and agreements of Seller and Seller and shall furnish the
Buyer, its officers and representatives with all information concerning the
affairs of such companies which may be reasonably requested. The Buyer agrees
that it will use its best efforts to prevent its review of the
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foregoing materials from causing any disruption of the business of the Seller.
The Buyer shall exercise its general rights under this provision to ascertain
that the business is generally as represented by the financial statement dated
January 31, 1997. The Buyer may, on or before thirty (30) days from the date of
this Agreement, cancel this Agreement if the results of the Buyer's
investigation reveal material discrepancies from that represented in the
financial statements and the earnest money paid herewith shall be returned to
the Buyer.
5. FAILURE TO CONSUMMATE SALE. In the event the Buyer fails to
consummate the purchase of the Partnership Interests from the Seller for any
reason except that described in Paragraph 4 or the failure of a condition
precedent as set forth in Paragraph 11, the earnest money paid this date shall
be forfeited and shall be retained by the Seller as liquidated damages. In the
event the Seller fails to consummate the sale of the Partnership Interests or
transfer of its assets to the Partnership for any reason except the default of
Buyer under this Agreement, the Buyer may require specific performance of this
Agreement by the Seller in any court of competent jurisdiction, in addition to
any other rights or remedies which Buyer may have at law or in equity.
6. FORMATION OF PARTNERSHIP. Prior to the Closing the Seller shall
contribute all of the assets (including intangibles) of Seller, subject to
liabilities set forth on the Closing Date Balance Sheet to the Partnership in
exchange for all of the limited partnership interests representing ninety-nine
percent (99%) of the total partnership interests (the "Partnership Interests").
The general partner of the Partnership shall be First Team Management, Inc.
which shall own one percent (1%) of the total Partnership Interests in exchange
for the payment of Twenty-Seven Thousand Four Hundred Twenty-Five Dollars
($27,425.00) subject to adjustment proportionately with the purchase price of
the assets being sold hereunder. The Partnership shall be formed in accordance
with the provisions of the Partnership Agreement attached hereto as EXHIBIT "A."
7. CLOSING. The closing of the sale shall take place at the offices of
Shutts & Bowen, L.L.P., 20 North Orange Ave., Suite 1000; Orlando, Florida
32801, or such other place mutually agreed by the parties on or before ninety
(90) days after the date of execution hereof, unless extended by the mutual
agreement of Buyer and Seller. At the Closing, Seller shall deliver to the
Buyer, free and clear of all liens, encumbrances and restrictions, an assignment
of the Partnership Interests, an updated title commitment reflecting no changes
from that provided in Paragraph 11 below, the Seller's resignation as JECP
Dealer-Operators and such other documents as required by this Agreement. Upon
such delivery, the Buyer shall deliver to the Seller, a certified or cashier's
check payable to the order of the Seller or a wire transfer of funds fully
completed to an account and bank as directed by the Seller for the total
purchase price, less the amount of the earnest money, together with interest
thereon, previously paid hereunder, and subject to any adjustments as provided
in Paragraph 3.
8. REPRESENTATIONS AND WARRANTIES. The Seller and Shareholder , jointly
and severally, represent and warrant as follows:
(a) ORGANIZATION AND STANDING OF SELLER. The Seller is duly
organized, validly existing and in good standing under the laws of the State of
Florida. Copies of the Seller's Articles of Incorporation and all amendments
thereof to date, certified by the Secretary of State of Florida,
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and of the Seller's Bylaws as amended to date, certified by the Seller's
Secretary, shall be delivered to the Buyer, and are complete and correct as of
the date of this Agreement.
(b) OWNERSHIP. Seller represents and warrants that it is the
owner, free and clear of any liens, restrictions, encumbrances or rights of
others, of all of the Partnership Interests. Seller has full right and authority
to transfer said Partnership Interests to the Buyer. Shareholder is the owner of
one hundred percent (100%) of the outstanding capital stock of the Seller, and
there are no other shares of the Seller owned or claimed by any other person or
entity.
(c) FINANCIAL STATEMENTS. Seller has delivered to Buyer a copy
of the financial statements for the Seller as of January 31, 1997, a copy of
which is attached as EXHIBIT "B" which present a true and complete statement of
the Seller's condition as of that date and an accurate representation of the
results of the Seller's operations for the period indicated and an accurate and
complete list of the Seller's assets, fixed or otherwise. The financial
statements have been prepared in accordance with Generally Accepted Accounting
Principles consistently applied, and which are to be consistently applied
through and including the Closing, except as set forth on EXHIBIT "B-1." All
other assets so listed are correct and will remain so until Closing, except as
might be affected by normal business operations of the Seller.
(d) ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
reflected or reserved against in the January 31, 1997 financial statement, the
Seller had no material liabilities of any nature, whether accrued, absolute,
contingent, or otherwise, including tax liabilities due or to become due and
arising out of transactions entered into or any state of facts existing prior
thereto. Seller warrants that there are no material liabilities of any nature or
any material amount not fully reflected or reserved against in said statement.
Further, all liabilities of the Seller shall be current as of the date of
Closing and reserved for in the Closing Date Balance Sheet. For purposes of this
Agreement, the term material shall refer to any individual liability of $500.00
or more, or aggregate liabilities of the Seller in excess of $2,500.00 or more.
(e) ABSENCE OF CERTAIN CHANGES. Except as set forth in EXHIBIT
"C", from January 31, 1997 and continuing through the date of Closing, the
Seller further represents that there has not been (i) any material change in the
Seller's financial condition, assets, liabilities or business, other than
changes in the ordinary course of business, none of which have been materially
adverse; (ii) any material damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the Seller's properties or
business; (iii) any declaration, or setting aside, or payment of any dividend or
other distribution in respect to the Seller's shares, or any direct or indirect
redemption, purchase or other acquisition of any such shares; or (iv) any labor
strike of the Seller by its employees, or any event or condition of any
character, materially and adversely affecting the Seller's business or
prospects.
(f) TITLE TO PROPERTIES. The Seller has good and marketable
title to all of its properties and assets, real and personal, including those
reflected in the balance sheet of January 31, 1997 [except those sold or
otherwise disposed of in the ordinary course of business], subject to no
security interests, mortgage, pledge, lien, encumbrance or charge, except for
liens shown on the
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Balance Sheet as securing specified liabilities set forth therein (with respect
to which no default exists).
(g) CONDITION OF EQUIPMENT. All of Seller's equipment is in
good operating condition and repair as of the date hereof and shall be as of the
date of Closing, shall be in conformity with all applicable ordinances and
regulations, and environmental, building, zoning, occupational safety and other
laws, provided Seller makes no warranty with respect to such equipment's
condition after Closing. Buyer shall have the right at any time prior to Closing
to inspect such equipment and ascertain its condition. Such equipment is all the
equipment necessary for the operation of the Seller's business in accordance
with Chrysler Motors Corporation dealer guidelines, and all equipment currently
used in the Seller's business is owned by Seller.
(h) ACCOUNTS RECEIVABLE. Seller shall deliver to Buyer a true
and complete list, certified by Seller, of the Seller's accounts receivable
within ten (10) days of the date of this Agreement. All of such accounts
receivable reflected in the Closing Date Balance Sheet are good and collectible.
All such uncollected receivables in excess of ninety (90) days shall be
reserved, at 100%, on the Closing Date Balance Sheet. Any over ninety (90) days
receivables which have been reserved on the Closing Date Balance Sheet and which
are subsequently collected shall be paid to Seller.
(i) CONDITION OF BUILDINGS. Seller's buildings and leasehold
improvements are in conformity with all applicable ordinances and regulations,
building, zoning, environmental and other laws and the conditions of any special
use or similar permits. The Seller's real property is unconditionally zoned ____
under the zoning ordinances to which it is subject and such zoning
classification permits the use of such property as an automobile dealership and
its related operations.
(j) REAL PROPERTY; HAZARDOUS WASTE. Except as disclosed on
EXHIBIT "D", there are no pollutants, contaminants, petroleum products or
by-products, asbestos or other substances, whether hazardous or not, on or
beneath the surface of any of the Seller's property including leasehold estates,
which Seller, or any other person or entity has placed, caused or allowed to be
placed upon the Seller's property, and which have caused or may cause any
investigation by any agency or instrumentality of government, which are or may
be on the Seller's property in violation of any law or regulation of any local,
state or federal government or which are or may be a nuisance or health threat
to occupants of the Seller's property or other residents of the area and no
person, firm or other legal entity has any right or option whatsoever to acquire
the property or any portion or portions thereof or any interest or interests
therein.
(k) CONTRACTS. The Seller has no contract or commitment
extending beyond April 1, 1997, or involving payment by the Seller of more than
$1,000.00 in the aggregate, except those listed on the attached EXHIBIT "E"
which is made a part hereof. True and complete copies of all listed contracts
have been delivered to the Buyer. The Seller has complied with all the
provisions of all such contracts and commitments to which it is a party, and is
not in default under any of them nor will the execution of this Agreement result
in a default under any of such contracts.
(l) TAX RETURNS. Both now and up to and including the Closing,
the Seller has paid all due and payable income, social security, withholding,
sales, use, unemployment insurance and
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other taxes to all city, state and federal governments, and have paid all due
and payable premiums in satisfaction of their statutory obligations for workers'
compensation insurance coverage. The Seller has duly filed all federal, state
and other tax returns required to be filed. All taxes, assessments and other
governmental charges at any time known by the Seller to be due from or upon the
Seller or any of its income, property or assets have been duly paid, and no
extensions for the time of payment have been requested. The Seller has paid, or
set upon its books, accruals or reserves adequate for the payment of all
federal, state and other income, franchise and other tax liabilities relating to
any actions taken by Seller through the date of Closing. Seller hereby warrants
and indemnifies Buyer or Partnership as to any future tax deficiencies,
penalties and interest of Seller not otherwise reserved for, relating to any
transaction or event taking place prior to the Closing.
(m) DIRECTOR AND OFFICERS; COMPENSATION; BANKS. The Seller
shall deliver to the Buyer within ten (10) days of the date of this Agreement a
true and complete list, as of the date of this Agreement, certified by the
Seller's treasurer, showing: (i) the names of all the Seller's directors and
officers; (ii) the names and title of all persons whose are employed by the
Seller together with a statement of the full amount presently paid or payable to
each such person for services rendered; (iii) the name of each bank in which the
Seller has an account or safe deposit box, and the names of all persons
authorized to draw thereon, or to have access thereto; and (iv) the names of all
persons holding powers of attorney from the Seller and a summary statement of
the terms thereof.
(n) LITIGATION. Except as disclosed on EXHIBIT "F" for suits
of a character incident to the normal conduct of the Seller's business and
involving not more than $2,500.00 in the aggregate, there is no litigation or
proceeding pending, or to the Seller's knowledge threatened, against or relating
to the Seller, its properties or business, nor does the Seller know or have
reasonable grounds to know of any basis for any such action, or of any
governmental investigation relative to the Seller, its properties or business.
(o) LEASE, CONTRACTS AND LICENSES. Seller represents and
warrants that the transfer of the Partnership Interests in accordance with the
terms of this Agreement will not constitute a prohibited assignment or transfer
of any of the licenses, leases or contracts of the Seller, and that all of the
foregoing will remain in full force and effect without acceleration as a result
of this transaction. However, it is acknowledged that Chrysler Motors
Corporation is required to acknowledge the Partnership as an acceptable owner
together with its partners, both general and limited.
(p) DISCLOSURE. No representation or warranty by the Seller in
this Agreement, nor any statement or certificate furnished or to be furnished to
the Buyer pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
(q) LABOR MATTERS. Within the last three (3) years, Seller has
not been the subject of any union activity or labor dispute, nor has there been
any strike of any kind called, or threatened to be called against Seller and,
Seller has not violated any applicable federal or state law or regulation
relating to labor or labor practices, and is not a party to any collective
bargaining agreement.
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(r) PROFIT SHARING AND BENEFIT PLANS. Except as disclosed on
EXHIBIT "G", there are no employee benefit plans and agreements maintained by
Seller for the benefit of its shareholders, officers, directors or employees.
There are no contributions or payments due with respect to such plans or
agreements, nor will any such contributions or payments be due or required to be
paid on or prior to the Closing Date. Seller is in compliance in all respects
with the presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). No event which constitutes a
reportable event as defined in Section 4043 of ERISA has occurred and is
continuing with respect to any plan covered by ERISA. There would be no
liability of any of Seller under Subtitle D of Title IV of ERISA if any plan
were terminated as of the Closing Date and Seller has not incurred any
withdrawal liability to any multi-employer plan and does not have any contingent
withdrawal liability to any multi-employer plan under ERISA, as amended by the
Multi-employer Pension Plan Amendments Act of 1980.
(s) DEALER AGREEMENT. No default presently exists under the
Seller's Dealer Agreement with Chrysler Motors Corporation and Seller is in good
standing under such Dealer Agreement. Seller has no knowledge of a change in
Chrysler Motors Corporation marketing strategy in its area (except the proposed
relocation of Seller) or the granting of any additional JECP dealership points,
which are not already open and operating, within a twenty (20) mile radius of
Orange County, Florida.
(t) GUARANTEES. Seller is not a guarantor, surety, endorser or
accommodation party for any third party, or otherwise obligated for the debt of
any person except as reflected in the January 31, 1997 Financial Statements.
(u) CHARGE-BACKS. Any charge-backs or claims on credit life,
disability or extended warranty policies sold by Corporation or any affiliated
entity prior to the Closing Date in excess of Two Hundred Fifty Thousand Dollars
($250,000.00) in any twelve month period commencing with the date of Closing and
continuing for conecutive twelve (12) month periods thereafter. shall be the
liability of the Seller and Seller shall reimburse Buyer for same. The Seller
represents that all of such policies and contracts have been entered into in the
ordinary course of business on terms consistent with those prevailing in the
industry and in accordance with regulatory requirements. Buyer and Seller both
agree not to cause the bulk termination of any of such policies sold by Seller
to its customers.
9. CONDUCT OF BUSINESS PENDING CLOSING. The Seller covenants that,
pending the closing:
(a) The Seller's business will be conducted only in the
ordinary course and there shall be no acceleration of payment of any contract or
change in rate of compensation payable to any employee in the form of a bonus or
otherwise, other than commitments previously disclosed to Buyer in writing.
(b) No change will be made in the Seller's Articles of
Incorporation or Bylaws, except as may be first approved in writing by the
Buyer.
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(c) No change will be made in the Seller's authorized or
issued corporate shares.
(d) No contract or commitment will be entered into by or on
behalf of the Seller, except normal commitments for the purchase of inventory,
parts and supplies, without the Buyer's written approval.
(e) No change will be made affecting the personnel, or banking
or safe deposit arrangements of the Seller without the Buyer's written approval.
(f) Except as otherwise requested by the Buyer, the Seller
will cause the Seller to use its best efforts (without making any commitment on
the Buyer's behalf) to preserve the Seller's business organization intact; to
keep available to the Seller the services of its present employees; and to
preserve for the Seller the goodwill of its suppliers, customers, and others
having business relations with the Seller.
(g) All debts will be paid as they become due.
(h) No contract right of the Seller will be waived without
Buyer's written approval.
(i) No uninsured material physical damage for loss will occur
to the assets of the Seller.
(j) No obligations except current liabilities under contracts
entered into the ordinary course of business will be incurred without Buyer's
written approval.
10. SELLER PERSONNEL. The Buyer (or the Partnership) shall have no
obligation to employ Seller's personnel after the Closing.
11. CONDITIONS PRECEDENT. All obligations of the Buyer under this
Agreement, are, at its option, subject to the fulfillment, prior to or at the
closing, of each of the following conditions:
(a) CHRYSLER MOTORS CORPORATION APPROVAL. Approval of the
transaction by Chrysler Motors Corporation of the Buyer or its designee as the
Dealer/Operator.
(b) FINANCING. Partnership shall have obtained floor-plan
financing in an amount sufficient to permit the Partnership to operate a JECP
Dealership on terms as may be prevailing at the time of Closing and conditions
as may be satisfactory to Buyer. Buyer shall use reasonable efforts to cause the
Partnership to obtain such financing.
(c) PARTNERSHIP FORMATION. Seller shall have completed the
transfer of the Assets of Seller to the Partnership in form acceptable to Buyer.
(d) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
Seller's representations and warranties contained in this Agreement shall be
true at the time of closing.
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(e) PERFORMANCE. The Seller shall have performed and complied
with all agreements and conditions required by this Agreement to be performed or
complied with by them prior to or at the Closing.
(f) OFFICER'S CERTIFICATE. The Seller has delivered to the
Buyer a certificate of the Seller's president and treasurer, certified by the
Seller's secretary, dated the closing date, certifying to the fulfillment of the
conditions specified in subparagraphs (b) and (c) of this paragraph.
(g) OPINION OF SELLER'S COUNSEL. The Seller shall have
delivered to the Buyer an opinion of the Seller's counsel, John Baum, Esq., 213
South Swoope Ave., Maitland, FL 32751, dated the closing date, that the Seller's
corporate existence, good standing, and authorized and issued stock are as
stated in subparagraphs (a) and (b) of paragraph 8; that the Seller has good and
marketable title to all its property and assets as set forth in subparagraph (i)
of paragraph 8; and that, except as may be specified by such counsel, they do
not know or have any reasonable grounds to know of any litigation, proceeding,
or governmental investigation pending or threatened against, or relating to, the
Seller, its properties, or business.
(h) TITLE BINDER.
(i) Not later than twenty (20) days after the
execution of this Agreement, Seller shall obtain at Seller's
expense a leasehold title insurance binder (ALTA FORM B)
issued by a company reasonably acceptable to Buyer, agreeing
to insure title in the Corporation with respect to a leasehold
interest in Seller's present facility (the "Property") in an
amount of not less than $5,500.000.00 together with copies of
all exceptions to title. Other than taxes for the year 1997
and subsequent years, Buyer shall have the unqualified right
to approve all exceptions and matters of title, which shall in
all respects be satisfactory to Buyer.
(ii) Within ten (10) days after receipt, Buyer's
counsel shall notify Seller's counsel in writing of any
matters in the binder which are unacceptable. Seller shall
then have twenty (20) days to cure defects or otherwise
satisfy Buyer's concerns or to notify Buyer that the alleged
defects cannot be cured by the exercise of reasonable
diligence and/or the expenditure of not more than $100,000.00.
If Seller so notifies Buyer, Buyer shall have ten (10) days to
cancel this Agreement and receive a refund of the earnest
money and all accrued interest or to waive the alleged defects
and close.
(i) HAZARDOUS WASTE INSPECTION. As of the date of full
execution hereof, Buyer shall have requested a hazardous waste report (the
"Report") from a registered environmental engineer to be delivered to Buyer. If
the Report discloses that the property subject to the Lease or underlying ground
water is contaminated with any hazardous or toxic substances, wastes, materials,
pollutants or contaminants, Buyer shall have the right to terminate this
Agreement and receive a refund of the Deposit. In the event that Buyer elects to
terminate this Agreement, said election to terminate shall be of no force and
effect if Seller, within seven (7) days of receipt of Buyer's termination
notice, notifies Buyer that it shall remove the hazardous substances from the
said property at its sole cost and expense. If Seller elects to remove the
hazardous substances it shall be obligated
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to remove the hazardous substances from the contaminated area in accordance with
applicable statutes, rules, ordinances and regulations which govern clean up of
hazardous substances. In the event of an election by Seller to clean up the
Property, Seller must provide Buyer with a certificate from a registered
environmental engineer which states that any and all substances which have
contaminated the Property or the underlying ground water have been removed in
accordance with all applicable regulations.
12. INDEMNIFICATION. The Seller and Shareholder, jointly and severally,
shall indemnify and hold harmless the Partnership and the Buyer, at all times
after the date of this Agreement, against and in respect of:
(a) UNDISCLOSED LIABILITIES. All material liabilities of the
Seller of any nature, whether accrued, absolute, contingent, or otherwise,
existing at Closing or thereafter arising out of facts or transactions existing
or taking place prior to Closing, to the extent not reflected or reserved
against in full in the Seller's Closing Date Balance Sheet, including, without
limitation, any tax liabilities to the extent not so reflected or reserved
against, accrued in respect of, or measured by the Seller's income for any
period prior to Closing, or arising out of transactions entered into, or any
state of facts existing, prior to such date;
(b) INTERIM LIABILITIES. All material liabilities of, or
claims against, the Seller arising out of the conduct of the Seller's business
between January 31, 1997 and the Closing otherwise than in ordinary course, or
arising out of any presently existing contract or commitment of the character
described in subparagraph (L) of paragraph 8 and not listed therein, or arising
out of any contract or commitment entered into or made by the Seller between the
date hereof and the Closing except as permitted by the provisions of
subparagraph (E) of paragraph 8 and not reflected on the Closing Date Balance
Sheet;
(c) MISREPRESENTATION. Any damage or deficiency resulting from
any misrepresentation, breach of warranty, or nonfulfillment of any agreement on
the part of the Seller under this Agreement, or from any misrepresentation in or
omission from any certificate or other instrument furnished or to be furnished
to the Buyer hereunder; and
(d) INCIDENTAL EXPENSES. All actions, suits, proceedings,
demands, assessments, judgment, costs, attorneys' fees (including appellate and
bankruptcy proceedings), and expenses incident to any of the foregoing.
The Seller shall reimburse the Partnership or the Buyer, on
demand for any payment made or required to be made by the Partnership or the
Buyer at any time after Closing, in respect of any liability or claim to which
the foregoing indemnity relates.
(e) In the event of any damages arising from any of the
aforesaid matters, and as part of the indemnification, Buyer may set off against
any amounts owed by Buyer to Seller any damages sustained by it. In the event
said damages exceed such sums, Seller shall pay directly to Buyer the difference
between the damages sustained and the unpaid balance.
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(f) In the event of Buyer becoming aware of facts which could
give rise to a claim entitling Buyer to set-off, before Buyer exercises this
right of set-off the Buyer must first:
(i) Notify Seller promptly upon the receipt by Buyer
of a written statement of facts that, if not corrected, would in its
judgment constitute a breach in this Agreement.
(ii) Upon the occurrence of an event which could give
rise to the Buyer making a claim for set-off, the Seller shall within
thirty (30) days (unless a shorter period is required to prevent Buyer
from suffering damage, loss or liability) after the receipt of written
notice from Buyer, (i) satisfy or take steps that will satisfy such
obligations, and pay such amount, or make adequate (in the reasonable
opinion of Buyer) provisions to reimburse Buyer for any loss incurred
or that may be incurred by Buyer as a result of the damages or (ii)
notify Buyer that it denies or disputes the alleged occurrence of such
damages giving rise to the claim for set-off asserted in the notice. If
within such thirty (30) day period Seller has, with respect to Buyer's
claim for set-off, failed to take the action required to be taken,
Buyer has the right, but not the duty to satisfy all or part of any
obligation with respect to such damages in the manner that in its sole
reasonable judgment is proper, and thereupon will be entitled to a
set-off against sums due to Seller from Buyer.
(iii) If Seller intends to defend a claim Seller
shall defend same at its own expense. Seller shall assume defense of
the claim unless Buyer reasonably objects because it has legal defenses
that Seller would not have. Seller may, at its own expense, defend the
claim in Buyer's name with their own counsel if they give notice of
their intention to do so within thirty (30) days of receiving notice of
the claim from Buyer. Buyer may participate in any action conducted by
Seller.
(iv) Regardless of whether either Seller or Buyer
choose to defend or participate in the defense of a claim, each shall
cooperate upon the other's reasonable request in the other's defense of
the claim. Such cooperation shall include furnishing records,
information and testimony and attending conferences, discovery
proceedings, hearings, trials and appeals, provided that the attendance
and participation of Buyer in such process shall be at Seller's sole
cost and expense if requested by Seller.
(v) Unless Seller has failed to perform its
obligations under subparagraph (ii) of this Section, Buyer shall not
settle any claim for which it will claim a right of set-off from Seller
without Seller's consent, which shall not be unreasonably withheld.
Buyer shall notify Seller of any firm settlement offer for any such
claim. If Seller desires to accept the offer, it shall tender the
amount of the settlement together with all other amounts due.
(g) In the event that all payables of Buyer to Seller have been paid
and the factory conducts any warranty or other type audit resulting in factory
charge backs relating to Seller's operation of the Business, then Seller shall
pay or reimburse Buyer for the amount of such charge backs subject to Seller's
opportunity to review and have same justified.
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13. BROKERAGE. The Seller and Buyer each represent and warrant to the
other that all negotiations relative to this Agreement have been carried on by
them directly with each other, without the intervention of any person, and each
party shall indemnify the other and hold it harmless against and in respect of
any claim for brokerage or other commissions relative to this Agreement, or to
the transactions contemplated hereby, and also in respect of all expenses of any
character incurred by such party in connection with this Agreement or such
transactions.
14. LEASE AGREEMENT. At closing the parties hereto shall simultaneously
enter into the Lease Agreement attached hereto as EXHIBIT "H".
15. PUT AND CALL OPTIONS. The Partnership Agreement shall be in form
mutually acceptable to the parties providing the following:
(a) Seller may Put all of his remaining forty-nine percent
(49%) Partnership Interests to Buyer for a cash purchase price of $1,000,000.00
plus or minus forty-nine percent (49%) of the increase or decrease in FIFO book
value from the Date of the January 31, 1997 Balance Sheet until the exercise of
the Put or Call, as the case may be. This Put Option shall be valid commencing
one (1) year after the earlier of (i) the date of closing, or (ii) an initial
public offering of an entity affiliated with Buyer.
(b) The Partnership Agreement shall contain a Call provision
providing the Buyer with the right to initiate the purchase of Seller's
remaining Partnership Interests on the terms set forth in (a) above.
16. NATURE AND SURVIVAL OF REPRESENTATIONS. All statements contained in
any certificate or other instrument delivered by or on behalf of the Seller
pursuant hereto, or in connection with the transactions contemplated hereby,
shall be deemed representations and warranties by the Seller hereunder. All
representations, warranties, and agreements made by the Seller in this
Agreement, or pursuant hereto, shall be deemed joint and several, except as
otherwise expressly stated, and shall survive the Closing and any investigation
conducted in connection with this Agreement.
17. POST OFFICE BOX AND TELEPHONE NUMBER. The Seller's post office box
number, P. O. Box ______, and telephone number _____________, shall be the
property of the Partnership. The Partnership agrees to turn over to Seller all
mail of a purely personal nature to Seller on a daily basis or as otherwise
requested by Seller.
18. CLAIMS. Following Closing, Seller shall have no claims against or
be due any sums from Partnership except as otherwise provided pursuant to the
terms of this Agreement and any related agreements.
19. BENEFIT. This Agreement shall be binding upon, and inure to the
benefit of, the respective legal representatives of the Seller, and the
successors and assigns of the Buyer. Without limiting the foregoing, the
Seller's rights hereunder may be enforced by it in its own name. In the event
that the Buyer causes the assets and business of the Seller to be transferred to
some other
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<PAGE>
corporation, the rights of the Buyer of the Seller hereunder may be enforced by
such other corporation in its own name.
20. ENFORCEMENT. This Contract may be enforced by a specific
performance action by the Buyer if the Seller, without just cause, refuses to
complete this Agreement in addition to any other remedy Buyer may have at law or
in equity.
21. CONSTRUCTION. This Agreement shall be governed by the laws of the
State of Florida.
22. NOTICES. All notes, requests, demands, and other communications
hereunder shall be in writing, and shall be deemed to have been duly given if
delivered or mailed, first class postage prepaid, if to Seller, at __
______________________________, with a copy to John V. Baum, Esq., 213 South
Swoope Ave., Maitland, FL 32751, or at such other address as either of them may
have furnished to the Buyer in writing, or, if to the Buyer, 350 S. Lake Destiny
Dr., #200, Orlando, Florida 32810, with a copy to: J. Gregory Humphries,
Esquire, Shutts & Bowen, L.L.P., 20 North Orange Ave., Suite 1000, Orlando, FL
32801-4626, or at such other addresses as Buyer may have furnished to Seller in
writing.
23. EXPENSES. Each of the parties shall bear all expenses incurred by
it in connection with this Agreement and in the consummation of the transactions
contemplated hereby and in preparation thereof.
24. ATTORNEYS' FEES. In the event it becomes necessary for either party
to enforce the terms of this Agreement, the prevailing party shall be entitled,
in addition to such damages or other relief as may be granted, to recover
reasonable attorneys' fees and costs, such attorneys' fees to include those
incurred on any appeal.
25. COOPERATION. Seller is an authorized JECP "Dealer" and agrees to
cooperate in assisting Buyer to obtain approval of the Partnership as a JECP
Dealer-Operator. Seller agrees to assign to the Partnership at the Closing all
of its rights and interest in any JECP parts returns privileges. Seller shall
assign to the Partnership the balance as of the date of closing allocable to
Seller in connection with any advertising cooperative or association.
26. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto and supersedes and cancels any prior agreements,
representations, warranties, or communications, whether oral or written, among
the parties hereto relating to the transactions contemplated hereby or the
subject matter herein. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an agreement in
writing signed by the party against whom or which the enforcement of such
change, waiver, discharge or termination is sought.
Executed the day and year first above written.
Signed in the presence of: SELLER:
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ROYAL JEEP EAGLE, CHRYSLER-PLYMOUTH, INC.
_____________________________
Print Name:__________________
_____________________________ By:_________________________
Print Name:__________________ Name:_______________________
Title:______________________
_____________________________
Print Name:__________________
_____________________________ _____________________________
Print Name:__________________ RAY TATUM
BUYER:
MEALEY ACQUISITIONS, INC.
_____________________________
Print Name:__________________
_____________________________ By:___________________________
Print Name:__________________ W. Warner Peacock,
Vice President
ESCROW PROVISION
The undersigned ("Escrow Agent") hereby agrees to hold and disburse the
Deposit hereinabove described in accordance with the foregoing Agreement, upon
condition, however, that if Seller and Buyer shall disagree as to the manner in
which the Deposit is to be disbursed, or if the Deposit shall become the subject
of a controversy between Seller and Buyer, the undersigned, without liability or
obligation to either Seller or Buyer, may pay the Deposit into the Registry of
the Circuit Court of the Ninth Judicial Circuit of Florida, in and for Orange
County, and commence an interpleader action in that Court with regard to the
Deposit.
ESCROW AGENT:
Shutts & Bowen, L.L.P.
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<PAGE>
By:______________________________
J. Gregory Humphries, Esq.
Seller and Buyer hereby agree to the above conditions and furthermore
Seller agrees to hold Escrow Agent harmless from any and all claims, demands,
injuries and damages arising out of or in connection with its duties hereunder
as Escrow Agent.
BUYER:
MEALEY ACQUISITIONS, INC.
By:_______________________________________
Its:___________________________________
350 South Lake Destiny Drive
Suite 200
Orlando, Florida 32810
(Address)
SELLER:
ROYAL JEEP EAGLE, CHRYSLER-PLYMOUTH, INC.
By:________________________________________
Its:
_______________________________________
_______________________________________
(Address)
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EXHIBIT 2.5
CONTRACT FOR SALE
AGREEMENT made this 9th day of June, 1997, between SEMINOLE FORD,
INC. ("Corporation"), JOHN V. VERNER AND EDWARD VERNER ("Shareholders") and
MEALEY HOLDINGS, INC., or its assigns ("Buyer").
The parties have reached an understanding with respect to the sale and
purchase of One Hundred Percent (100%) of the outstanding stock of Corporation
(the "Stock") and the obligations of Corporation, Shareholders and Buyer in
connection therewith.
IT IS THEREFORE AGREED:
1. PURCHASE PRICE. The Shareholders agree to sell and the Buyer agrees
to purchase, One Hundred Percent (100%) of the Stock and as consideration
therefor to pay Five Million Five Hundred Twenty Thousand Dollars
($5,520,000.00) plus 50% of any increase and less 50% of any decrease in the net
book value as reflected in the Closing Date Balance Sheet (as defined below), to
be paid as follows:
(a) Buyer shall receive that number of unregistered common shares
of First Team Automotive Corp., a Delaware corporation ("FTAC")
determined in accordance with the following:
$5,520,000 # of shares of FTAC
_________ = to Shareholders
("IPO Shares")
per share price
received by
FTAC in its
initial public
offering
(b) The balance of the purchase price shall be paid in cash upon
the closing by Buyer in the event of an upwards adjustment or by
the Shareholders in the event of a downward adjustment.
2. CONDITIONS. This purchase price for the Stock set forth in Section 1
above is based on the net worth of the Corporation, which Shareholders represent
to the Buyer will be ___________________________ Dollars ($__________). The
Buyer shall determine the net worth of the Corporation prior to Closing and
Buyer and Shareholders shall arrive at a balance sheet as of the date of Closing
(the "Closing Date Balance Sheet"). The purchase price shall be adjusted
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upwards by fifty percent (50%) of the amount by which the net worth of the
Corporation as determined in the Closing Date Balance Sheet is greater than
__________________________ Dollars ($___________) and adjusted downwards by
fifty percent (50%) of the amount by which the net worth of the Corporation as
determined in the Closing Date Balance Sheet is less than
___________________________ Dollars ($___________).
In determining the net worth of the Corporation, Generally Accepted
Accounting Principles, consistently applied shall be utilized by Buyer and
Corporation. In the event the Buyer and Corporation cannot agree on the Closing
Date Balance Sheet, they shall each choose a certified public accountant to whom
they shall submit the items in dispute for a determination by said accountant(s)
which shall be binding on Corporation and Buyer. For purposes of this Agreement
the assets of the limited partnership interest owned by the Corporation shall be
valued on a FIFO basis to determine the correctness of the Closing Date Balance
Sheet.
3. EXAMINATION OF RECORDS. After the execution of this Agreement,
Corporation will allow the Buyer, its counsel and other representatives full
access during normal business hours, or such other reasonable times, to all the
books, tax returns, both federal, state and local, records, files, documents,
assets, properties, contracts and agreements of Corporation and Corporation
shall furnish the Buyer, its officers and representatives with all information
concerning its affairs which may be reasonably requested. The Buyer agrees that
it will use its best efforts to prevent its review of the foregoing materials
from causing any disruption of the business of the Corporation. The Buyer shall
exercise its general rights under this provision to ascertain that the business
is generally as represented by the financial statement dated March 31, 1997. The
Buyer may, on or before thirty (30) days from the date of this Agreement, cancel
this Agreement if the results of the Buyer's investigation reveal material
discrepancies from that represented in the financial statements.
4. FAILURE TO CONSUMMATE SALE. In the event the Buyer fails to
consummate the purchase of the Stock from the Shareholders for any reason except
that described in Paragraph 3 or the failure of a condition precedent as set
forth in Paragraph 10, the earnest money paid this date shall be forfeited and
shall be retained by the Corporation as liquidated damages. In the event the
Shareholders fail to consummate the sale of the Stock for any reason except the
default of Buyer under this Agreement, the Buyer may require specific
performance of this Agreement by the Shareholders in any court of competent
jurisdiction, in addition to any other rights or remedies which Buyer may have
at law or in equity.
5. CLOSING. The closing of the sale shall take place at the offices of
Shutts & Bowen, L.L.P., 20 North Orange Ave., Suite 1000; Orlando, Florida
32801, or such other place mutually agreed by the parties contemporaneously with
the initial public offering of FTAC, unless extended by the mutual agreement of
Buyer and Shareholders. At the Closing, Shareholders shall deliver to the Buyer,
free and clear of all liens, encumbrances and restrictions, an assignment of the
Stock, and such other documents as required by this Agreement. Upon such
delivery, the Buyer shall deliver to the Shareholders, a certified or cashier's
check payable to the Shareholders of the other for the cash portion of the
purchase price, subject to any adjustments as provided in Paragraph 2 and Buyer
shall also deliver the IPO shares.
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<PAGE>
6. REPRESENTATIONS AND WARRANTIES. The Shareholders, jointly and
severally, represent and warrant as follows:
(a) ORGANIZATION AND STANDING OF CORPORATION. The Corporation is
duly organized, validly existing and in good standing under the laws of the
State of Florida. Copies of the Corporation's Articles of Incorporation and all
amendments thereof to date, certified by the Secretary of State of Florida, and
of the Corporation's Bylaws as amended to date, certified by the Corporation's
Secretary, shall be delivered to the Buyer, and are complete and correct as of
the date of this Agreement.
(b) OWNERSHIP. Shareholders are the owners, free and clear of any
liens, restrictions, encumbrances or rights of others, of all of the Stock.
Shareholders have full right and authority to transfer said Stock to the Buyer,
and there are no other shares of the Corporation owned or claimed by any other
person or entity. Shareholders own the Stock as follows:
# OF SHARES
John V. Verner _______
Edward Verner _______
(c) FINANCIAL STATEMENTS. Corporation has delivered to Buyer a copy
of the financial statements for the Corporation as of March 31, 1997, a copy of
which is attached as EXHIBIT "A" which present a true and complete statement of
the Corporation's condition as of that date and an accurate representation of
the results of the Corporation's operations for the period indicated and an
accurate and complete list of the Corporation's assets, fixed or otherwise. The
financial statements have been prepared in accordance with Generally Accepted
Accounting Principles consistently applied, and which are to be consistently
applied through and including the Closing. All other assets so listed are
correct and will remain so until Closing, except as might be affected by normal
business operations of the Corporation.
(d) ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
reflected or reserved against in the March 31, 1997 financial statement, the
Corporation had no material liabilities of any nature, whether accrued,
absolute, contingent, or otherwise, including tax liabilities due or to become
due and arising out of transactions entered into or any state of facts existing
prior thereto. Corporation warrants that there are no material liabilities of
any nature or any material amount not fully reflected or reserved against in
said statement. Further, all liabilities of the Corporation shall be current as
of the date of Closing and reserved for in the Closing Date Balance Sheet. For
purposes of this Agreement, the term material shall refer to any individual
liability of $2,500.00 or more, or aggregate liabilities of the Corporation in
excess of $25,000.00 or more.
(e) ABSENCE OF CERTAIN CHANGES. Except as set forth in EXHIBIT "B",
from March 31, 1997 and continuing through the date of Closing, there has not
been (i) any material change in the Corporation's financial condition, assets,
liabilities or business, other than changes in the ordinary course of business,
none of which have been materially adverse; (ii) any material damage,
destruction
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<PAGE>
or loss, whether or not covered by insurance, materially and adversely affecting
the Corporation's properties or business; (iii) any declaration, or setting
aside, or payment of any dividend or other distribution in respect to the
Corporation's shares, or any direct or indirect redemption, purchase or other
acquisition of any such shares; or (iv) any labor strike of the Corporation by
its employees, or any event or condition of any character, materially and
adversely affecting the Corporation's business or prospects.
(f) TITLE TO PROPERTIES. The Corporation has good and marketable
title to all of its properties and assets, real and personal, including those
reflected in the balance sheet of March 31, 1997 [except those sold or otherwise
disposed of in the ordinary course of business], subject to no security
interests, mortgage, pledge, lien, encumbrance or charge, except for liens shown
on the Balance Sheet as securing specified liabilities set forth therein (with
respect to which no default exists).
(g) Except as disclosed on EXHIBIT "C", the Corporation has not
received any request for information, notice of claim, demand or other
notification that it is or may be potentially responsible with respect to any
investigation or clean-up of hazardous, toxic or polluting substances; except in
accordance with applicable regulations, the Corporation has not treated, stored
for more than ninety (90) days, recycled or disposed of any hazardous, toxic or
polluting substances on any of its property, and to the best of Corporaton's
knowledge, no other person has treated or stored for more than ninety (90) days,
substances on any such property; no PCB's, asbestos or urea formaldehyde
insulation is present at any property owned or leased by and of the Corporation;
and there are no underground storage tanks, active or abandoned, on any of its
property.
To the best of its knowledge, the Corporation has complied with and
is not in violation of any federal, state or local law, regulation, permit,
provision or ordinance relating to the generation, storage, transportation,
treatment or disposal of hazardous, toxic or polluting substances; have obtained
and adhered to all necessary permits and other approvals necessary to store,
dispose, and otherwise handle hazardous, toxic and polluting substances; have
reported, to the extent required by federal, state and local law, all past and
present sites where hazardous, toxic or polluting substances, if any, from the
Corporation have been treated, stored or disposed. To the best of its knowledge,
the Corporation has not transported any hazardous, toxic or polluting substances
or arranged for the transportation of such substances to any location which is
listed or proposed for listing under the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended ("CERCLA") the Resource
Conservation and Recovery Act, as amended, ("RCRA"), or the Clean Water Act, as
amended, ("CWA") or which is the subject of federal, state or local enforcement
actions or other investigations which may lead to claims against any of the
Seller for clean-up costs, remedial work, damages to natural resources or for
personal injury claims, including, but not limited to, claims under CERCLA, RCRA
or the CWA which could lead to a claim being made against Buyer or Corporation.
(h) CONTRACTS. The Corporation has no contract or commitment
extending beyond March 31, 1997, or involving payment by the Corporation of more
than $1,000.00 in the aggregate, except those listed on the attached EXHIBIT "D"
which is made a part hereof. True and complete copies of all listed contracts
have been delivered to the Buyer. The Corporation has complied with
4
<PAGE>
all the provisions of all such contracts and commitments to which it is a party,
and is not in default under any of them nor will the execution of this Agreement
result in a default under any of such contracts.
(i) TAX RETURNS. Both now and up to and including the Closing, the
Corporation has paid all due and payable income, social security, withholding,
sales, use, unemployment insurance and other taxes to all city, state and
federal governments, and have paid all due and payable premiums in satisfaction
of their statutory obligations for workers' compensation insurance coverage. The
Corporation has duly filed all federal, state and other tax returns required to
be filed. All taxes, assessments and other governmental charges at any time
known by the Corporation to be due from or upon the Corporation or any of its
income, property or assets have been duly paid, and no extensions for the time
of payment have been requested. The Corporation has paid, or set upon its books,
accruals or reserves adequate for the payment of all federal, state and other
income, franchise and other tax liabilities relating to any actions taken by
Corporation through the date of Closing. Shareholders hereby indemnify Buyer or
Corporation as to any future tax deficiencies, penalties and interest of
Corporation not otherwise reserved for, relating to any transaction or event
taking place prior to the Closing.
(j) DIRECTOR AND OFFICERS; COMPENSATION; BANKS. The Corporation
shall deliver to the Buyer within ten (10) days of the date of this Agreement a
true and complete list, as of the date of this Agreement, certified by the
Corporation's treasurer, showing: (i) the names of all the Corporation's
directors and officers; (ii) the names and title of all persons whose are
employed by the Corporation together with a statement of the full amount
presently paid or payable to each such person for services rendered; (iii) the
name of each bank in which the Corporation has an account or safe deposit box,
and the names of all persons authorized to draw thereon, or to have access
thereto; and (iv) the names of all persons holding powers of attorney from the
Corporation and a summary statement of the terms thereof.
(k) LITIGATION. Except as disclosed on EXHIBIT "E" for suits of a
character incident to the normal conduct of the Corporation's business and
involving not more than $1,000.00 in the aggregate, there is no litigation or
proceeding pending, or to the Corporation's knowledge threatened, against or
relating to the Corporation, its properties or business, nor does the
Corporation know or have reasonable grounds to know of any basis for any such
action, or of any governmental investigation relative to the Corporation, its
properties or business.
(l) LEASE, CONTRACTS AND LICENSES. Corporation represents and
warrants that the transfer of the Stock in accordance with the terms of this
Agreement will not constitute a prohibited assignment or transfer of any of the
licenses, leases or contracts of the Corporation, and that all of the foregoing
will remain in full force and effect without acceleration as a result of this
transaction.
(m) DISCLOSURE. No representation or warranty by the Corporation
and/or Shareholders in this Agreement, nor any statement or certificate
furnished or to be furnished to the Buyer pursuant hereto, or in connection with
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
5
<PAGE>
(n) PROFIT SHARING AND BENEFIT PLANS. Except as disclosed on
EXHIBIT "F", there are no employee benefit plans and agreements maintained by
Corporation for the benefit of its Shareholders, officers, directors or
employees. There are no contributions or payments due with respect to such plans
or agreements, nor will any such contributions or payments be due or required to
be paid on or prior to the Closing Date. Corporation is in compliance in all
respects with the presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). No event which constitutes a
reportable event as defined in Section 4043 of ERISA has occurred and is
continuing with respect to any plan covered by ERISA. There would be no
liability of any of Corporation under Subtitle D of Title IV of ERISA if any
plan were terminated as of the Closing Date and Corporation has not incurred any
withdrawal liability to any multi-employer plan and does not have any contingent
withdrawal liability to any multi-employer plan under ERISA, as amended by the
Multi-employer Pension Plan Amendments Act of 1980.
(o) GUARANTEES. Corporation is not a guarantor, surety, endorser or
accommodation party for any third party, or otherwise obligated for the debt of
any person except as reflected in the March 31, 1997 Financial Statements.
7. CONDUCT OF BUSINESS PENDING CLOSING. The Shareholders and
Corporation covenant that, pending the closing:
(a) The Corporation's business will be conducted only in the
ordinary course and there shall be no acceleration of payment of any contract or
change in rate of compensation payable to any employee in the form of a bonus or
otherwise, other than commitments previously disclosed to Buyer in writing.
(b) No change will be made in the Corporation's Articles of
Incorporation or Bylaws, except as may be first approved in writing by the
Buyer.
(c) No change will be made in the Corporation's authorized or
issued corporate shares.
(d) No contract or commitment will be entered into by or on behalf
of the Corporation, except normal commitments in the ordinary course of
business, without the Buyer's written approval.
(e) No change will be made affecting the personnel, or banking or
safe deposit arrangements of the Corporation without the Buyer's written
approval.
(f) All debts will be paid as they become due.
(g) No contract right of the Corporation will be waived without
Buyer's written approval.
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<PAGE>
(h) No obligations except current liabilities under contracts
entered into the ordinary course of business will be incurred without Buyer's
written approval.
8. CORPORATION PERSONNEL. The Buyer shall have no obligation to employ
Corporation's personnel, if any, after the Closing.
9. CONDITIONS PRECEDENT. All obligations of the Buyer and Shareholders
under this Agreement, are, at its option, subject to the fulfillment, prior to
or at the closing, of each of the following conditions:
(a) FORD MOTOR COMPANY APPROVAL. Approval of the transaction by
Ford Division of Ford Motor Company of the transfer of the Stock to Buyer.
(b) COMPLETION OF IPO. Completion of an initial public offering of
FTAC on or before November 15, 1997.
(c) HART-SCOTT-RODINO ANTITRUST ACT. All applicable waiting periods
related to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR"
Act") shall have expired.
(d) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
Shareholders' representations and warranties contained in this Agreement shall
be true at the time of Closing.
(e) PERFORMANCE. The Shareholders shall have performed and complied
with all agreements and conditions required by this Agreement to be performed or
complied with by them prior to or at the Closing.
(f) OPINION OF SHAREHOLDERS' COUNSEL. The Corporation shall have
delivered to the Buyer an opinion of the Shareholders' counsel, Robert S.
Trinkle, Esq., Trinkle, Redman, Swanson, Byrd & Coton, P.A., 121 North Collins
St., Plant City, Florida 33564-9040, dated the closing date, that the
Corporation's corporate existence, good standing, and authorized and issued
stock are as stated in subparagraphs (a) and (b) of Paragraph 6; and that,
except as may be specified by such counsel, they do not know or have any
reasonable grounds to know of any litigation, proceeding, or governmental
investigation pending or threatened against, or relating to, the Corporation,
its properties, or business.
10. INDEMNIFICATION. The Shareholders shall, jointly and severally,
indemnify and hold harmless the Corporation and the Buyer, at all times after
the date of this Agreement, against and in respect of:
(a) UNDISCLOSED LIABILITIES. All material liabilities of the
Corporation of any nature, whether accrued, absolute, contingent, or otherwise,
existing at Closing or thereafter arising out of facts or transactions existing
or taking place prior to Closing, to the extent not reflected or reserved
against in full in the Corporation's Closing Date Balance Sheet, including,
without limitation, any tax liabilities to the extent not so reflected or
reserved against, accrued in respect of, or measured by the
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Corporation's income for any period prior to Closing, or arising out of
transactions entered into, or any state of facts existing, prior to such date;
(b) INTERIM LIABILITIES. All material liabilities of, or claims
against, the Corporation arising out of the conduct of the Corporation's
business between March 31, 1997 and the Closing otherwise than in ordinary
course, or arising out of any presently existing contract or commitment of the
character described in subparagraph (h) of paragraph 6 and not listed therein,
or arising out of any contract or commitment entered into or made by the
Corporation between the date hereof and the Closing except as permitted by the
provisions of subparagraph (d) of paragraph 6 and not reflected on the Closing
Date Balance Sheet;
(c) MISREPRESENTATION. Any damage or deficiency resulting from any
misrepresentation, breach of warranty, or nonfulfillment of any agreement on the
part of the Corporation and/or Shareholders under this Agreement, or from any
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished to the Buyer hereunder; and
(d) INCIDENTAL EXPENSES. All actions, suits, proceedings, demands,
assessments, judgment, costs, attorneys' fees (including appellate and
bankruptcy proceedings), and expenses incident to any of the foregoing.
The Shareholders shall reimburse the Corporation or the Buyer, on
demand for any payment made or required to be made by the Corporation or the
Buyer at any time after Closing, in respect of any liability or claim to which
the foregoing indemnity relates. The maximum amount of this indemnity shall not
exceed the total purchase price.
11. HSR ACT FILINGS. To the extent such filings have not been completed
prior to the execution of this Agreement, each party shall, in cooperation with
the other parties, file or cause to be filed any reports or notifications that
may be required to be filed by it under the HSR Act, with the Federal Trade
Commission and the Antitrust Division of the Department of Justice, and shall
furnish to the others all such information in its possession as may be necessary
for the completion of the reports or notifications to be filed by the other.
Prior to making any communication, written or oral, with the Federal Trade
Commission, the Antitrust Division of the Federal Department of Justice or any
other governmental agency or authority or members of their respective staffs
with respect to this Agreement or the transactions contemplated hereby, the
Shareholders shall consult with Buyer.
12. BROKERAGE. The Shareholders and Buyer each represent and warrant to
the other that all negotiations relative to this Agreement have been carried on
by them directly with each other, without the intervention of any person, and
each party shall indemnify the other and hold it harmless against and in respect
of any claim for brokerage or other commissions relative to this Agreement,or to
the transactions contemplated hereby, and also in respect of all expenses of any
character incurred by such party in connection with this Agreement or such
transactions.
13. NATURE AND SURVIVAL OF REPRESENTATIONS. All statements contained in
any certificate or other instrument delivered by or on behalf of the Corporation
and/or Shareholders pursuant hereto, or in connection with the transactions
contemplated hereby, shall be deemed representations and
8
<PAGE>
warranties by the Corporation and/or Shareholders hereunder. All
representations, warranties, and agreements made by the Corporation and
Shareholders in this Agreement, or pursuant hereto, shall be deemed joint and
several, except as otherwise expressly stated, and shall survive the Closing and
any investigation conducted in connection with this Agreement for a period of
three (3) years, except for liabilities associated with the operation of the
Seminole Ford Dealership which shall survive for a period of two (2) years.
14. CLAIMS. Following Closing, Shareholders shall have no claims
against or be due any sums from Corporation except as otherwise provided
pursuant to the terms of this Agreement and any related agreements.
15. BENEFIT. This Agreement shall be binding upon, and inure to the
benefit of, the respective legal representatives of the Shareholders, and the
successors and assigns of the Buyer. Without limiting the foregoing, the
Shareholders' rights hereunder may be enforced by it in its own name. In the
event that the Buyer causes the assets and business of the Corporation to be
transferred to some other corporation, the rights of the Buyer hereunder may be
enforced by such other corporation in its own name.
16. ENFORCEMENT. This Contract may be enforced by a specific
performance action by the Buyer if the Shareholders, without just cause, refuse
to complete this Agreement in addition to any other remedy Buyer may have at law
or in equity.
17. CONSTRUCTION. This Agreement shall be governed by the laws of
the State of Florida.
18. NOTICES. All notes, requests, demands, and other communications
hereunder shall be in writing, and shall be deemed to have been duly given if
delivered or mailed, first class postage prepaid, or delivered by overnight
courier, if to Corporation or Shareholders, at 300 W. Reynolds St., Plant City,
Florida 33566, with a copy to Robert S. Trinkle, Esq., Trinkle, Redman, Swanson,
Byrd & Coton, P.A., 121 North Collins St., Plant City, Florida 33564-9040, or at
such other address as either of them may have furnished to the Buyer in writing,
or, if to the Buyer, 350 S. Lake Destiny Dr., #200, Orlando, Florida 32810, with
a copy to: J. Gregory Humphries, Esq., Shutts & Bowen, L.L.P., 20 North Orange
Ave., Suite 1000, Orlando, FL 32801-4626, or at such other addresses as Buyer
may have furnished to Corporation in writing.
19. EXPENSES. Each of the parties shall bear all expenses incurred
by it in connection with this Agreement and in the consummation of the
transactions contemplated hereby and in preparation thereof.
20. ATTORNEYS' FEES. In the event it becomes necessary for either
party to enforce the terms of this Agreement, the prevailing party shall be
entitled, in addition to such damages or other relief as may be granted, to
recover reasonable attorneys' fees and costs, such attorneys' fees to include
those incurred on any appeal.
21. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties hereto and supersedes and cancels any prior
agreements, representations, warranties, or
9
<PAGE>
communications, whether oral or written, among the parties hereto relating to
the transactions contemplated hereby or the subject matter herein. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an agreement in writing signed by the party
against whom or which the enforcement of such change, waiver, discharge or
termination is sought.
Executed the day and year first above written.
Signed in the presence of: CORPORATION:
SEMINOLE FORD, INC.
- ------------------------
Print Name:
-------------
By:
- ------------------------ ----------------------
Print Name: Name:
------------- --------------------
Title:
--------------------
SHAREHOLDERS:
- ------------------------
Print Name:
-------------
- ------------------------ -------------------------
Print Name: JOHN V. VERNER
--------------
- ------------------------
Print Name:
-------------
- ------------------------ -------------------------
Print Name: EDWARD VERNER
-------------
BUYER:
MEALEY HOLDINGS, INC.
- ------------------------
Print Name:
-------------
10
<PAGE>
By:
- ------------------------ ---------------------
Print Name: DONALD C. MEALEY,
------------- President
11
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
FIRST TEAM MANAGEMENT, INC.
First Team Management, Inc. (the "Corporation") certifies as follows:
A. The original Certificate of Incorporation of the Corporation
was filed with the Secretary of the State of the State of Delaware on February
19, 1997 under its original name.
B. The Corporation's Certificate of Incorporation is hereby
amended and restated to read in its entirety as follows:
ARTICLE I
NAME
The name of the corporation is FIRST TEAM AUTOMOTIVE CORP. (the
"Corporation").
ARTICLE II
PURPOSE
The purpose for which the Corporation is organized is to engage in any
and all lawful acts and activities for which corporations may be organized under
the Delaware General Corporation Law.
ARTICLE III
REGISTERED OFFICE AND AGENT
The Corporation's registered office in the State of Delaware is located
at 1013 Centre Road, Wilmington, New Castle County, Delaware 19801. The name of
the Corporation's registered agent at such address is Corporation Service
Company.
<PAGE>
ARTICLE IV
AUTHORIZED CAPITAL STOCK
The total number of shares of stock which the Corporation shall have
the authority to issue is 110,000,000 shares of capital stock, classified as
100,000,000 shares of common stock, par value $.01 per share ("Common Stock"),
and 10,000,000 shares of preferred stock, par value $.01 per share ("Preferred
Stock").
4.1 COMMON STOCK. All shares of Common Stock issued and outstanding
shall be identical in all respects and will entitle the holders thereof to the
same rights and privileges. Except for and subject to those rights expressly
granted to the holders of the Preferred Stock, or except as may be provided by
the laws of the State of Delaware, the holders of Common Stock shall have all
the rights of stockholders, including but not by way of limitation, (a) the
right to receive dividends, when and as declared by the Board of Directors out
of assets lawfully available therefor, and (b) in the event of any distribution
of assets upon liquidation, dissolution or winding up of the Corporation or
otherwise, the right to receive ratably and equally all the assets and funds of
the Corporation remaining after the payment to the holders of the Preferred
Stock of any amounts which they are entitled to receive upon such liquidation,
dissolution or winding up of the Corporation.
4.2 PREFERRED STOCK. Shares of Preferred Stock may be issued from time
to time in one or more series. The Board of Directors is authorized, by
resolution adopted and filed in accordance with law, to provide for the issue of
such series of shares of Preferred Stock. Each series of shares of Preferred
Stock (a) may have such voting powers, full or limited, or may be without voting
powers; (b) may be subject to redemption at such time or times and at such
prices; (c) may be entitled to receive dividends (which may be cumulative or
non-cumulative) at such rate or rates, on such conditions and at such times and
payable in preference to, or in such relation to, the dividends payable on any
other class or classes or series of stock; (d) may have such rights upon the
dissolution of, or upon any distribution of the assets of, the Corporation; (e)
may be made convertible into, or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class or classes of
stock of the Corporation or such other corporation or other entity at such price
or prices or at such rates of exchange and with such adjustments; (f) may be
entitled to the benefit of a sinking fund to be applied to the purchase or
redemption of shares of such series in such amount or amounts; (g) may be
entitled to the benefit of conditions and restrictions upon the creation of
indebtedness of the Corporation or any subsidiary, upon the issue of any
additional shares (including additional shares of such series or of any other
series), and upon the payment of dividends or the making of other distributions
on, and the purchase, redemption or other acquisition by the Corporation or any
subsidiary of, any outstanding shares of the Corporation; and (h) may have such
other relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof; in each case as shall be stated in said
resolution or resolutions providing for the issue of such shares of Preferred
Stock. Shares of Preferred Stock of any series that have been redeemed or
repurchased by the Corporation (whether through the operation of a sinking fund
or otherwise) or that, if convertible or exchangeable, have been converted or
exchanged in accordance with their terms
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shall be retired and have the status of authorized and unissued shares of
Preferred Stock of the same series and may be reissued as a part of the series
of which they were originally a part or may, upon the filing of an appropriate
resolution in accordance with law, be reissued as part of a new series of shares
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors or as part of any other series of shares of Preferred Stock, all
subject to the conditions or restrictions on issuance set forth in the
resolution or resolutions adopted by the Board of Directors providing for the
issue of any series of shares of Preferred Stock. The shares of each class or
series of Preferred Stock may vary from the shares of any other class or series
thereof in any or all of the foregoing respects.
ARTICLE V
BOARD OF DIRECTORS
5.1 FUNCTION. All corporate powers shall be exercised by or under the
authority of, and the business and affairs of the Corporation shall be managed
under the direction of, the Board of Directors.
5.2 NUMBER OF DIRECTORS. The Board of Directors of the Corporation
shall consist of not less than two persons, the exact number to be determined
from time to time by resolution adopted by the affirmative vote of a majority of
all directors of the Corporation then holding office at any special or regular
meeting. Commencing with the consummation of the initial offering and sale by
the Corporation of shares of its Common Stock pursuant to an effective
registration statement under the Securities Act of 1933, as amended, the Board
of Directors shall be divided into three (3) classes, designated Class I, Class
II and Class III, with each class having as nearly an equal number of directors
as possible. Directors of Class I shall be initially elected to hold office for
a one-year term, directors of Class II shall be initially elected to hold office
for a two-year term, and directors of Class III shall be initially elected to
hold office for a three-year term with each director in each class to hold
office until his successor is elected and qualified, or until his earlier
resignation, removal from office or death. At each annual meeting of
shareholders, the successors of the class of directors whose term expires at the
meeting will be elected to hold office for a term expiring at the annual meeting
of shareholders held in the third year following the year of their election or
until their successors are duly elected and qualified. The initial allocation of
directors among the three classes of directors shall be determined by a
resolution of the Board of Directors.
5.3 ELECTION OF DIRECTORS. Directors shall be elected at the annual
meeting of shareholders, but when the annual meeting is not held or directors
are not elected thereat, they may be elected at a special meeting called and
held for that purpose. Directors shall be elected by a plurality of the votes
cast by the shares entitled to vote in the election at a meeting at which a
quorum is present. Elections of Directors need not be by written ballot. There
shall be no cumulative voting in the election of directors.
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<PAGE>
5.4 VACANCIES. Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, may be
filled only by the Board of Directors (and not by the shareholders), by
resolution adopted by the affirmative vote of a majority of the remaining
directors, even though less than a quorum of the Board of Directors; provided,
however, that if not so filled within ninety (90) days after the vacancy is
created, any such vacancy shall be filled by the shareholders at the next annual
meeting or at a special meeting called for that purpose. Any director so elected
or appointed shall hold office for the remainder of the full term of the class
of directors in which the new directorship was created or the vacancy occurred,
as the case may be, and until such director's successor is elected and
qualified.
5.5 REMOVAL OF DIRECTORS. Prior to the expiration of their term of
office, Directors may be removed only as provided in this Section 5.5. At a
meeting of shareholders, any director or the entire Board of Directors may be
removed, solely with Cause (as defined below) and provided the notice of the
meeting states that one of the purposes of the meeting is the removal of the
director or directors. A director may be removed only if the number of votes
cast to remove him constitutes at least 66 2/3% of the voting power of all of
the shares of capital stock then entitled to vote generally in the election of
directors, voting together as a single class. For purposes of this Section 5.5
of Article V, "Cause" shall mean the failure of a director to substantially
perform such director's duties to the Corporation (other than any such failure
resulting from incapacity due to physical or mental illness) or the willful
engaging by a director in gross misconduct injurious to the Corporation.
ARTICLE VI
INDEMNIFICATION
The Corporation shall indemnify any and all of its officers and
directors, including former officers and directors, to the fullest extent
permitted by law.
ARTICLE VII
BYLAWS
The Bylaws of the Corporation may be amended or repealed, and new
Bylaws adopted, by the affirmative vote of a majority of the members of the
Board of Directors then in office or by the affirmative vote of the holders of
not less than 66 2/3% of the voting power of all shares of capital stock of the
Corporation then entitled to vote generally in the election of directors, voting
as a single class.
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ARTICLE VIII
AMENDMENT OF CERTIFICATE
The Corporation hereby reserves the right from time to time to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation in any manner permitted by law and all rights and powers conferred
upon shareholders, directors and officers herein are granted subject to this
reservation. In addition to any vote otherwise required by law, any such
amendment, alteration, change or repeal shall require approval of both (a) the
Board of Directors by the affirmative vote of a majority of the members then in
office, and (b) the holders of a majority of the voting power of all the shares
of capital stock of the Corporation entitled to vote generally in the election
of directors, voting together as a single class; provided, however, that any
proposal to amend, alter, change or repeal the provisions of Article V, Article
VII, or this Article VIII shall require the affirmative vote of the holders of
at least 66 2/3% of the voting power of all the shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class.
ARTICLE IX
ARRANGEMENTS WITH CREDITORS
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application of any
receiver or receivers appointed for the Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting
of the creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing three
fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
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<PAGE>
ARTICLE X
LIMITATION OF CERTAIN LIABILITY OF DIRECTORS
No director shall have any personal liability to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability of a director (a) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the General Corporation Law of Delaware, or (d)
for any transaction from which the director derived an improper personal
benefit. If the General Corporation Law of Delaware is amended after the
effective date of this Certificate of Incorporation to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of a director of this Corporation shall be eliminated or limited
to the fullest permitted by the General Corporation Law of Delaware, as so
amended. Any repeal or modification of this Section either (i) by the
stockholders of this Corporation, or (ii) by an amendment to the General
Corporation Law of Delaware (unless such statutory amendment specifically
provides to the contrary) shall not adversely affect any right or protection,
existing at the time of such repeal or modification with respect to any acts or
omissions occurring either before or after such repeal or modification, of a
person serving as a director at the time of such repeal or modification.
ARTICLE XI
NO WRITTEN CONSENT
No action required or permitted to be taken at any meeting of holders
of the Common Stock of the Corporation may be taken without such meeting, the
giving of prior notice or the taking of a vote. The power of the holders of the
Common Stock of the Corporation to consent, in writing or otherwise, to the
taking of any action without such meeting, notice and vote is specifically
denied.
ARTICLE XII
SEVERABILITY
If any provisions contained in this Certificate of Incorporation shall
for any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not invalidate the entire
Certificate of Incorporation or any other provisions hereof. Such provision
shall be deemed to be modified to the extent necessary to render it valid and
enforceable and if no such modification shall render it valid and enforceable,
then the Certificate of Incorporation shall be construed as if not containing
such provisions.
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<PAGE>
ARTICLE XIII
INCORPORATOR
The name and address of the incorporator is as follows:
Robert Matera
Corporation Service Company
1013 Centre Road
Wilmington, DE 19805
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its authorized officer on the ___ day of May, 1997.
FIRST TEAM AUTOMOTIVE CORP.
By:
--------------------------------
Donald C. Mealey, President
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EXHIBIT 3.2
BYLAWS
OF
FIRST TEAM AUTOMOTIVE GROUP, INC.
ARTICLE I. MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of
this corporation shall be held at the time and place designated by the Board of
Directors of the corporation. Business transacted at the annual meeting shall
include the election of Directors of the corporation.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders shall
be held when directed by the Chief Executive Officer ("CEO") or the Board of
Directors, and shall be called by the CEO when requested in writing by the
holders of not less than a majority of all the shares entitled to vote generally
in the election of directors. A meeting requested by shareholders shall be
called for a date not less than ten nor more than ninety days after the request
is made, unless the shareholders requesting the meeting designate a later date.
The call for the meeting shall be issued by the CEO, unless the CEO or the Board
of Directors designates another person to do so. At a special meeting no
business shall be transacted and no action shall be taken other than as stated
in the notice of the meeting.
SECTION 3. PLACE. Meetings of shareholders may be held at such place
or places within or without the State of Delaware as may be designated by the
Board of Directors.
SECTION 4. NOTICE. Written notice stating the place, day and hour of
the meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called shall be delivered not less than ten nor more than
sixty days before the meeting, either personally or by first class mail, by or
at the direction of the CEO or the Officer or persons calling the meeting to
each shareholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
SECTION 5. NOTICE OF ADJOURNED MEETINGS. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the adjourned
meeting any business may be transacted that might have been transacted on the
original date of the meeting. If, however, after the adjournment the Board of
Directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given as provided in these Bylaws to each shareholder
of record on the new record date entitled to vote at such meeting.
SECTION 6. FIXING RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other purpose, the Board
of
<PAGE>
Directors shall fix in advance a date as the record date for any determination
of shareholders, such date in any case to be not more than sixty days prior to
the date on which the particular action requiring such determination of
shareholders is to be taken. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof.
SECTION 7. VOTING LIST. The Officers or agent having charge of the
stock transfer books for shares of the corporation shall make, at least ten days
before each meeting of shareholders or such shorter time as exists between the
record date and the meeting, a complete alphabetical list of the shareholders
entitled to vote at such meeting or any adjournment thereof, with the address of
and the number and class and series, if any, of shares held by each. Such list
shall be open to the examination of any stockholder, for any purposes germane to
the meeting, during ordinary business hours, 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, for said ten (10) days. The list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
shareholder at any time during the meeting. If the requirements of this section
have not been substantially complied with, the meeting on demand of any
shareholder in person or by proxy, shall be adjourned until the requirements are
complied with. If no such demand is made, failure to comply with the
requirements of this section shall not affect the validity of any action taken
at such meeting.
SECTION 8. SHAREHOLDER QUORUM. Except as otherwise provided by law, the
Certificate of Incorporation, or these ByLaws, (a) a majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders; and (b) when a specified item of business is
required to be voted on by a class or series of stock, a majority of the shares
of such class or series shall constitute a quorum for the transaction of such
item of business by that class or series. After a quorum has been established at
a shareholders' meeting, the subsequent withdrawal of shareholders, so as to
reduce the number of shareholders entitled to vote at the meeting below the
number required for a quorum, shall not affect the validity of any action taken
at the meeting or any adjournment thereof.
SECTION 9. VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or his duly authorized attorney-in-fact.
Voting at meetings of shareholders need not be by written ballot. At each
election for Directors every shareholder entitled to vote at such election shall
have the right to vote, in person or by proxy, the number of shares owned by him
for as many persons as there are Directors to be elected at that time and for
whose election he has a right to vote. Except as otherwise provided by statute,
the Certificate of Incorporation or these Bylaws, all matters submitted to a
vote of the shareholders shall be determined by the affirmative vote of the
majority of shares present in person or by proxy and entitled to vote on the
subject matter.
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SECTION 10. PROXIES. Every shareholder entitled to vote at a meeting of
shareholders or any shareholder's duly authorized attorney-in-fact may authorize
another person or persons to act for him by proxy. Every proxy must be signed by
the shareholder or his attorney-in-fact. If a proxy for the same shares confers
authority upon two or more persons and does not otherwise provide, a majority of
them present at the meeting, or if only one is present then that one, may
exercise all the powers conferred by the proxy; but if the proxy holders present
at the meeting are equally divided as to the right and manner of voting in any
particular case, the voting of such shares shall be prorated. If a proxy
expressly provides, any proxy holder may appoint in writing a substitute to act
in his place.
SECTION 11. NO ACTION WITHOUT A MEETING. Any action required or
permitted to be taken at any annual or special meeting of shareholders of the
corporation may be taken only at such duly called annual or special meeting of
shareholders; shareholders may not act by written consent in lieu of a meeting.
SECTION 12. ADJOURNMENT OF MEETINGS. If less than a quorum shall attend
at the time for which a meeting shall have been called, the meeting may be
adjourned from time to time by a majority vote of the stockholders present or
represented by proxy and entitled to vote (even though less than a quorum),
without notice other than by announcement at the meeting. Any meeting at which a
quorum is present may also be adjourned in like manner and for such time or upon
such call as may be determined by a majority vote of the stockholders present or
represented by proxy and entitled to vote. At any adjourned meeting at which a
quorum shall be present, any business may be transacted and any corporate action
may be taken which might have been transacted at the meeting as originally
called.
SECTION 13. CONDUCT OF MEETINGS. The Chief Executive Officer, or any
Vice President designated by the Chief Executive Officer, shall preside at all
regular or special meetings of stockholders. To the maximum extent permitted by
law, such presiding person shall have the power to set procedural rules
governing all aspects of the conduct of such meetings, including but not limited
to rules respecting the time allotted to stockholders to speak.
ARTICLE II. DIRECTORS
SECTION 1. FUNCTION. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall
be managed under the direction of, the Board of Directors.
SECTION 2. QUALIFICATION. Directors must be natural persons who are
18 years of age but need not be residents of this state or shareholders of
this corporation.
SECTION 3. COMPENSATION. The Board of Directors shall have authority
to fix the compensation of Directors.
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SECTION 4. NUMBER. This corporation shall initially have (2)
Directors. The number of Directors may be increased or decreased from time to
time as set forth in the Certificate of Incorporation.
SECTION 5. ELECTION AND TERM. The directors of the corporation shall be
divided into three classes: Class I, Class II and Class III. The number of
directors in each class shall be divided equally so far as possible among the
three classes. The Class I, Class II and Class III directors shall be designated
by the Board of Directors, and their terms of office shall be as follows:
(i) Class I Directors shall be elected to serve until the 1998 Annual
Meeting of Stockholders,
(ii) Class II Directors shall be elected to serve until the 1998 Annual
Meeting of Stockholders, and
(iii) Class III Directors shall be elected to serve until the 2000
Annual Meeting of Stockholders,
and until their successors shall be duly elected and qualified. At each
annual election of directors, beginning with the 1998 annual election, the
successors to the directors of each class whose term shall expire at such
meeting shall be elected to hold office for a term of three (3) years from the
date of their election and until their successors shall be duly elected and
qualified.
SECTION 6. REMOVAL AND RESIGNATION OF DIRECTORS. A director may be
removed from the Board of Directors only in accordance with the provisions of
the Certificate of Incorporation. Any director may resign at any time. Such
resignation shall take effect at the time specified therein, and if no time be
specified, at the time of its receipt by the Chief Executive Officer or
Secretary. The acceptance of a resignation shall not be necessary to make it
effective, unless so specified therein.
SECTION 7. FILLING OF VACANCIES. Any vacancy among the directors,
occurring from any cause whatsoever, may be filled only in accordance with the
provisions of the Certificate of Incorporation.
SECTION 8. REGULAR MEETINGS. The Board of Directors shall hold an
annual meeting for the transaction of any business immediately after the annual
meeting of the stockholders, provided a quorum of directors is present. Other
regular meetings may be held at such times as may be determined from time to
time by resolution of the Board of Directors.
SECTION 9. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board of Directors, by the Chief
Executive Officer, or by any three directors.
SECTION 10. NOTICE AND PLACE OF MEETINGS. Meetings of the Board of
Directors may be held at the principal office of the Corporation or at such
other place as shall be stated in the notice of such meeting. Notice of any such
meeting shall be given in compliance with applicable law. No notice of the
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annual meeting of the Board of Directors shall be required if it is held
immediately after the annual meeting of the stockholders and if a quorum is
present.
SECTION 11. BUSINESS TRANSACTED AT MEETINGS, ETC. Any business may be
transacted and any corporate action may be taken at any regular or special
meeting of the Board of Directors at which a quorum shall be present, whether
such business or proposed action be stated in the notice of such meeting or not,
unless special notice of such business or proposed action shall be required by
statute.
SECTION 12. QUORUM. A majority of the Board of Directors at any time in
office shall constitute a quorum. At any meeting at which a quorum is present,
the vote of a majority of the members present shall be the act of the Board of
Directors unless the act of a greater number is specifically required by law or
by the Certificate of Incorporation or these ByLaws. The members of the Board of
Directors shall act only as the Board of Directors and the individual members
thereof shall not have any powers as such.
SECTION 13. COMMITTEES.
13.1 EXECUTIVE COMMITTEE. The Board of Directors may, by
resolution passed by a majority of the members of the Board of Directors then in
office, designate one (1) or more of their number to constitute an Executive
Committee to hold office at the pleasure of the Board of Directors, which
Committee shall, during the intervals between meetings of the Board of
Directors, have and exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, subject only to such
restrictions or limitations as the Board of Directors may from time to time
specify, or as limited by law. Any member of the Executive Committee may be
removed at any time, with or without cause, by a resolution passed by a majority
of the members of the Board of Directors then in office. Any person ceasing to
be a director shall IPSO FACTO cease to be a member of the Executive Committee.
Any vacancy in the Executive Committee occurring from any cause whatsoever may
be filled from among the directors by a resolution passed by a majority of the
entire Board of Directors.
13.2 OTHER COMMITTEES. Other Committees may be appointed by
resolution adopted by a majority of the members of the Board of Directors then
in office, which Committees shall hold office for such time and have such powers
and perform such duties as may from time to time be assigned to them by the
Board of Directors.
13.3 RESIGNATION. Any member of a Committee may resign at any
time. Such resignation shall be made in writing and shall take effect at the
time specified therein, or, if no time be specified, at the time of its receipt
by the Chief Executive Officer or Secretary. The acceptance of a resignation
shall not be necessary to make it effective unless so specified therein.
13.4 QUORUM; VOTING. A majority of the members of a
Committee shall constitute a quorum. The act of a majority of the members of a
Committee present
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at any meeting at which a quorum is present shall be the act of such Committee.
The members of a Committee shall act only as a Committee, and the individual
members thereof shall not have any powers as such.
13.5 RECORD OF PROCEEDINGS, ETC. Each Committee shall
keep a record of its proceedings, which record shall be filed with the minutes
of the proceedings of the Board of Directors.
13.6 ORGANIZATION, MEETINGS, NOTICES, ETC. A Committee may
hold its meetings at the principal office of the Corporation, or at any other
place which a majority of the Committee may at any time agree upon. Each
Committee may make such rules as it may deem expedient for the regulation and
carrying on of its meetings and proceedings. Unless otherwise ordered by a
Committee, any notice of a meeting of such Committee may be given by the
Secretary of the Corporation or by the chairman of the Committee and shall be
sufficiently given if mailed to each member at his residence or usual place of
business at least five (5) days before the day on which the meeting is to be
held, or if sent to him at such place by facsimile, telegraph or cable, or
delivered personally or by telephone not later than twenty-four (24) hours
before the time at which the meeting is to be held.
13.7 COMPENSATION. The members of any Committee shall be
entitled to such compensation as may be allowed them by resolution of the Board
of Directors.
SECTION 14. DIRECTOR CONFLICTS OF INTEREST. No contract or other
transaction between this corporation and one or more of its Directors or any
other corporation, firm, association or entity in which one or more of the
Directors are directors or officers or are financially interested, shall be
either void or voidable because of such relationship or interest or because such
Director or Directors are present at the meeting of the Board of Directors or a
committee thereof which authorizes, approves or ratifies such contract or
transaction or because his or their votes are counted for such purposes, if:
(a) the fact of such relationship or interest is disclosed or known to
the Board of Directors or committee which authorizes, approves or ratifies the
contract or transaction by a vote or consent of a majority of the disinterested
Directors, even though the disinterested directors may be less than a quorum; or
(b) the fact of such relationship or interest is disclosed or known to
the shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote; or
(c) the contract or transaction is fair to the corporation at the time
it is authorized by the Board of Directors, a committee thereof, or the
shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
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SECTION 15. ACTION WITHOUT A MEETING. Any action required to be taken
at a meeting of the Board of Directors, or any action which may be taken at a
meeting of a committee thereof, may be taken without a meeting if a consent in
writing, setting forth the action so to be taken, signed by all of the
Directors, or all of the members of the committee, as the case may be, is filed
in the minutes of the proceedings of the Board or of the committee. Such consent
may: (a) be signed in counterparts, (b) have faxed signatures, copies of which
shall be effective when received by the corporation, and (c) shall have the same
effect as a unanimous vote.
ARTICLE III. OFFICERS
SECTION 1. NUMBER. The Officers of the corporation shall be a Chief
Executive Officer, one or more Vice Presidents, a Secretary, one or more
Assistant Secretaries, a Treasurer, and one or more Assistant Treasurers, and
such other officers as may be appointed in accordance with the provisions of
Section 3 of this Article III. The Board of Directors in its discretion may also
elect a Chairman of the Board of Directors and/or a Vice Chairman of the Board
of Directors, and may designate the Chairman of the Board to also serve as Chief
Executive Officer.
SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers,
except as provided in Section 3 of this Article III, shall be appointed annually
by the Board of Directors. Each such officer shall, except as herein otherwise
provided, hold office until his successor shall have been chosen and shall
qualify. Except as otherwise provided by law, any number of offices may be held
by the same person.
SECTION 3. OTHER OFFICERS. Other officers, including a president, one
or more additional executive vice presidents, vice presidents, assistant
secretaries or assistant treasurers, may from time to time be appointed by the
Board of Directors or Executive Committee, which other officers shall have such
powers and perform such duties as may be assigned to them by authority
appointing them.
SECTION 4. REMOVAL OF OFFICERS. Any Officer or agent elected or
appointed by the Board of Directors may be removed by the Board, with or without
cause, whenever in its judgment the best interests of the corporation will be
served thereby. Any vacancy, however occurring, in any office may be filled by
the Board of Directors. Removal of any Officer shall be without prejudice to the
contract rights, if any, of the person so removed; however, election or
appointment of an Officer or agent shall not of itself create contract rights.
SECTION 5. CHAIRMAN AND/OR VICE CHAIRMAN OF THE BOARD OF DIRECTORS. The
Chairman and/or Vice Chairman of the Board of Directors shall be a director and
shall preside at all meetings of the Board of Directors at which he shall be
present, and shall have such power and perform such duties as may from time to
time be assigned to him by the Board of Directors.
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SECTION 6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall,
when present, preside at all meetings of the stockholders. He shall have power
to call special meetings of the stockholders or the Board of Directors at any
time. He shall be the chief executive officer of the Corporation, and shall have
the general direction of the business, affairs and property of the Corporation,
and of its several officers, and shall have and exercise all such powers and
discharge such duties as usually pertain to the office of Chief Executive
Officer.
SECTION 7. PRESIDENT; VICE PRESIDENTS. The President, if any, or Vice
Presidents, or any of them, shall, subject to the direction of the Board of
Directors, at the request of the Chief Executive Officer or in case of his
inability to perform his duties for any cause, perform the duties of the Chief
Executive Officer, and, when so acting, shall have all the powers of, and be
subject to all restrictions upon, the Chief Executive Officer. The President, if
any, and the Vice Presidents shall also perform such other duties as may be
assigned to them by the Board of Directors, and the Board of Directors may
determine the order of priority among the Vice Presidents.
SECTION 8. SECRETARY. The Secretary shall perform such duties as are
usually incident to the office of Secretary, or as may from time to time be
assigned to him by the Board of Directors, or as are prescribed by these ByLaws.
SECTION 9. TREASURER. The Treasurer shall perform such duties and
have powers as are usually incident to the office of Treasurer or may from time
to time be assigned to him by the Board of Directors.
ARTICLE IV. STOCK CERTIFICATES
SECTION 1. ISSUANCE. Every holder of shares in the corporation shall
be entitled to have a certificate, representing all shares to which he is
entitled. No certificate shall be issued for any share until such share is fully
paid.
SECTION 2. FORM. Certificates representing shares in the corporation
shall be signed by the Chairman, President or Vice President and/or the
Secretary or an Assistant Secretary and may be sealed with the seal of this
corporation or a facsimile thereof. The signatures of the Chairman, President or
Vice President and/or the Secretary or Assistant Secretary may be facsimiles if
the certificate is manually signed on behalf of a transfer agent or a registrar,
other than the corporation itself or an employee of the corporation. In case any
Officer who signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such Officer before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such Officer at the date of its issuance.
SECTION 3. TRANSFER OF STOCK. The corporation shall register a stock
certificate presented to it for transfer if the certificate is properly endorsed
by the holder of record or by his duly authorized attorney.
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SECTION 4. LOST, STOLEN, OR DESTROYED CERTIFICATES. The corporation
shall issue a new stock certificate in the place of any certificate previously
issued if the holder of record of the certificate (a) makes proof in affidavit
form that it has been lost, destroyed or wrongfully taken; (b) requests the
issue of a new certificate before the corporation has notice that the
certificate has been acquired by a purchaser for value in good faith and without
notice of any adverse claim; and (c) satisfies any other reasonable requirements
imposed by the corporation, including bond in such form as the corporation may
direct, to indemnify the corporation, the transfer agent, and registrar against
any claim that may be made on account of the alleged loss, destruction or theft
of a certificate.
ARTICLE V. MISCELLANEOUS PROVISIONS
SECTION 1. FISCAL YEAR. The fiscal year of the corporation shall
commence on the first day of January and end on the last day of December, or
such other dates as may be determined by the Board of Directors.
SECTION 2. CORPORATE SEAL. The corporation may use a corporate seal
which shall be in such form as approved by the Board of Directors and may be
altered at their pleasure. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 3. NOTICES. Any notice required by these ByLaws to be given
shall be sufficient if given by depositing the same in a post office or letter
box in a sealed postpaid wrapper addressed to the person entitled thereto at his
address, as the same appears upon the books of the corporation, or transmitted
by facsimile, telegraph or cable to such person at such address; and such notice
shall be deemed to be given at the time it is mailed, transmitted by facsimile,
telegraphed or cabled.
SECTION 4. WAIVER OF NOTICE. Any stockholder or director may at any
time, by writing or by facsimile, telegraph or cable, waive any notice required
to be given under these ByLaws.
SECTION 5. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation, and in such manner, as shall from time to time be
designated by resolution of the Board of Directors.
SECTION 6. DEPOSITS. All funds of the corporation shall be deposited
from time to time to the credit of the corporation in such bank or banks, trust
companies or other depositories as the Board of Directors may select, and, for
the purpose of such deposit, checks, drafts, warrants and other orders for the
payment of money which are payable to the order of the corporation, may be
endorsed for deposit, assigned and delivered by any officer of the Corporation,
or by such agents of the corporation as the Board of Directors or the Chief
Executive Officer may authorize for that purpose.
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SECTION 7. VOTING STOCK OF OTHER CORPORATIONS. Except as otherwise
ordered by the Board of Directors or the Executive Committee, the Chief
Executive Officer or any Vice President shall have full power and authority on
behalf of the corporation to attend and to act and to vote at any meeting of the
stockholders of any corporation of which the corporation is a stockholder and to
execute a proxy to any other person to represent the corporation at any such
meeting, and the Chief Executive Officer or any Vice President or the holder of
any such proxy, as the case may be, shall possess and may exercise any and all
rights and powers incident to ownership of such stock and which the corporation
might have possessed and exercised if present. The Board of Directors, the
Executive Committee or the President may from time to time confer like powers
upon any other person or persons.
SECTION 8. INDEMNIFICATION OF OFFICERS AND DIRECTORS. The corporation
shall indemnify any and all its directors or officers, including former
directors or officers, and any employee who shall serve as an officer or
director of any corporation at the request of the corporation, to the fullest
extent permitted under and in accordance with the laws of the State of Delaware.
ARTICLE VI. AMENDMENT
These ByLaws may be repealed or amended, and new ByLaws may be adopted,
by the affirmative vote of a majority of the members of the Board of Directors
then in office, or by the affirmative vote of the holders of not less than 66
2/3% of the voting power of all shares of capital stock of the corporation then
entitled to vote generally in the election of directors, voting as a single
class.
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EXHIBIT 4.2
FIRST TEAM AUTOMOTIVE GROUP, CORP. 1997 STOCK OPTION PLAN
1. PURPOSES. The purposes of this 1997 Stock Option Plan (the "Plan")
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to the Employees of
the Company or its Subsidiaries as well as other individuals who perform
services for the Company or its subsidiaries, and to promote the success of the
Company's business. Options granted hereunder may be either Incentive Stock
Options or Nonqualified Stock Options, at the discretion of the Committee and as
reflected in the terms of the written option agreement.
2. DEFINITIONS. As used herein, the following definitions
shall apply:
"BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company.
"CHANGE-OF-CONTROL is defined in Section 13(b) of the Plan.
"COMMON STOCK" shall mean the common stock, par value $.01
per share, of the Company.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMPANY" shall mean First Team Automotive Group, Corp., a
Delaware corporation, and its successors and assigns.
"COMMITTEE" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
"CONTINUOUS STATUS AS AN EMPLOYEE" shall mean the absence of
any interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Committee.
"EMPLOYEE" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
"EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
"INCENTIVE STOCK OPTION" or "ISO" shall mean a stock option
intended to qualify as an "incentive stock option" within the meaning of Section
422 of the Code.
"NONQUALIFIED STOCK OPTION" or "NSO" shall mean a stock option
not intended to qualify as an Incentive Stock Option.
<PAGE>
"OPTION" shall mean a stock option granted pursuant to the
Plan.
"OPTIONED STOCK" shall mean the Common Stock subject to an
Option.
"OPTIONEE" shall mean the recipient of an Option.
"PARENT" shall mean a "parent corporation" of the Company,
whether now or hereafter existing, as defined in Section 424(e) of the Code.
"RULE 16b-3" shall mean Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange Act or any successor rule.
"SHARE" shall mean a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
"SUBSIDIARY" shall mean a "subsidiary corporation", of the
Company, whether now or hereafter existing, as defined in Section 424(f) of the
Code.
"TRANSFEREE" shall mean a "transferee" of the Optionee as
defined in Section 12 of the Plan.
3. STOCK. Subject to the provisions of Section 13 of the Plan, the
maximum aggregate number of Shares which may be issued under the Plan is
_______. If an option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
further grant under the Plan.
4. ADMINISTRATION.
(a) COMMITTEE. The Plan at all times shall be administered by
a Committee appointed by the Board of Directors. The Committee shall consist of
not less than two members of the Board of Directors, each of whom must be a
"disinterested person" as defined-in Rule 16b-3 and an "outside director" as
defined for purposes of Section 162(m) of the Code.
(b) POWERS OF THE COMMITTEE. Subject to the provisions of the
Plan, the Committee shall have the authority, in its discretion: (i) to grant
Incentive Stock Options or Nonqualified Stock Options; (ii) to determine the
fair market value of the Common Stock; (iii) to determine the exercise price per
Share of Options to be granted; (iv) to determine the persons to whom, and the
time or times at which, Options shall be granted and the number of Shares to be
represented by each Option; (v) to determine the vesting schedule of Options to
be granted; (vi) to prescribe, amend and rescind rules and regulations relating
to the Plan; (vii) to determine the terms and provisions of each Option granted
under the Plan (which need not be identical); (viii) to accelerate the exercise
date of any Option; (ix) to authorize any person to execute on behalf of the
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Company any instrument required to effectuate the grant of an option previously
granted by the Committee; (x) subject to the provisions of the Plan and subject
to such additional limitations and restrictions as the Committee may impose, to
delegate to specific members of management or to a committee of management
personnel the authority to determine: (A) the persons to whom, and the time and
times at which, options shall be granted and the number of Shares to be
represented by each Option; (B) the vesting schedule of Options; (C) the term of
options; and (D) other terms and conditions of any options, provided that the
Committee shall not have the authority to delegate such matters with respect to
awards to be granted to any person subject to Section 16 of the Exchange Act or
any "covered employee" under Section 162(m) of the Code; and (xi) to interpret
the Plan and make all other determinations deemed necessary or advisable for the
administration of the Plan. The Committee may require the voluntary surrender of
all or any portion of any option granted under the Plan as a condition precedent
to a grant of a new Option to such Optionee. Subject to the provisions of the
Plan, such new Option shall be exercisable at the price, during the period and
on such other terms and conditions as are specified by the Committee at the time
the new Option is granted. Upon surrender, the options surrendered shall be
unexercisable and the Shares previously subject to such Options shall be
available for the grant of other Options.
(c) EFFECT OF THE COMMITTEE'S DECISION. All decisions,
determinations and interpretations of the Committee shall be final and binding
on all Optionees or Transferees, if applicable.
5. ELIGIBILITY. Incentive Stock Options may be granted only to
Employees. Nonqualified Stock Options may be granted to Employees, non-Employee
directors (in accordance with the provisions of Section 6 of the Plan),
independent contractors and agents. Any person who has been granted an Option
may, if he is otherwise eligible, be granted an additional option or Options.
Subject to the provisions of Section 13 of the Plan, the maximum number of
Shares with respect to which Options may be granted under the Plan to any
Employee in any calendar year is an amount equal to one percent (1%) of the
total number of shares of Common Stock issued and outstanding as of the date of
such grant. Except as otherwise provided under the Code, to the extent that the
aggregate fair market value of stock for which Incentive Stock Options (under
all stock option plans of the Company and of any Parent or Subsidiary) are
exercisable for the first time by an Employee during any calendar year exceeds
$100,000, such Options shall be treated as Nonqualified Stock Options. For
purposes of this limitation, (a) the fair market value of stock is determined as
of the time the Option is granted, and (b) the limitation is applied by taking
into account options in the order in which they were granted. The Plan shall not
confer upon any Optionee any right with respect to continuation of employment,
nor shall it interfere in any way with his right or the Company's right to
terminate his employment at any time.
6. AUTOMATIC GRANT OF OPTION TO NON-EMPLOYEE DIRECTORS. Subject to
Section 3 of the Plan, each person who is a non-Employee director of the Company
on the effective date of the Plan and each person who is a non-Employee director
of the Company on the first business day following any annual meeting of
shareholders of the Company shall automatically receive on such date an option
to acquire 1,000 Shares, as adjusted in accordance with the provisions
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of Section 13 of the Plan. The exercise price for the Shares to be issued
pursuant to Options granted under this Section 6 shall be as set forth in
Section 9 (a) (ii) of the Plan. The Options granted pursuant to this Section 6
shall have a term of ten years from the date of grant. The foregoing formula may
not be amended more than once every six months other than to comport with
changes in the Code, the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder. Non-Employee directors shall have the right,
if they so wish, to decline receipt of any options to be granted under this
Section 6.
7. TERM OF PLAN. The Plan shall become effective upon its adoption by
the Board of Directors; provided that, if the Plan is not approved by the
shareholders of the Company in accordance with Section 18 of the Plan within
twelve months after the date of adoption by the Board of Directors, the Plan and
any options granted thereunder shall terminate and become null and void. The
Plan shall continue in effect for a period of ten (10) years after its effective
date, unless sooner terminated in accordance with Section 15 of the Plan.
8. TERM OF OPTION. The term of each Option shall be ten years from the
date of grant thereof or such shorter term as may be determined by the
Committee; provided, however, that the term of each option granted under Section
6 of the Plan shall be ten years from the date of grant. However, in the case of
an Incentive Stock Option granted to an Employee who, immediately before the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or subsidiary, the term of the Incentive Stock Option shall be five years from
the date of grant thereof or such shorter time as may be determined by the
Committee.
9. EXERCISE PRICE AND CONSIDERATION.
(a) PRICE. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as determined by
the Committee, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
which is: (A) granted to an Employee who, immediately before the grant of such
Incentive Stock Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the fair
market value per Share on the date of grant; and (B) granted to any other
Employee, the per share exercise price shall be no less than the fair market
value per Share on the date of grant.
(ii) In the case of a Nonqualified Stock Option,
the per share exercise price shall be no less than the fair market value per
Share on the date of grant and, with respect to Options granted to non-Employee
directors as provided in Section 6 of the Plan, shall be equal to the fair
market value per Share on the date of the grant.
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(b) CERTAIN CORPORATE TRANSACTIONS. Notwithstanding Section
9(a) of the Plan, in the event the Company substitutes an option for a stock
option issued by another corporation in connection with a corporate transaction,
such as a merger, consolidation, acquisition of property or stock, separation
(including a spin-off or other distribution of stock or property);
reorganization (whether or not such reorganization comes within the definition
of such term in Section 368 of the Code) or partial or complete liquidation
involving the Company and such other corporation, the exercise price of such
substituted Option shall be as determined by the Committee in its discretion
(subject to the provisions of section 424 (a) of the Code in the case of a stock
option that was intended to qualify as an "incentive stock option") to preserve,
on a per share basis immediately after such corporate transaction, the same
ratio of fair market value per option share to exercise price per share which
existed immediately prior to such corporate transaction under the option issued
by such other corporation.
(c) DETERMINATION OF FAIR MARKET VALUE. The fair market value
per share shall be determined by the Committee in its discretion; provided,
however, that where there is a public market for the Common Stock, the fair
market value per Share shall be as follows: (i) if the Common Stock is listed or
admitted for trading on any United States national securities exchange, or if
actual transactions are otherwise reported on a consolidated transaction
reporting system, the closing price of Common Stock on such exchange or
reporting system, as the case may be, on the date of grant of the Option, as
reported in any newspaper of general circulation, or (ii) if the Common Stock is
quoted on the National Association of Securities Dealers Automated Quotations
("NASDAQ") System, or any similar system of automated dissemination of
quotations of securities prices in common use, the mean between the closing bid
and asked quotations for Common Stock on the date of grant, as reported by a
generally recognized reporting service.
(d) PAYMENT. The consideration to be paid for the Shares to be
issued upon exercise of an option, including the method of payment, shall be
determined by the Committee and may consist entirely of cash, check, promissory
note, or other shares of the Company's capital stock having a fair market value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised, or any combination of such methods of
payment, or such other consideration and method of payment for the issuance of
Shares to the extent permitted under Delaware law and by the Committee. When
payment of the exercise price for the Shares to be issued upon exercise of an
option consists of shares of the Company's capital stock, such shares will not
be accepted as payment unless the Optionee or Transferee, if applicable, has
held such shares for the requisite period necessary to avoid a charge to the
Company's earnings for financial reporting purposes.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE. Any Option granted hereunder shall
be exercisable at such times and under such conditions as determined by the
Committee, including performance criteria with respect to the Company and/or the
Optionee, and as shall be permissible under the terms of the Plan. An Option may
not be exercised for a fraction of a Share. An Option shall be deemed
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<PAGE>
to be exercised when written notice of such exercise has been given to the
Company in accordance with the terms of the Option by the person entitled to
exercise the Option and full payment for the Shares with respect to which the
Option is exercised has been received by the Company. Full payment may, as
authorized by the Committee, consist of any consideration and method of payment
allowable under Section 9(d) of the Plan.
(b) RIGHTS AS A SHAREHOLDER. Until the issuance of the stock
certificate evidencing such Shares (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company),
which in no event will be delayed more than thirty (30) days from the date of
the exercise of the Option, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in the Plan. Exercise of an option in
any manner shall result in a decrease in the number of Shares which thereafter
may be available, both for purposes of the Plan and for sale under the Option,
by the number of Shares as to which the option is exercised.
11. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF STATUS AS AN EMPLOYEE. Unless otherwise
determined by the Committee, if any Employee ceases to be in Continuous Status
as an Employee, other than (i) by reason of retirement or (ii) as a result of
the Employee's resignation or a termination by the Company for deliberate,
willful or gross misconduct, any Option held by such Employee or Transferee, if
applicable, shall be exercisable within twelve months (three months in the case
of ISO's) after the date said Employee ceases to be in Continuous Status as an
Employee (or such longer period as the Committee shall determine) to the extent
the Employee or Transferee, if applicable, was entitled to exercise such Option
as of the date of such Employee's termination of employment.
(b) RETIREMENT OF OPTIONEE. Unless otherwise determined by the
Committee, if any Employee ceases to be in Continuous Status as an Employee by
reason of such Employee's retirement, any Option held by such Employee or
Transferee, if applicable, shall be exercisable within thirty-six months (three
months in the case of ISO's) after the date said Employee ceases to be in
Continuous Status as an Employee to the extent that the Employee or Transferee,
if applicable, was entitled to exercise such option as of the date of such
Employee's retirement. For purposes of the Plan, "retirement" means termination
of services as an Employee at or after age 65 other than as a result of
deliberate, willful or gross misconduct.
(c) RESIGNATION; TERMINATION FOR MISCONDUCT. If any Employee
ceases to be in Continuous Status as an Employee as a result of the Employee's
resignation or a termination by the Company for deliberate, willful or gross
misconduct, any Option held by such Employee or Transferee, if applicable, shall
terminate immediately and automatically on the date of said Employee's
resignation or termination as an Employee unless otherwise determined by the
Committee.
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(d) DEATH OF OPTIONEE. Unless otherwise determined by the
Committee, subject to the provisions of the Plan, (i) any Option held by an
Optionee or Transferee, if applicable, at the time of the Optionee's death may
be subsequently exercised by either the legal representative of the Optionee's
estate, the person or persons who acquired the right to exercise the Option by
bequest or inheritance, or such Transferee, as the case may be, but only to the
extent the Optionee or Transferee was entitled to exercise such option as of the
date of Optionee's death; and (ii) if an Optionee shall die while employed by
the Company or within three months after the termination of his employment, the
Option may be exercised at any time within thirty-six months following the date
of his death, by either the Optionee's estate, a person or persons who acquired
the right to exercise the Option by bequest or inheritance or a Transferee, as
the case may be, but only to the extent the Optionee or Transferee was entitled
to exercise such Option as of the date of the Optionee's death.
(e) EXPIRATION OF OPTIONS. None of the events described above
in this Section 11 shall extend the period of exercisability of the Option
beyond the expiration date thereof. Unless otherwise determined by the
Committee, to the extent that an Optionee or Transferee, if applicable, was not
entitled to exercise an option on the date said Optionee ceased to be in
Continuous Status as an Employee or the date of the Optionee's death, or if the
Optionee or Transferee does not exercise such Option (which they were entitled
to exercise) within the time period specified in this Section 11, the option
shall terminate and become null and void. Notwithstanding the provisions of
Section 11(a), 11(b) or 11(d) of the Plan, no Options shall be exercisable after
an Optionee ceases to be in Continuous Status as an Employee in the event the
Optionee shall have, during the time period in which his Options are
exercisable, engaged in deliberate action which, as determined by the Committee,
causes substantial harm to the interests of the Company or constitutes a breach
of any obligation of the Optionee to the Company. In such event, the Optionee or
Transferee, if applicable, shall forfeit all rights to any unexercised option as
of the date of such deliberate action.
12. NON-TRANSFERABILITY OF OPTIONS. During an Optionee's lifetime, an
option may be exercisable only by the Optionee and an Option granted under the
Plan and the rights and privileges conferred thereby shall not be subject to
execution, attachment or similar process and may not be sold, pledged, assigned,
hypothecated, transferred or otherwise disposed of in any manner (whether by
operation of law or otherwise) other than by will or by the laws of descent and
distribution. Notwithstanding the foregoing, to the extent permitted by
applicable law and Rule 16b3, the Committee may grant Nonqualified Stock Options
that permit an Optionee to transfer such Options to any of the following: (1) a
spouse or lineal descendant of the Optionee; (2) a trust established primarily
for the benefit of the Optionee and/or a spouse or lineal descendant of said
Optionee; or (3) any charitable organization exempt from income tax under
Section 501(c)(3) of the Code (collectively, the "Transferee"). Any other
attempt to sell, pledge, assign, hypothecate, transfer or otherwise dispose of
any Option under the Plan or of any right or privilege conferred thereby,
contrary to the provisions of the Plan, or the sale or levy or any attachment or
similar process upon the rights and privileges conferred hereby, shall be null
and void.
-7-
<PAGE>
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CHANGE IN
CONTROL; DISSOLUTION.
(a) Subject to any required action by the shareholders of the
Company, each of (i) the number of shares of Common Stock covered by each
outstanding option, (ii) the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, (iii) the price per share of Common Stock covered by each such
outstanding Option, (iv) the number of shares of Common Stock to be granted to
non-Employee directors pursuant to Section 6 of the Plan, and (v) the maximum
number of Shares with respect to which Options may be granted to any Employee,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split or the payment of a
stock dividend with respect to the Common Stock or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that (a) each such
adjustment with respect to an Incentive Stock Option shall comply with the rules
of Section 424(a) of the Code (or any successor provision) and (b) in no event
shall any adjustment be made which would render any Incentive Stock Option
granted hereunder other than an "incentive stock option" as defined in Section
422 of the Code; and provided further, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
(b) If: (i) any person (as defined for purposes of Section
13(d) and 14(d) of the Exchange Act, but excluding the Company and any of its
wholly-owned subsidiaries) acquires direct or indirect ownership of 50% or more
of the combined voting power of the then outstanding securities of the Company
as a result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise; or (ii) the shareholders of the Company
approve (A) any consolidation or merger of the Company in which the Company is
not the surviving corporation (other than a merger of the Company in which the
holders of the Company's outstanding voting securities immediately prior to the
merger have the same proportionate ownership of the surviving corporation
immediately after the merger), or (B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company to an entity which is not a
wholly-owned subsidiary of the Company (any of the foregoing transactions being
referred to sometimes as a "Change-In-Control"), then the exercisability of each
option outstanding under the Plan shall be automatically accelerated so that
each such Option shall, immediately prior to the specified effective date of any
of the foregoing transactions, become fully exercisable with respect to the
total number of Shares subject to such option and may be exercisable for all or
any portion of such Shares. Upon the consummation of any of such transactions
(other than
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<PAGE>
a transaction specified in Section 13 (b) (i)), all outstanding options under
the Plan shall, to the extent not previously exercised, terminate and cease to
be outstanding.
(c) In the event of the proposed dissolution or liquidation of
the Company, all outstanding Options will terminate immediately prior to the
consummation of such proposed transaction, unless otherwise provided by the
Committee.
14. TIME FOR GRANTING OPTIONS. The date of grant of an Option shall be
the date on which the Committee makes the determination granting such option or
such later date as the Committee may specify. Notice of the determination shall
be given to each Employee to whom an Option is so granted within a reasonable
time after the date of such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) COMMITTEE ACTION; SHAREHOLDERS' APPROVAL. Subject to the
limitations set forth in Section 6 of the Plan, the Committee may amend or
terminate the Plan from time to time in such respects as the Committee may deem
advisable; provided, that the following revisions or amendments shall require
approval of the Company's shareholders in accordance with Section 18 of the
Plan: (i) any increase in the number of Shares subject to the Plan, other than
in connection with an adjustment under Section 13 of the Plan; (ii) any change
in the designation of the class of persons eligible to be granted options; (iii)
any material increase in the benefits accruing to participants under the Plan;
or (iv) any increase in the maximum number of Shares with respect to which
options may be granted to any Employee.
(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment or
termination or modification of the Plan shall in any manner affect any option
theretofore granted without the consent of the Optionee, except that the
Committee may amend or modify the Plan in a manner that does affect Options
theretofore granted upon a finding by the Committee that such amendment or
modification is in the best interest of shareholders or Optionees.
16. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. As a condition to the exercise of an
option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required by law.
17. STOCK OPTION AGREEMENTS. Options shall be evidenced by
written option agreements in such form as the Committee shall approve. Such
agreements shall contain such
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<PAGE>
provisions, including, without limitation, restrictions upon the exercise of the
Option, as the Committee shall determine.
18. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company entitled to vote thereon within
twelve months after the date the Plan is adopted. Shareholder approval for the
continuance of the Plan or for any amendments to the Plan pursuant to Section
15(a) hereof shall be obtained by (i) the affirmative vote of the holders of a
majority of the outstanding shares of the Company present or represented and
entitled to vote thereon at any duly held shareholders meeting, or (ii) to the
extent permitted by the Articles of Incorporation and Bylaws of the Company, the
written consent of a majority of the outstanding shares of the Company entitled
to vote thereon.
19. OTHER COMPENSATION PLANS. The adoption of the Plan shall not affect
any other stock option or incentive or other compensation plans in effect for
the Company or any Subsidiary, nor shall the Plan preclude the Company from
establishing any other forms of incentive or other compensation for employees
and directors of the Company or any Subsidiary.
20. SINGULAR, PLURAL, GENDER. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine gender.
21. HEADINGS. Headings of Articles and Sections hereof are inserted
for convenience and reference; they constitute no part of the Plan.
22. WITHHOLDINGS. The Company and any Subsidiary may, to the extent
permitted by law, deduct from any payments or transfers of any kind due to an
Optionee the amount of any federal, state, local or foreign taxes required by
any governmental regulatory authority to be withheld or otherwise deducted with
respect to the Options or the Optioned Stock.
23. GOVERNING LAW. The Plan, the Options granted hereunder and all
related matters shall be governed by, and construed and enforced in accordance
with, the laws of the State of Delaware.
24. COMPLIANCE WITH RULE 16b-3. It is the intent of the Company that
this Plan comply in all respects with Rule 16b-3 (or any successor rule) in
connection with any option granted to a person who is subject to Section 16 of
the Exchange Act. Accordingly, any provision of this Plan or any Option
agreement that does not comply with the requirements of Rule 16b-3 (or any
successor rule) as then applicable to any such person shall be construed or
deemed amended to the extent necessary to conform to such requirements, except
that such automatic amendment shall not apply to any other participant in the
Plan who is not (at the time of such application) subject to Section 16 of the
Exchange Act. Any action taken by the Committee pursuant to the Plan that does
not comply with the requirements of Rule 16b-3 (or any successor rule) shall be
null and void.
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FIRST TEAM AUTOMOTIVE CORP.
INCENTIVE COMPENSATION PLAN
I. OBJECTIVES
The objectives of the First Team Automotive Corp. Incentive Compensation Plan
(the "Plan") are:
A. To reward executive management for their efforts
in optimizing the profitability and growth of First
Team Automotive Corp. (the "Company") consistent with
the Company's mission of achieving unequaled customer
satisfaction and with other goals of the Company, its
stockholders and its employees.
B. To provide significant opportunity for those
members of executive management who have major profit
responsibility within the Company.
II. ELIGIBILITY AND AWARDS
A. Membership in this Plan will consist of the Chief
Executive Officer, the Chief Financial Officer and
the Senior Vice Presidents of the Company (the
"Participants") plus any other executive officers as
chosen by the Compensation Committee of the Board of
Directors of the Company (the "Compensation
Committee"). The Compensation Committee will notify
Participants of their selection prior to the
commencement of each fiscal year.
B. Incentive compensation will be computed by
measuring (i) the Company's achievement of actual
consolidated pre-tax income ("Consolidated Pre-tax
Income") for each fiscal year against Consolidated
Pre-tax Income objectives established by the
Compensation Committee for each fiscal year prior to
the commencement thereof, or (ii) such other
performance goals as may be established by the
Compensation Committee from time to time and approved
by the Company's shareholders in accordance with
Internal Revenue Service regulations promulgated
under Section 162(m) of the Internal Revenue Code
(the "Code").
C. Prior to the commencement of each fiscal year, the
Compensation Committee shall establish an award or
range of awards which will be earned by the
Participants upon the achievement of target goals as
to Consolidated Pre-tax Income established pursuant
to Section II(B) above. The Compensation Committee
may not increase award amounts established at the
start of any year, but may, in its sole discretion,
decrease the amount of incentive compensation to be
paid for any fiscal year to an amount less than would
be payable based on the Company's actual performance
for that year.
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<PAGE>
Notwithstanding anything herein to the contrary, the
maximum incentive compensation paid for any fiscal
year to any Participant may not exceed One Million
Dollars ($1,000,000).
D. The Company's actual Consolidated Pre-tax Income for
each fiscal year will be determined in accordance
with generally accepted accounting principles;
provided, however, that (i) the effects of accounting
policy changes from the prior fiscal year and unusual
non-recurring gains and losses will be excluded, and
(ii) incentive compensation generated pursuant to
incentive plans of the Company, including this Plan,
shall be accrued and deducted as an expense for such
fiscal year.
E. Incentive compensation is earned in addition to
consideration for merit and promotional increases
under the Company's wage and salary program.
Incentive compensation will be paid to Participants
on or before March 15 following the close of the
fiscal year in respect of which it was earned.
III. ADMINISTRATION OF THIS PLAN
This Plan shall be administered by the Compensation Committee, which shall have
full power and final authority to construe, interpret and administer the Plan.
Following the close of a fiscal year and before any payments are made hereunder
for the fiscal year, the Compensation Committee must certify in writing whether
and to what extent the performance goals have been satisfied. The Compensation
Committee shall consist solely of two or more non-employee directors who qualify
for the Code ss. 162(m)(4)(C)(i) exemption.
IV. ELIGIBILITY DURING FISCAL YEAR
Subject to the discretion of the Compensation Committee as set forth in Section
II(C) of this Plan, an individual who becomes a Participant in this Plan due to
employment, transfer or promotion during the fiscal year will be eligible to
receive partial incentive compensation based upon the Participant's Salary for
the period of time eligible and the level of achievement in relation to targeted
goals for the entire fiscal year. In no event, however, will partial payments be
made for any period of time of less than two (2) months.
V. INELIGIBILITY DURING FISCAL YEAR
A Participant in this Plan who becomes ineligible during the fiscal year due to
transfer or change of position shall cease to be eligible for further
participation in this Plan on the date of transfer or change to the ineligible
position. Subject to the discretion of the Compensation Committee as set
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<PAGE>
forth in Section II(C) of this Plan, if the Participant, prior to the date of
transfer or change, has been a Participant in the Plan for a minimum of two (2)
calendar months of the fiscal year, the Participant will be eligible to receive
partial incentive compensation based upon the Participant's Salary for such
period of time and the level of achievement in relation to targeted goals for
the entire fiscal year.
VI. TERMINATION OF EMPLOYMENT; LEAVE OF ABSENCE
Subject to the discretion of the Compensation Committee as set forth in Section
II(C) of this Plan, a Participant who has been employed (i) during the entire
fiscal year for which incentive compensation is to be paid, but whose employment
is terminated, voluntarily or involuntarily (other than for cause), or who is
granted a leave of absence after the end of such fiscal year and prior to the
payment date therefor will be eligible to receive his/her full incentive
compensation with respect to such fiscal year as determined in accordance with
the provisions of this Plan, or (ii) through the first two (2) calendar months
of any fiscal year, but whose employment is terminated, voluntarily or
involuntarily (other than for cause), or who is granted a leave of absence after
the end of the first two (2) calendar months of any fiscal year but prior to the
end of such fiscal year, will be eligible to receive partial incentive
compensation with respect to such fiscal year based upon the Participant's
Salary for the period of time he/she was a Participant at the level of
achievement in relation to targeted goals for the entire fiscal year. A
Participant whose employment is terminated for cause or whose employment is
terminated for any other reason prior to the end of the first two (2) calendar
months of such fiscal year shall not be eligible to receive any incentive
compensation under this Plan other than those amounts which have been paid to
him/her prior to the date he/she is terminated.
VII. DEFERRED COMPENSATION
A Participant in this Plan may irrevocably elect to defer receipt of any amount
earned pursuant to this Plan, provided such election is made in writing. The
terms of any deferred compensation arrangement must be approved in writing by
the Chairman of the Compensation Committee and the Participant. Any amount
deferred pursuant to this Plan will bear interest at a rate determined by the
Compensation Committee, unless otherwise expressly provided in an employment
agreement between the Company and the Participant.
VIII. COMPANY'S RIGHT TO TERMINATE
The Company shall have the right to terminate this Plan, with or without notice,
in whole or in part, at any time, but no such action may adversely affect any
rights or obligations with respect to any awards theretofore made under the
Plan.
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<PAGE>
IX. GENERAL PROVISIONS
A. No person has any claim or right to be included in
this Plan or to be granted incentive compensation
under this Plan until such individual has been
declared a Participant and received an official
written notice thereof in accordance with the
procedures as set forth in this Plan. In addition,
all of the requirements and applicable rules and
regulations of this Plan must have been met
including, but not limited to the availability of
funds for incentive compensation awards and the
determination by the Compensation Committee of the
extent to which targeted goals have been met.
B. The designation of an individual as a Participant
under this Plan does not in any way alter the nature
of the Participant's employment relationship.
X. SHAREHOLDER APPROVAL
Notwithstanding anything herein to the contrary, this Plan is subject to and
conditioned upon the approval of the Company's shareholders.
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EXHIBIT 5.1
SHUTTS & BOWEN LLP
ATTORNEYS AND COUNSELLORS AT LAW
1500 MIAMI CENTER
201 SOUTH BISCAYNE BOULEVARD
MIAMI, FLORIDA 33131
MIAMI (305) 358-6300
FACSIMILE (305) 381-9982
_______________, 1997
First Team Automotive Corp.
350 South Lake Destiny Drive
Suite 200
Orlando, FL 32810
Ladies and Gentlemen:
We have acted as counsel for First Team Automotive Corp., a Delaware
corporation (the "Company"), with respect to the preparation and filing by the
Company with the Securities and Exchange Commission (the "SEC") of a
Registration Statement on Form S-1 (No. 333- ___________), as it may be amended
(the "Registration Statement"), and the Prospectus contained in the Registration
Statement (the "Prospectus") covering the registration under the Securities Act
of 1933, as amended (the "Act"), of ____________ shares (the "Initial Shares")
of the Company's Common Stock, par value $.01 per share (the "Common Stock"),
plus up to an additional ______ shares of Common Stock to cover over-allotments
(the "Option Shares") to be sold by the Selling Stockholders referred to in the
Registration Statement (collectively, the "Shares"). The Shares will be offered
to the public pursuant to an underwriting agreement (the "Underwriting
Agreement") among the Company and a group of underwriters for whom Merrill Lynch
Pierce Fenner & Smith Incorporated and Wheat, First Securities, Inc. are acting
as representatives.
In connection with our opinion, we have examined: (i) the Registration
Statement, including all exhibits thereto, as filed with the SEC; (ii) the
Articles of Incorporation and Bylaws, as amended, of the Company; and (iii) such
other documents, certificates and proceedings as we have considered necessary or
appropriate for the purposes of this opinion.
In rendering this opinion, we have undertaken no independent review of
the operations of the Company. Instead, we have relied solely upon the documents
described above. In examining such documents, we have assumed, without
independent investigation: (i) the authenticity of all documents submitted to us
as originals; (ii) the conformity to original documents of all documents
submitted to us as certified or photostatic copies; (iii) the authenticity of
the originals of such latter documents;
<PAGE>
First Team Automotive Corp.
_______________, 1997
Page 2
(iv) that all factual information supplied to us is accurate, true and complete;
and (v) the genuineness of all signatures. In addition, as to questions of fact
material to the opinions expressed herein, we have relied upon the accuracy of:
(i) all representations and warranties as to factual matters contained in any of
the documents submitted to us for purposes of rendering the opinion; and (ii)
factual recitals made in the resolutions adopted by the Board of Directors of
the Company. We express no opinion as to federal securities laws or the "blue
sky" laws of any state or jurisdiction.
Based on the foregoing, and having regard to legal considerations which
we deem relevant, we are of the opinion that the Shares have been duly
authorized by the Company and that the Shares to be sold by the Selling
Stockholders are, and the Shares to be issued and sold by the Company will, if
and when issued and delivered by the Company or the Selling Stockholders against
payment of consideration therefor in accordance with the terms of the
Underwriting Agreement, be validly issued, fully paid and non-assessable.
This opinion is intended solely for the Company's use in connection
with the registration of the Shares and may not be relied upon for any other
purpose or by any other person. This opinion may not be quoted in whole or in
part or otherwise referred to or furnished to any other person except in
response to a valid subpoena. This opinion is limited to the matters expressly
stated herein, and no opinion is implied or may be inferred beyond the matters
expressly stated herein. This opinion is rendered as of the date hereof, and we
assume no obligation to update or supplement such opinion to reflect any facts
or circumstances that may hereafter come to our attention or any changes in
facts or law that may hereafter occur. We hereby consent to the inclusion of
this opinion letter as an exhibit to the Registration Statement, and to all
references to this firm under the heading "Legal Matters" in the Prospectus
constituting a part of the Registration Statement.
Sincerely,
SHUTTS & BOWEN LLP
EXHIBIT 10.1
LEASE AGREEMENT
THIS LEASE AGREEMENT made and entered into this ___ day of ___________,
1997, by and between DONALD C. MEALEY, hereinafter referred to as "Landlord,"
and DON MEALEY CHEVROLET, INC., hereinafter referred to as "Tenant."
W I T N E S S E T H:
In consideration of the rents covenants and agreements herein, Landlord
does hereby lease to Tenant and Tenant hereby leases from Landlord upon terms,
provisions and conditions herein, the real property hereinafter described.
ARTICLE I
DESCRIPTION OF PROPERTY, TERMS AND USE
1.1 DESCRIPTION OF PROPERTY. -- Landlord leases to Tenant a portion of
the real estate as described on the attached EXHIBIT "A", together with the
improvements located thereon (hereinafter referred to as "Leased Property").
1.2 TERM. -- Tenant is to have the Leased Property herein described
subject to the terms and conditions hereof for a term of ten (10) years,
commencing on _____________, 1997, (the "Commencement Date") and ending on
_______________. Tenant shall have the option to renew the Lease Agreement for
two (2) renewal terms, each for a period five (5) years, on the same terms and
conditions excepting the rental rate which will be determined by the parties
upon the exercise of such option. Written notice of the exercise of each such
option shall be given by Tenant to Landlord at least one hundred eighty (180)
days prior to the commencement date of such renewal term.
1.3 USE. -- The Leased Property shall be used and occupied by Tenant
solely for vehicle sales and service and related uses. Tenant covenants to
comply with the provisions of all recorded covenants, conditions and
restrictions and all building, zoning, fire and other governmental laws,
ordinances and regulations, rules applicable to the Leased Property and all
requirements of the carriers of insurance covering the Leased Property. Tenant
shall not do or permit anything to be done in or about the Leased Property or
bring or keep anything on the Leased Property that may increase any insurance
premium upon the Leased Property; that may injure the Leased Property; that may
constitute waste; or that may be a nuisance, public or private, or, without
limiting the generality of the foregoing, Tenant shall not allow said Leased
Property to be used for any improper, immoral, unlawful or objectionable
purpose. Tenant agrees that it has determined to Tenant's satisfaction that the
Leased Property can be used for the purpose for which it is leased and waives
any right to terminate this Lease in the event the Leased Property cannot be
used for such purpose.
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<PAGE>
ARTICLE II
RENT
2.1 RENTAL. -- Tenant shall pay to Landlord the annual rent of
$858,000.00 payable in advance and without notice in monthly installments of
$71,500.00 each, commencing on ____________, 1997, and continuing on the first
day of each month thereafter during the term of this Lease. Should the Lease
commence on a day other than the first day of a month or end on a day other than
the last day of a month, then the rent shall be appropriately prorated. Rent
shall be paid to Landlord without deduction or offset, in lawful money of the
United States of America at 350 South Lake Destiny Drive, Suite 200, Orlando,
Florida 32810, or to such other person or at such other place as Landlord may
from time to time designate in writing. Tenant shall also pay in addition to the
annual rent the Florida sales tax (and any other applicable tax) on all rent
payable hereunder.
2.2 The annual rent shall be increased five (5) years after the
commencement date and on each succeeding anniversary of the commencement date by
the percentage increase in the Consumer Price Index (defined below) during the
twelve (12) month period immediately preceding each anniversary of the
commencement date. Such increased annual rent shall be payable in monthly
installments in advance commencing on the anniversary date and continuing until
the next anniversary date. Landlord shall notify Tenant in writing of such
increased rent as soon as such determination is reasonably possible. If
notification is not given until after the anniversary date, any rent due but not
paid since the anniversary date shall be payable upon Tenant's receipt of such
notice. Rent shall never be decreased during the term of this Lease. The parties
hereto adopt as a standard for measuring fluctuations in the Consumer Price
Index (revised using the 1982-84 averages as equal to 100), United States
average on all items and commodity groups issued by the Bureau of Labor
Statistics of the United States.
2.3 ADDITIONAL CHARGES. -- As and when due and payable, Tenant shall
pay all charges levied, assessed or imposed upon the Leased Property (except
debt service on any mortgage encumbering the Leased Property), including, but
not limited to, the following:
(a) All supplies and materials used in the operation and
maintenance of the Leased Property;
(b) Cost of all utilities for the Leased Property, including
cost of electricity, water, lighting, heating, air conditioning and ventilating;
(c) Cost of all maintenance and service agreements for the
Leased Property, the servicing and repair of equipment therein and grounds,
including janitorial service, security service, landscape and irrigation system
maintenance, alarm service, window cleaning, elevator maintenance, refuse
collection, parking lot sweeping and maintenance;
(d) cost of all insurance relating to the Leased Property,
including rent loss, casualty and liability insurance applicable to the Leased
Property;
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<PAGE>
(e) All taxes and assessments and governmental charges,
whether federal, state, county or municipal and whether they be by taxing
districts or authorities presently taxing the Leased Property or by others,
subsequently created or otherwise, and any other taxes and assessments
attributable to the Leased Property or its operation;
(f) Cost of all repairs and general maintenance of the Leased
Property;
(g) Costs incurred in compliance with new or revised federal
or state laws or municipal or county ordinances or codes or regulations
promulgated under any of the same.
2.4 If Tenant shall refuse, neglect, or otherwise fail or omit to make
any of the payments herein required, then the Landlord may, at its option, but
without being obligated to do so, pay the same and the amount or amounts of
money so paid, including reasonable attorneys' fees and expenses which may have
been incurred together with interest on all such amounts at the highest lawful
rate permitted under the laws of the State of Florida, shall be considered as
rent immediately due and payable. The payment of such rent may be collected or
enforced by Landlord in the same manner as though it were an installment of rent
specifically required by the terms of this Lease to be paid by Tenant to
Landlord.
ARTICLE III
REPAIR AND MAINTENANCE OF LEASED PROPERTY
3.1 Tenant shall at its sole cost and expense keep and maintain the
interior and exterior of the Leased Property (structural and non-structural) in
good condition and repair, including, but not by way of limitation, necessary
replacements of the interior and exterior painting, mechanical equipment, fire
protection devices, heating, air conditioning, electrical, plumbing and sewer
systems, doors, windows, glass, roofs, walls, floors, foundations, paving,
parking lots, walks and landscaping.
3.2 Landlord shall not furnish any services whatsoever to the Leased
Property. Tenant shall be solely responsible for all operating expenses
necessary for the proper and efficient operation and first class maintenance of
the Leased Property. In all respects this Lease shall be deemed and construed to
be a "Net Lease" and Tenant shall pay to Landlord the required rent free of any
charges, set-offs, taxes, assessments, impositions, expenses or deductions.
Tenant shall be solely responsible for and shall pay all costs and expenses
relating to the complete and total maintenance, repair, insuring and operation
of the Leased Property.
ARTICLE IV
HOLDING OVER
If Tenant should remain in possession of the Leased Property after the
termination or expiration of the term without the execution by Landlord and
Tenant of a new lease, then Tenant shall be deemed to be occupying the Leased
Property as a tenant at sufferance, subject to all the covenants and obligations
of this Lease and at a daily rental of twice the per day rent in effect
immediately prior to such expiration or termination, computed on the basis of a
thirty (30) day month, but such holding over shall not extend the term.
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<PAGE>
ARTICLE V
ALTERATIONS, ADDITIONS, IMPROVEMENTS
Tenant will make no alteration, change, improvements or addition to the
Leased Property without the prior written consent of Landlord. Landlord will not
unreasonably withhold its approval for such items after first reviewing the
plans and specifications depicting the improvements. The Tenant may, without the
written consent of the Landlord, but at the sole cost and expense of the Tenant
and in a good and workmanlike manner, erect and alter shelves, movable
partitions, and trade fixtures and equipment as the Tenant may deem advisable so
long as such activity does not alter the basic character of the building or
improvements, and in each case complying with all applicable governmental laws,
ordinances, regulations and other applicable requirements. Tenant may remove its
trade fixtures, office supplies and moveable office furniture and equipment not
attached to the Leased Property provided such removal is made prior to the
termination or expiration of the term, Tenant is not then in default in the
timely performance of any obligation or covenant under this Lease, and Tenant
promptly repairs all damage caused by such removal. All other property at the
Leased Property and any alteration or addition to the Leased Property
(including, but not limited to, wall-to-wall carpeting, drywall partitions,
paneling or other wall covering) and any other article attached or affixed to
the floor, wall or ceiling of the Leased Property shall become the property of
the Landlord and shall be surrendered with the Leased Property as part thereof
at the termination of this Lease, without payment or compensation therefor. If,
however, Landlord so requests in writing, Tenant will prior to vacating the
premises upon the termination or expiration of this Lease, remove any and all
alterations, additions, fixtures, equipment and property placed or installed by
it in the Leased Property and will repair any damage caused by such removal.
ARTICLE VI
ASSIGNMENT AND SUBLETTING
6.1 Tenant shall not assign this Lease nor any rights hereunder, nor
let or sublet all or any part of the Leased Property, nor suffer or permit any
person or entity to use any part of the Leased Property, without first obtaining
the express written consent of Landlord, which consent shall not be unreasonably
withheld. Should Landlord consent to such assignment of the Lease, or to a
sublease of all or any part of the Leased Property, Tenant does hereby guarantee
payment of all rent herein reserved until the expiration of the term hereof,
sublessees or assignees shall become directly liable to Landlord for all
obligations of Tenant hereunder, and no failure of Landlord to promptly collect
from any assignee or sublessee, or any extension of the time for payment of such
rent, shall release or relieve Tenant from its guaranty or obligation of payment
of such rent. Any assignment or sublet approved by Landlord shall not relieve
Tenant of its obligations hereunder. As partial consideration for Landlord's
consent to any sublet or assignment, Landlord shall be entitled to fifty percent
(50%) of any amount paid by an assignee or subtenant to Tenant for such
assignment or sublet and/or fifty percent (50%) of the difference between the
rent due hereunder for the sublet premises and the amount paid by any assignee
or subtenant to Tenant for the assignment or sublet of premises. Tenant shall
reimburse Landlord for all of the reasonable and necessary legal, accounting and
other direct costs incurred due to Tenant's sublet or assignment. In determining
whether or not to grant consent to the Tenant's sublet or assignment request,
Landlord may consider any reasonable factor. Landlord and Tenant agree that any
one of the following factors, or any other
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reasonable factor, will be reasonable grounds upon which Landlord may approve or
deny the Tenant's request:
(a) Financial strength of the proposed subtenant/assignee must
be at least equal to that of the existing Tenant at the time of the Lease
commenced;
(b) Business reputation of the proposed subtenant/assignee
must be in accordance with generally acceptable commercial standards;
(c) Use of the Leased Property by the proposed
subtenant/assignee will not violate or create any potential violation of any
laws, covenants or other agreements affecting the Leased Property.
6.2
(a) Landlord shall have the right to transfer and assign, in
whole or in part, all of its rights and obligations hereunder, and in the Leased
Property referred to herein, and upon any such transfer or assignment, no
further liability or obligation shall thereafter accrue against Landlord
hereunder (except to the extent of any retained Lessor's interest by Landlord
upon any partial assignment of its interest in this Lease).
(b) Landlord may, at any time during the term of this Lease,
pledge the proceeds of rents and other profits from the real property to a
third-party lender as a part of a real estate loan transaction (the "Loan"). In
such event, Tenant shall, if Landlord is ever in default under the terms and
conditions of the Loan, upon written notification by any such lender,
immediately pay to such lender all rents due hereunder in timely fashion and
Tenant shall also subordinate its position as Tenant to the lien of a mortgage
or any other security instrument given to such lender.
6.3 Should Tenant be a corporation, any transfer of this Lease by
merger, consolidation or liquidation or any change in the ownership of or power
to vote a majority of its outstanding voting stock shall constitute an
assignment. Such an assignment shall require Landlord's consent if by one or
more sales or transfers, by operation of law or otherwise or by creation of new
stock, an aggregate of more than fifty percent (50%) of Tenant's stock shall
become vested in a party or parties who are not stockholders of Tenant as of the
Commencement Date of this Lease. An assignment to a subsidiary or parent
corporation of the corporate Tenant shall not require Landlord's consent, but
Tenant shall remain liable for Tenant's obligations hereunder. Should Tenant be
a partnership, trust or other association or entity having transferable
ownership interests, any transfer of more than fifty percent (50%) of such
ownership interests to a party or parties who are not holders of such ownership
interest at the Commencement Date shall constitute an assignment hereunder which
shall require Landlord's consent.
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ARTICLE VII
INSURANCE
7.1 At all times during the term of this Lease, Tenant shall purchase
and maintain the following insurance in the name of Landlord:
(a) Fire and Extended Coverage Casualty Insurance upon the
Leased Property in an amount equal to the full replacement value of the
improvements on the Leased Property. The value of the improvements will exclude
the costs of foundation, underground piping and/or wiring, outside paving and
landscaping. Such insurance shall include the "Inflation Guard Endorsement" or
shall be adjusted annually to reflect the then current construction costs.
(b) Rent loss insurance on an "All Risk" basis in an amount
equal to the annual rent plus the sum of the annual taxes and insurance.
(c) Comprehensive Public Liability Insurance covering both
bodily injury liability and property damage liability with a combined single
limit of $1,000,000.00 for each occurrence.
7.2 Tenant shall also maintain, in its name, business interruption
insurance in an amount sufficient to protect Tenant against loss due to
interruption of its occupancy of the Leased Property after casualty.
7.3 The insurance to be maintained under this Article VII also will be
subject to the requirements of any mortgagee, including, but not limited to,
federal Flood Insurance. This insurance will be maintained with insurance
companies licensed and qualified to do business in the State of Florida and
having a general policyholders' rating of A or A+ and a financial rating of
Class X as established by A.M. Best Company of Oldwick, New Jersey.
7.4 To the extent that a loss is covered by insurance in force and
recovery is made for such loss, Landlord and Tenant hereby mutually release each
other from liability and waive all right of recovery against each other for any
loss from perils insured against under their respective policies. Landlord and
Tenant also agree to obtain a waiver of subrogation from their insurance
carriers permitting this waiver.
7.5 The original of each such policy of insurance or certified
duplicate thereof issued by the insurance or insuring organization shall be
delivered by Tenant to Landlord on or before ten (10) days prior to commencement
of the Lease term and ten (10) days prior to the expiration or termination of
any existing policy. Any mortgagee of Landlord shall be named as an additional
insured under such insurance and such insurance shall be primary and
noncontributing with any insurance carried by Landlord. The insurance policies
shall contain endorsements requiring thirty (30) days written notice to Landlord
prior to any cancellation or any reduction in amount of coverage. Tenant shall
deliver to Landlord as a condition precedent to its maintaining occupancy of the
Leased Property (but not to its obligation to pay rent) a certificate evidencing
each renewal of such insurance and shall maintain such insurance in effect
throughout the term of this Lease. Tenant shall promptly notify Landlord of any
accident or injury occurring on the Leased Property.
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ARTICLE VIII
HOLD HARMLESS
Except for loss, damage or claims arising from the Landlord's negligent
acts, omissions or breaches of this Lease, Landlord shall not be liable to
Tenant for any injury or damage to any person or property in or about the Leased
Property from any cause whatsoever. Tenant shall indemnify and save harmless the
Landlord and its agents from and against any and all liability, claims, demands,
damages, expenses, fees, fines, penalties, suits, proceedings, actions and costs
of actions of any kind and nature, including attorneys' fees, for injury or
death to persons or damage to property or property rights (a) occurring in, on
or about the Leased Property or any part thereof, or (b) occurring in, on or
about the Leased Property or any part thereof, when any such injury or damage
shall be caused or result in whole or in part by any act, negligence, or fault
or omission of any duty by the Tenant, its agents, servants, employees,
licensees or invitees, or by any person under the control or direction of
Tenant. Tenant will further indemnify and save harmless the Landlord for all
liability, claims and other items above mentioned, arising or growing out of or
connected with any breach, violation, non-performance or failure to abide by any
covenant, condition, agreement or provisions contained in this Lease on the part
of the Tenant to be kept, performed, complied with or abided by. If it becomes
necessary for the Landlord to defend any action seeking to impose any such
liability, the Tenant will pay the Landlord all costs of court and reasonable
attorneys' fees incurred by Landlord in such defense, in addition to any other
sums which said Landlord may be called upon to pay by reason of the entry of a
judgment or decree against the Landlord in the litigation in which such claim is
asserted.
ARTICLE IX
DESTRUCTION OR DAMAGE BY FIRE OR OTHER CASUALTY
In the event of a fire or other casualty on the Leased Property, Tenant
shall immediately give notice thereof to Landlord. If the damage or destruction
is such that in the opinion of Landlord it cannot be repaired with reasonable
diligence within one hundred eighty (180) days from the date of such casualty,
then either Landlord or Tenant may terminate this Lease by giving to the other
written notice of such termination within ten (10) days following the giving of
Landlord's opinion. Should this Lease be so terminated, then all rent owed up to
the date of such casualty shall be paid by Tenant to Landlord and this Lease
shall then terminate. In the event that neither Landlord nor Tenant so
terminates this Lease, then Landlord shall repair said improvements with all
reasonable speed.
If the damage or destruction is such that in the opinion of Landlord it
can be repaired with reasonable diligence within one hundred eighty (180) days
from the date of such casualty, then the rent hereby reserved shall abate from
the date of such casualty until the damage has been repaired and Landlord shall
repair the damage with all reasonable speed. Notwithstanding the giving of such
opinion by Landlord, Landlord shall not be liable to Tenant if Landlord shall
not actually repair such damage within said one hundred eighty (180) day period
if Landlord shall proceed diligently with such repair work.
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If in the opinion of Landlord the damage can be repaired within one
hundred eighty (180) days of the date of casualty and the damage is such that
the Leased Property is capable of being partially used by Tenant, then until
such damage has been repaired the rent shall abate as to the portion of the
Leased Property rendered untenantable until such time as the Leased Property is
repaired.
The opinions to be given by Landlord shall be in writing and shall be
provided to Tenant within thirty (30) days after casualty.
ARTICLE X
CONDEMNATION
If the Leased Property or any part thereof shall be taken or condemned
for any public purpose (or conveyed in lieu or in settlement thereof) to such an
extent as to render the remainder of the Leased Property, in the opinion of
Landlord, not reasonably suitable for occupancy, this Lease shall, at the option
of either party, forthwith cease and terminate, and all proceeds from any taking
or condemnation of the Leased Property shall belong to and be paid to Landlord.
Tenant shall be entitled to maintain an independent claim against any condemning
authority for damages suffered by Tenant. If this Lease is not so terminated,
Tenant shall repair any damage resulting from such taking, to the extent and in
the manner provided in Article IX and rental hereunder shall be abated to the
extent the Leased Property is rendered untenantable during the period of repair,
and thereafter be adjusted on an equitable basis considering the areas of the
Leased Property taken and remaining.
ARTICLE XI
SIGNS
Tenant may erect signs on the Leased Property with respect to the
Tenant's business. During the term of this Lease, Tenant shall have the right to
maintain those signs or signs of equivalent size and quality in such locations
as may be in compliance with local laws, ordinances and regulations. Any
additional signs or changes to existing signs shall require the written consent
of Landlord.
ARTICLE XII
DEFAULT
12.1 Each of the following shall be an "Event of Default":
(a) Tenant shall fail to pay when due any monthly installment
of rent or any other charge or payment required of Tenant hereunder.
(b) Tenant shall violate or fail to perform any of the other
conditions, covenants or agreements herein made by Tenant and such violation or
failure shall continue for a period of fifteen (15) days after written notice
thereof to Tenant from Landlord.
(c) Tenant shall make a general assignment for the benefit of
its creditors or shall file a petition for bankruptcy or other reorganization,
liquidation, dissolution or similar relief.
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(d) A proceeding is filed against Tenant seeking any relief
mentioned in (c) above.
(e) A trustee, receiver or liquidator shall be appointed for
Tenant or a substantial part of its property.
(f) Tenant shall vacate or abandon the Leased Property (an
absence of substantial activity by Tenant in the Leased Property for more than
seven (7) consecutive days shall constitute such abandonment).
(g) Tenant shall mortgage, assign or otherwise encumber its
leasehold interest.
12.2 If any such Event of Default occurs, Landlord may, without further
notice, immediately or at any time thereafter do one or more of the following:
(a) Re-enter and repossess the Leased Property and remove any
property therein and store the same elsewhere at Tenant's expense without
relieving Tenant from any liability or obligation hereunder.
(b) Relet the Leased Property or any part thereof for Tenant's
account, but without obligation to do so and without relieving Tenant from any
liability or obligation hereunder. Any amount received by Landlord from
reletting will apply first to all reasonable costs and expenses incurred by
Landlord in reletting (including, without limitation, broker's commissions,
advertising expenses, cleaning and remodeling expenses).
(c) Bring an action then or thereafter against Tenant to
recover the amount of any payment owing by Tenant to Landlord as the same is
due, becomes due or accumulates.
(d) Terminate this Lease by giving Tenant written notice
thereof, without relieving Tenant from any liability or obligation for payments
theretofore becoming due or for present and prospective damages resulting from
tenant's default.
(e) Accelerate the entire amount of rent due under this Lease
for the entire term of this Lease, which amount shall be immediately due and
payable.
(f) Pursue any other remedy provided by law.
12.3 If Tenant fails to pay Landlord any amount that Tenant is
obligated to pay, Tenant shall pay Landlord interest thereon at the rate of
eighteen percent (18%) per annum on the amount of the delinquency or deficiency
from the date due until the date paid. Landlord's remedies set forth in this
Lease are cumulative and not in limitation to any remedies given by law.
12.4 If, upon default by Tenant or termination of this Lease, Landlord
shall enter or take possession of the Leased Property, Landlord shall have the
right but not the obligation to remove
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from the Leased Property all personal property, fixtures, furnishings and other
property located therein, and to store such property in any place selected by
Landlord, including, but not limited to, a public warehouse, at the expense and
risk of the owners thereof, with the right to sell such stored property, without
notice to Tenant, after it has been stored for a period of thirty (30) days or
more, or as otherwise provided by law. The proceeds of such sale shall be
applied first to the cost of such sale, second to the payment of the charges for
storage, if any, and third to the payment of any other sums of money which may
then be due from tenant to Landlord under any of the terms hereof, the balance,
if any, to be paid to Tenant.
12.5 If Tenant asserts that Landlord has failed to meet its obligations
under this Lease, Tenant shall give written notice to Landlord specifying the
alleged failure to perform. If Landlord has not begun and pursued with
reasonable diligence the cure of any failure of the Landlord to meet its
obligations under this Lease within thirty (30) days of receipt of the notice,
then Landlord shall be in default. In no event shall Tenant have the right to
terminate or rescind this Lease as a result of Landlord's default as to any
covenant or agreement contained herein. Tenant hereby waives such remedy of
termination and rescission and hereby agrees that Tenant's remedy for default
hereunder by Landlord shall be limited to a suit for damages or for an
injunction or both. Landlord's liability for a default by Landlord under this
Lease shall, in all events, be limited to its interest in the Leased Property.
ARTICLE XIII
SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE
This Lease and all rights of the Tenant hereunder are subject and
subordinate to any mortgage, or other security instrument which does now or
hereafter encumber the Leased Property or any interest of Landlord therein and
to any and all advances made on the security thereof, and to any and all
increased, renewals, modifications, consolidations, and extension of any such
mortgage or security instrument. No further writing from Tenant shall be
necessary to evidence such subordination, however, within fifteen (15) days
after written request from Landlord, Tenant agrees to execute any instrument
which may be deemed necessary or desirable by Landlord to further effect the
subordination of this Lease to any mortgage. Should Tenant fail to respond to
such request, Tenant hereby irrevocably appoints Landlord as attorney-in-fact of
Tenant at any time for Tenant, and in Tenant's name, to execute proper
subordination agreements to this effect. If the interest of Landlord in the
Leased Property is transferred to any person or entity by reason of foreclosure
or other proceedings for enforcement of any mortgage or security interest or by
delivery of a deed in lieu of foreclosure or other proceedings, Tenant shall
immediately and automatically attorn to such person or entity. In the event of
such transfer, this Lease and Tenant's rights hereunder shall continue
undisturbed so long as Tenant is not in default.
ARTICLE XIV
ACCESS BY LANDLORD
Tenant shall permit Landlord or its agents or representatives to enter
into and upon any part of the Leased Property at all reasonable hours to inspect
same; to clean; to make repairs, alterations
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or additions thereto, as Landlord may deem necessary or desirable; to show the
Leased Property to prospective purchasers or tenants; or for any other purpose
deemed reasonable by Landlord.
ARTICLE XV
ESTOPPEL
Within ten (10) days after request therefor by Landlord, its agents,
successors or assigns, Tenant shall deliver, in recordable form, a certificate
to any proposed mortgagee or purchaser or to Landlord, together with a true and
correct copy of this Lease, certifying (if such be the case) the following:
(a) That this Lease is in full force and effect without
modification or, if modified, confirming the terms of such modification.
(b) The amount of rent currently being paid and the amount, if
any, of prepaid rent and security deposit paid by Tenant to Landlord.
(c) That Landlord has performed all of its obligations due to
be performed under this Lease and that there are no defenses, counterclaims,
deductions, offsets outstanding or other excuses for Tenant's performance under
this Lease.
(d) That Tenant is occupying the Leased Property and has
accepted same.
(e) Any other fact reasonably requested by Landlord or such
proposed mortgagee or purchaser.
Tenant's failure to timely deliver the above-described certificate
shall be conclusive upon Tenant that the above statements are true, that no more
than one month's rent has been paid in advance and that the amount of the
security deposit held by Landlord is as represented by Landlord.
ARTICLE XVI
QUIET ENJOYMENT
Landlord covenants that so long as Tenant pays the rent reserved in
this Lease and performs its agreements hereunder, Tenant shall have the right to
quietly enjoy and use the Leased Property for the term hereof, subject only to
the provisions of this Lease.
ARTICLE XVII
TENANT FORBIDDEN TO ENCUMBER LANDLORD'S INTEREST
It is expressly agreed and understood between the parties hereto that
nothing in this Lease shall ever be construed as empowering the Tenant to
encumber or cause to be encumbered the title or interest of Landlord in the
Leased Property in any manner whatsoever. In the event that regardless of this
prohibition any person, furnishing or claiming to have furnished labor or
materials at the request of the Tenant or of any person claiming by, through or
under the Tenant shall file a lien
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against Landlord's interest therein, Tenant, within thirty (30) days after being
notified thereof, shall cause said lien to be satisfied of record or the
premises released therefrom by the posting of a bond or other security as
prescribed by law, or shall cause same to be discharged as a lien against
Landlord's interest in the Leased Property by an order of a court having
jurisdiction to discharge such lien.
ARTICLE XVIII
APPLICABLE LAW
This Lease is entered into in the State of Florida and shall be
governed by the applicable law of said state.
ARTICLE XIX
RECOVERY OF LITIGATION EXPENSE
In the event either party requires the services of an attorney in
connection with enforcing the terms of this Lease or in the event suit is
brought for the recovery of any rents due under this Lease or for the breach of
any covenant or condition of this Lease or for the restitution of the Leased
Property to Landlord and/or eviction of Tenant, the party prevailing in such
legal action shall be entitled to an award of all legal costs and expenses,
including a reasonable sum for attorneys' fees and costs incurred by Landlord
(including appellate and bankruptcy proceedings) enforcing the terms of this
Lease when such enforcement is settled by the parties without entry of a final
judgment.
ARTICLE XX
NOTICES
All notices required by the law and this Lease to be given by one party
to the other shall be in writing, and the same shall be served by Certified
Mail, Return Receipt Requested, in postage prepaid envelopes addressed to the
following addresses or such other addresses as may be by one party to the other
designated in writing:
As to Landlord: Donald C. Mealey
350 S. Lake Destiny Drive
Suite 200
Orlando, Florida 32810
As to Tenant: Don Mealey Chevrolet, Inc.
3707 W. Colonial Dr.
Orlando, Florida 32808
Attn: Donald C. Mealey
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ARTICLE XXI
WAIVER
No assent or consent to changes in or waiver of any part of this Lease
shall be deemed or taken as made, unless the same be done in writing and
attached hereto and endorsed by Landlord. No covenant or term of this Lease
stipulated in favor of Landlord shall be waived except by express written
consent of Landlord, whose forbearance or indulgence in any regard whatsoever
shall not constitute a waiver of the covenant, term or condition to be performed
by Tenant. Until complete performance by the Tenant of said covenant, term or
condition, the Landlord shall be entitled to invoke any remedy available under
this Lease or by law despite such forbearance or indulgence.
ARTICLE XXII
RADON GAS
Radon is a naturally occurring radioactive gas which, when accumulated
in a building in sufficient quantities, may present health risks to persons who
are exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit. Pursuant to ss.404.056(8), Florida Statutes.
ARTICLE XXIII
ENTIRE AGREEMENT, BINDING EFFECT AND SEVERABILITY
This Lease and any written addenda and all exhibits hereto (which are
expressly incorporated herein by this reference) shall constitute the entire
agreement between Landlord and Tenant; no prior written or prior or
contemporaneous oral promises or representations shall be binding. This Lease
shall not be amended, changed or extended except by written instrument signed by
both parties hereto. Except for the amount and terms of payment of rent due
hereunder, Tenant agrees to approve and accept reasonable revisions to the terms
and conditions of this Lease required by any lender providing financing for the
development of the Leased Property or other property of Landlord adjacent
thereto, provided that no changes will be made which materially diminish
tenant's rights or increase Tenant's obligations hereunder. The provisions of
this Lease shall be binding upon and inure to the benefit of the heirs,
executors, administrators, successors and assigns of the parties, but this
provision shall in no way alter the restrictions on assignment and subletting
applicable to Tenant hereunder. Time is of the essence in the performance of the
obligations of the parties hereto. If any provision of this Lease or the
application thereof to any person or circumstance shall at any time or to any
extent be held invalid or unenforceable, and the basis of the bargain between
the parties hereto is not destroyed or rendered ineffective thereby, the
remainder of this Lease or the application of such provision to persons or
circumstances other than those as to which it is held invalid or unenforceable
shall not be affect thereby.
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ARTICLE XXIV
GUARANTY
The undersigned Guarantor absolutely and unconditionally guarantees to
the Landlord, its successors and assigns (whether collateral assigns or
otherwise), the prompt and full payment in United States currency and the
performance to the Landlord of any and all obligations of the Tenant under the
terms and conditions of the Lease Agreement, including, without limitation, the
full and timely payment of all installments of rent and other sums due to the
Landlord, its successors and assigns. The Guarantor also absolutely and
unconditionally guarantees the full and timely performance of all duties and
obligations whatsoever of the Tenant to Landlord, whether now existing or
hereafter arising, and agree that in the event the Tenant fails to fully and
timely perform any of said duties and obligations to fully and timely perform
the same.
The liability of the Guarantors hereunder shall continue until the
Tenant has performed all of its duties and obligations under the terms and
conditions of the Lease Agreement.
The Landlord may, in its discretion, amend, modify, extend, or renew,
in any way whatsoever, the Lease Agreement, any relationship with the Tenant,
the other Guarantors, or any other document or instrument evidencing or relating
to the relationship between the Landlord and the Tenant or the Guarantors, all
without affecting in any way whatsoever, the continuing liability of the
Guarantors hereunder.
This Guaranty shall bind and inure to the benefit of the respective
heirs, representatives, successors, and assigns of the Landlord and the
Guarantors.
IN WITNESS WHEREOF, the parties have executed this Lease Agreement the
day and year first above written.
LANDLORD:
____________________________ ____________________________________
____________________________ Donald C. Mealey
TENANT:
DON MEALEY CHEVROLET, INC.
____________________________ By:_________________________________
____________________________ Donald C. Mealey, President
[CORPORATE SEAL]
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The Guarantor hereby joins in execution hereof to evidence its obligations under
Article XXIV.
GUARANTOR:
FIRST TEAM AUTOMOTIVE CORP.
________________________________
________________________________ By:_______________________________
Print Name:_______________________
Title:____________________________
[CORPORATE SEAL]
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LEASED PROPERTY
EXHIBIT "A"
EXHIBIT 10.2
LEASE
THIS AGREEMENT, made this 1st day of April, 1996, by and between PLANT
FRUIT COMPANY, hereinafter called "Landlord," and FIRST TEAM FORD, LTD., whose
principal place of business is located in Seminole County, Florida, hereinafter
called "Tenant."
1. PREMISES
a. Landlord leases and demises to Tenant for the purpose of operating a
new and used automotive sales and service business, and such retail and
professional uses as are not inconsistent with the zoning for the Demised
Premises, and for no other purpose without Landlord's prior written consent and
Tenant hereby leases and rents from Landlord the following described premises,
hereinafter sometimes referred to as the "Demised Premises," located in Seminole
County, Florida, and more particularly described on EXHIBIT "A" attached hereto
and made a part hereof, together with all incidental rights and privileges in
and about the Demised Premises as may be necessary or convenient to Tenant's
business.
b. The above-described Demised Premises includes all buildings,
structures and other improvements constructed and to be constructed thereon, and
all easements, rights and appurtenances thereto.
2. TERM OF LEASE
a. The term and duration of this lease shall be for a period of five
(5) years, commencing from the commencement date herein provided.
b. The commencement date shall be the date of Closing as that term is
defined in that certain Contract for Sale between Seminole Ford, Inc. and Mealey
Acquisitions, Inc. dated January 15, 1996.
3. RENT
a. Tenant's liability for rent shall commence to accrue on the
commencement date as defined in paragraph 2.b above, provided that this lease
has not been terminated prior thereto. If the rent commencement date begins on a
date other than the first of the month, the rent for such partial initial month
shall be prorated and shall be due and payable on the first day of the first
full calendar month of the term hereof. The annual minimum rent to be paid by
Tenant to Landlord shall be Three Hundred Thousand Dollars ($300,000.00) plus
applicable sales taxes. Such rental shall be payable in equal monthly
installments on the first day of each calendar month during the term hereof.
b. All payments of rent hereunder shall be made to Landlord as the same
become due in lawful money of the United States, at such places as hereinafter
may be designated. Nothing contained in this lease shall be construed to be or
create a partnership or joint venture between
<PAGE>
Landlord and Tenant.
c. In addition to the payments required herein as rent to the Landlord,
the Tenant shall also pay the following:
(1) All occupational licenses and other licenses necessary in the
operation of the business to be carried on in the Demised Premises.
(2) All utility services provided to the Demised Premises and used
by Tenant, including, but not limited to, water, gas, electric, and telephone,
as they from time to time shall accrue and be due and payable during the term of
this lease.
(3) Tenant shall pay to the appropriate governmental agencies ad
valorem taxes with respect to the Demised Premises and the improvements thereon
during the term of this lease or any extension thereof. It is further understood
and agreed that all ad valorem taxes assessed during the first and last years of
the term of this lease shall be prorated and that Tenant shall only be liable
for such portions of such taxes assessed for said first and last years as its
months of occupancy during any of said years shall bear to the total of twelve
(12) months. Should Tenant fail to pay any tax when due and payable, Landlord
may, if Landlord so desires, pay the same and the amount together with any
penalties which Landlord may have paid, shall immediately become due and payable
to Landlord as additional rent. Tenant shall have the right in its name or in
Landlord's name, whichever shall be appropriate, but at its own cost and
expense, to file and prosecute applications for reduction of assessed valuation
and to institute legal proceedings for the reduction thereof. In no event shall
Tenant be liable for payment of any income, estate or inheritance taxes imposed
upon the Landlord or the estate of the Landlord with respect to the Demised
Premises. Landlord agrees to promptly deliver copies of all tax notices and tax
bills to the Tenant so that Tenant may timely contest any proposed tax increase
and promptly pay the tax due as to take advantage of any discounts allowed for
timely payment. In the event of any special assessment with respect to the
Demised Premises levied during the term of this Lease, the Tenant shall have no
obligation with respect to payment of such assessment and Landlord shall be
obligated to pay same.
Landlord shall use reasonable efforts, if requested by Tenant, to
obtain from the taxing authorities a separate assessment for the Demised
Premises if said premises are part of a larger parcel. If such separate
assessment shall be obtained, the real estate taxes payable by Tenant shall be
paid by Tenant directly to the taxing authority. If Landlord shall be unable to
obtain such separate assessment, and the tax bill covering the Demised Premises
shall include property in addition to the Demised Premises, Tenant shall pay its
proportionate share of said tax bill to Landlord, which proportionate share
shall equal the product obtained by multiplying the amount of the tax bill by a
fraction, the numerator of which is the acreage contained within the Demised
Premises and the denominator of which is the total land owned by the Landlord
and assessed in the tax bill. Tenant shall pay its share by the later of (i)
thirty (30) days after Landlord notifies Tenant of the amount
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thereof and furnishes Tenant with a copy of the tax bill and the calculations by
which Tenant's share has been determined, or (ii) ten (10) days prior to the due
date of the tax. Landlord shall pay said tax bill when due. In no event shall
Tenant be liable for interest or penalties, if Tenant shall pay such taxes
within such period. Landlord will furnish Tenant with a copy of the receipted
tax bill promptly after demand therefor.
4. CONSTRUCTION OF IMPROVEMENTS -- REPAIRS
a. The Tenant, during the term of this lease or any extension or
renewal of this lease, shall, at its expense, make all such routine repairs as
shall be reasonably necessary to keep the Demised Premises and Equipment in good
condition and repair. The Tenant further agrees that all damage or injury done
to the Demised Premises and any equipment by the Tenant or by any person who may
be in or upon the Demised Premises, except the Landlord, Landlord's agents,
servants and employees, shall be repaired by the Tenant at its expense. The
Tenant agrees at the expiration of this lease or upon the earlier termination
thereof, to quit and surrender said Demised Premises and Equipment in good
condition and repair, reasonable wear and damage by act of God or fire or other
causes beyond the control of Tenant excepted.
b. Tenant shall be permitted to install and use on and about the
Demised Premises at any time or times all such buildings, additions to
buildings, equipment, exterior and interior signs, trade fixtures, and other
personal property, and make such alterations and improvements in and about the
Demised Premises as it may desire.
c. Landlord shall maintain the Demised Premises in good structural
condition and repair, shall make all structural repairs and replacements
necessitated to the roof, foundation, walls, and other structural elements of
the Demised Premises by any cause other than Tenant's negligence, and shall make
all repairs or replacements necessitated by any peril covered by a Standard Fire
and Extended Coverage insurance policy to the extent of the proceeds received
from such insurance policy, whether or not caused by Tenant's negligence.
Tenant may make alterations, additions and improvements to the Demised
Premises from time to time during the term of this lease with the prior written
consent of Landlord and shall have the right to erect and install such other or
additional improvements, signs and equipment on the Demised Premises as Tenant
may deem desirable for conducting its business thereon or for such other
business as Tenant may deem advisable consistent with the permissible uses as
provided in Section 1 above. Tenant shall have no authority to create or place
any lien or encumbrance of any kind whatsoever upon, or in any manner to bind,
the interest of Landlord in the Demised Premises, and Tenant covenants and
agrees to pay all sums legally due and payable by it within forty-five (45) days
on account of any labor performed by it on the Demised Premises upon which any
lien is or can be asserted against the Demised Premises or the improvements
thereon. Tenant shall notify any contractor making improvements to the Demised
Premises that the Landlord's interest shall not be subject to any liens or
encumbrances as provided in ss.713.10, Florida Statutes.
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5. TIME OF THE ESSENCE
It is agreed that time is of the essence in respect to the provisions
contained in this lease.
6. DELIVERY OF POSSESSION
The Landlord shall deliver possession of the Demised Premises to the
Tenant at the beginning of the lease term provided, however, that if the
Landlord cannot deliver possession of the leased property on the commencement
date, the Tenant shall be entitled to terminate this lease.
7. WARRANTIES AND TITLE INSURANCE
a. Tenant shall be entitled to receive a good and marketable first
leasehold interest in and to the Demised Premises, free and clear of all liens,
encumbrances and other exceptions, except such as Tenant may waive.
b. Landlord covenants and warrants that Landlord has good and
marketable title in fee simple to the Demised Premises free and clear of all
liens, encumbrances and easements and has full power and authority to make this
lease. Tenant shall have and enjoy full, quiet and peaceful possession of the
Demised Premises, its appurtenances and all rights and privileges incidental
thereto during the term hereof and all extensions and renewals thereof.
c. Landlord hereby represents and warrants to Tenant that the
character, materials, design, construction and location of the improvements on
the Demised Premises, are in full compliance with all applicable building and
zoning laws and ordinances and requirements of Tenant. Landlord further hereby
represents and warrants to Tenant that Tenant will have the unrestricted right,
subject to deed restrictions, and applicable governmental regulations, to place
upon the Demised Premises at the locations now in use a pylon-sign of a type
selected by Tenant, and to use all parking areas and all driveways and means of
access to public roads.
d. Landlord makes no representation with respect to the buildings
located on the Demised Premises and to be leased by Tenant pursuant to this
lease (the "Buildings").
8. COMPLIANCE WITH LAWS AND ORDINANCES
a. Tenant shall comply with all federal, state, county and city laws
and ordinances and all rules and regulations of any duly constituted authority
present and future affecting or respecting the use or occupancy of the Demised
Premises by Tenant, or the business at any time thereon transacted by Tenant or
any assignee or subtenant of Tenant, after the commencement of the term of this
lease.
b. Tenant shall at all times keep the Demised Premises, the building
thereon and all
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appurtenances in a clean and sanitary condition, according to the applicable
statutes, city ordinances, and the directions or regulations of the proper
public authorities.
9. COVENANT OF QUIET ENJOYMENT
The Tenant, upon the payment of the rent herein reserved and upon the
performance of all of the terms of this lease, shall at all times during the
lease term and during any extension or renewal term peaceably and quietly enjoy
the Demised Premises without any disturbance from the Landlord or from any other
person claiming through the Landlord.
10. TERMINATION
The Tenant shall vacate the Demised Premises in the good order and
repair in which such premises are at the time of commencement of the term
hereof, ordinary wear and tear, depreciation, damage and loss from the elements,
loss covered by insurance, and other occurrences beyond the reasonable control
of Tenant excepted, and shall remove all of its property therefrom so that the
Landlord can repossess the Demised Premises not later than noon on the day upon
which this lease or any extension thereof ends, whether upon notice or by
holdover or otherwise. The Landlord shall have the same rights to enforce this
covenant by ejectment and for damages or otherwise as for the breach of any
other condition or covenant of this lease. The Tenant may at any time, provided
that Tenant is not in default hereunder, prior to or upon the termination of
this lease or any renewal or extension thereof remove from the Demised Premises
all materials, equipment and property of every other sort or nature the cost of
which was paid for by the Tenant, provided that such property is removed without
substantial injury to the Demised Premises and that Tenant repairs any damage to
the Buildings resulting from such removal. No injury shall be considered
substantial if it is promptly corrected by restoration to the condition prior to
the installation of such property, if so requested by the Landlord. Any such
property not removed shall become the property of the Landlord.
11. INSURANCE
a. The Tenant shall, at its sole cost and expense, cause to be placed
in effect immediately upon commencement of the term of this lease, and shall
maintain in full force and effect during said term (i) fire and extended
coverage insurance covering all improvements, structures and their contents on
the Demised Premises on a full replacement cost basis, insuring all risks of
direct physical loss, and excluding unusual perils such as nuclear attack, earth
movement, civil disturbance, riot, flood and war, with deductibles or self
insurance consistent with insurance industry practices, and (ii) bodily injury
and property damage comprehensive public liability insurance with a combined
single limit of not less than $2,000,000.00 including deductibles consistent
with normal insurance industry practices.
b. The Tenant shall deliver to Landlord a duplicate original of each
such policy, or in lieu thereof, a certificate issued by the carrier. Each such
policy or certificate shall provide that the
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same shall not be canceled without at least thirty (30) days prior written
notice to Landlord, and shall name Landlord and any mortgagee as an additional
insured thereunder.
12. UTILITIES
The Tenant agrees to pay for all water, fuel, gas, oil, heat,
electricity, power, materials, and services which may be furnished to it or,
used by it in, or about the Demised Premises and to keep said Demised Premises,
free and clear of any lien, or encumbrance of any kind whatsoever created by
Tenant's act or omission.
13. CONDEMNATION
a. The parties hereto agree that, should the whole of the Demised
Premises be taken or condemned by any competent authority for any public or
quasi-public use or purpose during the term of this lease and Tenant does not
elect to exercise its option, this lease shall terminate as of the time when
possession thereof is required for public use and from that day on the parties
shall be released from further obligations hereunder. Tenant reserves unto
itself the right to prosecute its claim for an award based upon its leasehold
interest for such taking, without impairing any rights of Landlord for the
taking.
In the event that a part of the Demised Premises shall be taken or
condemned and (a) the part so taken includes the building on the Demised
Premises or any part thereof, or (b) the part so taken shall remove from the
Demised Premises ten percent (10%) or more of the front depth of the parking
area thereof or more than a depth of ten (10) feet, whichever is greater, OR (c)
the part so taken shall consist of twenty percent (20%) or more of the total
parking area, or (d) such partial taking shall result in cutting off direct
access from the Demised Premises to any adjacent public street or highway, then
and in any such event, the Tenant may, at any time either prior to or within a
period of ninety (90) days after the date when possession of the Demised
Premises shall be required by the condemning authority, elect to terminate this
lease or, Tenant may, as an alternative to such termination of this lease, elect
to purchase the Demised Premises in accordance with its purchase option, except
that the purchase price to be paid for the Demised Premises shall be the lesser
of Three Million Three Hunded Thousand and No/100 Dollars ($3,300,000.00) or an
M.A.I. appraisal of the Demised Premises obtained from an appraiser mutually
satisfactory to the Landlord and the Tenant. In the event that the means of
ingress and egress to the Demised Premises are in any way blocked or partially
blocked as a result of any road construction or other improvements and Tenant's
business is adversely affected thereby, Landlord agrees to waive an equitable
portion of Tenant's obligations during such period of construction or
improvement.
b. In the event of a taking which does not give rise to an option to
terminate or an option to purchase the Demised Premises, or in the event of a
taking which does give rise to such options but Tenant does not elect to
exercise same, Landlord shall, to the extent of Landlord's award from such
taking (which word "award" shall include any settlement, or purchase price under
a sale in lieu
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of condemnation), promptly restore, replace or repair the Demised Premises to
the same condition as existed immediately prior to such taking insofar as is
reasonably possible. If the award shall exceed the amount spent or to be spent
promptly to effect such restoration, repair or replacements, such excess amount
shall be divided between Landlord and Tenant so that Tenant shall receive a
portion of the award which shall be attributable to (i) the value of the trade
fixtures lost and/or damaged as a result of the condemnation; (ii) the cost of
removal of the fixtures, equipment and inventory; (iii) that percentage of the
award attributable to the value of the improvements on the Demised Premises the
cost of which was contributed by the Tenant; and (iv) the value of Tenant's
leasehold estate hereunder had the property not been condemned so long as Tenant
does not elect to exercise its option to purchase. Tenant hereby acknowledges it
shall have no right to any settlement proceeds or award attributable to the
existing condemnation Case No. _________.
14. ASSIGNMENT AND SUBLETTING
The Tenant may not assign this lease or let or underlet the whole or
any part of said Demised Premises without the prior written consent of the
Landlord which consent shall not be unreasonably withheld. Any such assignment
or subletting shall not relieve Tenant of its obligations under this lease
except as provided in Section 15 below. For purposes of this paragraph an entity
shall be deemed affiliated with Tenant in the event Donald C. Mealey or First
Team Management, Inc. owns a Twenty-Five percent (25%) or greater interest in
the profits and losses of such entity.
15. OPTION TO PURCHASE
In consideration of the amounts payable hereunder during the term, the
Landlord and Tenant agree as follows:
a. OPTION GRANT. ~ The Landlord hereby grants unto the Tenant the
non-assignable exclusive right to purchase the property set forth on EXHIBIT "A"
hereto (the "Property") on the terms and conditions set forth below.
b. EXERCISE OF OPTION. ~ If the Tenant elects to exercise the option
granted herein, it shall furnish at least thirty (30) days advance written
notice to Landlord.
c. PURCHASE PRICE AND METHOD OF PAYMENT. ~ In the event Tenant elects
to purchase the Property, the purchase price to be paid by the Tenant to the
Landlord shall be Three Million, Three Hundred Thousand and No/100 Dollars
($3,300,000.00) plus the cost of any special assessments affecting the Demised
Premises which have been paid by the Landlord and which will benefit the Demised
Premises after the expiration of the term of this Lease.
The purchase price shall be paid to the Landlord at the time of closing
by cash, certified check, or by wire transfer of funds.
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d. SURVEY. ~ At any time while this Lease is in effect, Tenant may have
the Property surveyed at Tenant's sole cost and expense. Landlord agrees to
deliver a copy of any surveys in Landlord's possession upon request by Tenant.
e. EXPENSES, PRORATION AND CONVEYANCE. ~ The Tenant shall pay for
documentary stamps on the Deed and for recording the deed. At closing Tenant
shall deliver the cash required to close and Landlord shall convey title to
Tenant by general warranty deed.
f. REPRESENTATION OF OWNERSHIP. ~ The Landlord covenants that Landlord
is the fee simple owner of the Property subject to no liens or encumbrances of
any type. Landlord covenants that it shall not encumber the Property during the
term hereof in an amount greater than Two Million Five Hundred Thousand and
No/100 Dollars ($2,500,000.00), so long as Landlord's lender agrees in writing
to acknowledge Tenant's rights hereunder so long as Tenant is not in default of
its obligations pursuant to this Lease.
g. HAZARDOUS WASTE. ~ At the commencement of the term of this Lease,
there are no pollutants, contaminants, petroleum products or by-products,
asbestos or other substances, whether hazardous or not, on or beneath the
surface of the Property, except for 3 underground tanks on the Property, one of
which is in use and as otherwise disclosed on EXHIBIT "B", which Landlord or any
other person or entity has placed, caused or allowed to be placed upon the
Property, and which has caused or may cause any investigation by any agency or
instrumentality of government, which is or may be on the Property in violation
of any law or regulation of any local, state or federal government or which is
or may be a nuisance or health threat to occupants of the Property or other
residents of the area. In the event Tenant exercises its option, Tenant shall
take the Demised Premises subject to the conditions disclosed in EXHIBIT "B" or
any other condition which may exist at the time of exercise of the option.
Landlord hereby agrees to indemnify Tenant against any claim, loss, liability or
obligation which may accrue against Tenant as a result of the breach of any
representation or warranty set forth in this Lease.
h. CLOSING DATE. ~ This Option shall be closed at the offices of
Landlord's attorney not later than one hundred twenty (120) days after notice of
exercise.
i. CLOSING PROCEDURE. ~ At the Closing, the parties shall deliver the
following duly executed documents and funds:
(1) By Landlord:
(i) A statutory warranty deed conveying fee simple
title to the Property to Tenant.
(ii) A no-lien affidavit in a form satisfactory to
Tenant's attorney.
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(iii) Such other instruments and documents provided
in this Option and as may be reasonably required in order to consummate the
transaction herein contemplated.
(2) By Tenant:
(i) A certified check or a cashier's check payable to
the order of Landlord for the cash to close or a wire transfer of said funds to
a bank account designated by Landlord.
(ii) An Owner's Title Commitment showing no change
from the Leasehold Commitment delivered pursuant to the Agreement in the amount
of Three Million, Three Hundred Thousand and No/100 Dollars ($3,300,000.00).
j. MEMORANDUM OF OPTION. ~ Simultaneously with the execution of this
lease the parties hereto shall execute a Memorandum of Option Agreement
including Landlord's right to purchase solely for the purpose of recording in
the public records.
16. HOLDING OVER
In the event Tenant continues to occupy the Demised Premises after the
last day of the term hereby created, or after the last day of any extension of
said term, and the Landlord elects to accept rent thereafter, a tenancy from
month to month only shall be created and not for any longer period.
17. DESTRUCTION OF PREMISES
In the event of a total or partial destruction of the Buildings or
related improvements to be located on the Demised Premises during said term from
any cause, the Landlord shall forthwith repair the same, unless same was caused
by the negligence of Tenant, its employees or business invitees, provided such
repairs can be made within one hundred twenty (120) days under the laws and
regulations of state, federal, county or municipal authorities, but such total
or partial destruction shall in no wise annul or void this lease, except that
the minimum rent to be paid hereunder shall be equitably adjusted according to
the amount and value of the undamaged space.
Should the total or partial destruction result from causes covered by
the fire and extended coverage insurance furnished by the Tenant, the insurance
proceeds shall be made available to the Landlord to effect the required repairs.
In the interests of expediency, the Tenant may, at its option, elect to make the
necessary repairs, in which event the insurance proceeds shall be made available
to the Tenant for such purpose.
If such repairs cannot be made within one hundred twenty (120) days,
this lease may be terminated at the option of Tenant.
18. WAIVER OF SUBROGATION
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Landlord and Tenant do hereby waive any and all claims against the
other for damage to or destruction of any improvements upon the Demised Premises
(whether or not resulting from the negligence of Tenant) which is covered by
insurance which Tenant is obligated to carry under the terms of this lease;
provided, however, that this waiver shall not be applicable if it has the effect
of invalidating the Landlord's or Tenant's insurance coverage.
19. RELATIONSHIP OF PARTIES
It is understood and agreed that the relationship of the parties hereto
is strictly that of Landlord and Tenant and that this lease shall not be
construed as a joint venture or partnership. The Tenant is not and shall not be
deemed to be the agent or representative of the Landlord.
20. PERSONAL PROPERTY
The Landlord acknowledges that Landlord has no interest in any personal
property or equipment or furniture and fixtures which may be presently located
or installed by the Tenant upon the Demised Premises, and the Landlord agrees in
the future to furnish the Tenant, upon request, such Landlord's Waiver or
Mortgagee's Waiver or similar document as may be reasonably required by an
institutional lender or equipment lessor in connection with the Tenant's
acquisition or financing respecting such personal property, equipment, furniture
and fixtures. The Tenant shall have the right to remove same at the termination
of this lease, and, notwithstanding anything to the contrary contained in this
lease, Tenant shall be permitted five (5) days after the effective date of
termination of the term or any renewal or hold-over term within which to
accomplish the removal, and shall be obligated to repair any damage caused by
removal.
21. DEFAULT AND INSOLVENCY
a. The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease by Tenant:
(1) The failure by Tenant to make any payment of Rent or any
other payment required to be made by Tenant hereunder, as and when due provided
Landlord has given five (5) days' written notice to Tenant of non-payment; or
(2) More than three defaults by Tenant within any one year of
the term of the lease for the nonpayment of rent hereunder, necessitating that
Landlord, because of such defaults, shall have served upon Tenant within said
year more than three written notices. This default shall be deemed a non-curable
default; or
(3) The failure by Tenant to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
Tenant, other than paragraph (1) above, where such failure shall continue for a
period of thirty (30) business days after written notice thereof
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from Landlord to Tenant; or
(4) The insolvency of the Tenant or the execution by Tenant of
an assignment for the benefit of creditors; or
(5) The filing by or for reorganization or arrangement under
any law relating to bankruptcy or insolvency if said petition remains
undischarged for ninety (90) days; or
(6) The appointment of a receiver or trustee to take
possession of substantially all of Tenant's assets located at the Demised
Premises or of Tenant's interest in this Lease; or
(7) The vacating or abandonment of the Demised Premises for a
period of three (3) days or more.
b. Upon the occurrence of any event of default, Landlord shall have the
right at any time thereafter to pursue any one or more of the following remedies
with or without notice or demand. Pursuit of any of the following remedies shall
not preclude pursuit of any of the other remedies herein provided by law, nor
shall pursuit of any remedy herein provided constitute a forfeiture or waiver of
any rents due to Landlord hereunder or of any damages accruing to Landlord by
reason of the Tenant's violation of any of the terms, conditions or covenants
herein contained.
(1) Terminate this Lease, in which event Tenant shall
immediately surrender the Demised Premises to Landlord, and if Tenant fails to
do so, Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in rents, enter upon and take possession of the Demised
Premises and expel or remove Tenant and any other person who may by occupying
the Demised Premises or any part thereof, by force if necessary, without being
liable for prosecution or any claim or damages therefor. Tenant agrees to pay to
Landlord on demand the amount of all loss and damage which Landlord may suffer
by reason of such termination, whether through inability to relet the Demised
Premises on satisfactory terms or otherwise.
(2) Enter upon and take possession of the Demised Premises and
expel or remove Tenant and any other person who may be occupying the Demised
Premises, without being liable for prosecution or any claim for damages
therefor, and relet the Demised Premises and receive the rents therefrom. Tenant
agrees to pay to Landlord on demand any deficiency that may arise by reason of
such reletting.
(3) Enter upon the Demised Premises without being liable for
prosecution or any claim for damages therefor, and do whatever Tenant is
obligated to do under the terms of this Lease. Tenant agrees to reimburse
Landlord on demand for expenses which Landlord may incur in effecting compliance
with Tenant's obligations under this Lease, and Tenant further agrees that
Landlord shall not be liable for any damages resulting to the Tenant from such
action.
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(4) At its option, declare the rents for the entire remaining
term of the Lease, and other indebtedness, if any, immediately due and payable
without regard to whether or not possession shall have been surrendered to or
taken by Landlord, and may commence action immediately thereupon and recover
judgment therefor provided same shall not relieve Landlord of its duty to
mitigate its damages by reasonable action.
Any rents which may be due Landlord, whether by acceleration or
otherwise, as provided herein, shall include the minimum rent, and any
additional amounts provided for herein.
c. In the event of any default under this lease by Landlord, Tenant
may, without being judged in default hereunder, withhold payments of rent or
other sums due Landlord (provided that Tenant has given Landlord written notice
and thirty (30) days to cure such default unless a shorter period is required to
prevent Tenant from suffering damage or loss) by Tenant, and apply same to cure
any such default by Landlord. In addition to the foregoing rights, each party
shall have such other and further rights as are allowed by law or in equity.
Failure to exercise any right hereunder on any one or more occasions shall not
be deemed a waiver of such right or any subsequent right. In the event either
party is in default in the performance of any term, covenant, agreement or
condition contained in this lease, the defaulting party shall reimburse the
non-defaulting party for all costs and expense, including without limitation,
court costs and reasonable attorneys' fees incurred by it in protecting the
interests, whether or not litigation is involved.
22. RADON GAS
Radon is a naturally occurring radioactive gas which, when accumulated
in a building in sufficient quantities, may present health risks to persons who
are exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit. (Pursuant to ss.404.056(8), Florida Statutes.)
23. ESTOPPELS
Landlord and Tenant do each hereby agree at any time and from time to
time that within not more than ten (l0) days after written request by the other,
to execute, acknowledge and deliver to Landlord a written statement in such form
as may be required by a potential or existing lender or buyer certifying that
its lease is unmodified and in full force and effect (or, if there have been
modifications, that the same are in full force and effect as modified and
stating the modifications) and the dates to which the rent and other charges
have been paid in advance, if any, it being intended that any such statement may
be relied upon by any prospective purchaser of the fee or mortgage or assignee
of any mortgage upon the fee of the Demised Premises.
24. ACCESS
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The Landlord hereby warrants, represents and covenants to the Tenant
that Tenant has access to all street fronts and adjoining rights-of-way. If any
street, adjoining right-of-way, or all or any part of the parking area is
obstructed or blocked for repairs, reconstruction or otherwise, to the extent
the operation of Tenant's business is substantially adversely affected, a fair
and reasonable reduction of rent shall be made. If customer access to Tenant's
store is blocked, rent shall abate; provided, however, rent shall not abate if
access is blocked due to acts of Tenant.
25. ENTRY AND INSPECTION
The Tenant shall permit Landlord and its agents to enter the Demised
Premises at all reasonable times for any of the following purposes: to inspect
the same; to maintain the building in which the said Demised Premises are
located; to make such repairs to the Demised Premises as the Landlord is
obligated or may elect to make; to post notices of nonresponsibility for
alterations or additions or repairs. The Landlord shall have such right of entry
and the right to fulfill the purpose thereof without any rebate of rent to the
Tenant for any loss of occupancy or quiet enjoyment of the Demised Premises
thereby occasioned.
26. NOTICES
All notices to be given to the Tenant shall be in writing, deposited in
the United States mail, certified or registered, return receipt requested or by
hand delivery or overnight courier service, with postage prepaid, and addressed
to the Tenant at 350 S. Lake Destiny Drive, Orlando, Florida 32810, Attn: Donald
C. Mealey, with a copy to J. Gregory Humphries, Esq., Smith, Williams &
Humphries, 201 E. Pine Street, Suite 701, Orlando, Florida 32801. Notices by the
Tenant to Landlord shall be in writing, deposited in the United States mail,
certified or registered, return receipt requested, with postage prepaid, and
addressed to the Landlord at P. O. Drawer HH, Plant City, Florida 33564, Attn:
John V. Verner, Jr., with a copy to Robert S. Trinkle, Esq., Trinkle, Redman,
Moody, Swanson & Byrd, P.A., P. O. Drawer TT, Plant City, Florida 33564. Notices
shall be deemed delivered the day after same are deposited in the United States
mail or when delivered, as above provided. Change of address by either party
must be by notice given to the other in the same manner as above specified.
27. LICENSING
The Landlord agrees upon request by Tenant to sign promptly and without
charge therefore to the Tenant, any application for occupational licenses and
permits as may be required by the Tenant for the conduct and operation of the
business herein authorized or for the proper use of the Demised Premises, this
to include, without limitation, applications for occupational licenses, signs,
and any other licenses where the signature of the Landlord or owner is required
by the applicable laws of the state, county, or municipality in which the
Demised Premises are located that are in effect and in force at the time, the
cost of any such licenses and permits to be borne by the Tenant.
-13-
<PAGE>
28. COOPERATION
Landlord shall fully cooperate with Tenant throughout the term of this
lease and all extensions and renewals to secure and maintain proper zoning,
building and other permits and compliance with all applicable laws, and Landlord
shall execute all such petitions, requests and the like as Tenant shall
reasonably request for such purposes.
29. FORCE MAJEURE
If Landlord or Tenant is delayed or prevented from performing any of
their respective obligations under this lease by reason of strike or labor
troubles or any outside cause whatsoever (other than inability to obtain
financing) beyond Landlord's or Tenant's reasonable control, the period of such
delay or such prevention shall be deemed added to the time herein provided for
the performance of any such obligations.
30. SUCCESSORS AND ASSIGNS
The covenants, terms, conditions, provisions, and undertakings in this
lease or in any renewals thereof shall extend to and be binding upon the heirs,
executors, administrators, successors, and assigns of the respective parties
hereto, as if they were in every case named and expressed, and shall be
construed as covenants running with the land; and wherever reference is made to
either of the parties hereto, it shall be held to include and apply also to the
heirs, executors, administrators, successors, and assigns of such party, as if
in each and every case so expressed.
31. DECLARATION OF GOVERNING LAW
This lease shall be governed by, construed and enforced in accordance
with the laws of the State of Florida.
32. GRAMMATICAL USAGE
In construing this lease, feminine or neuter pronouns shall be
substituted for those masculine in form and vice versa, and plural terms shall
be substituted for singular and singular for plural in any place in which the
context so requires.
33. ADDITIONAL INSTRUMENTS
The parties agree to execute and deliver any instruments in writing
necessary to carry out any agreement, term, condition, or assurance in this
lease whenever occasion shall arise and request for such instruments shall be
made.
34. MARGINAL NOTES
-14-
<PAGE>
The captions and marginal notes of this lease are inserted only as a
matter of convenience and for reference and in no way define, limit, or describe
the scope or intent of this lease, nor in any way affect this lease.
35. ENTIRE AGREEMENT
This lease, together with any written agreements which shall have been
executed simultaneously herewith, contains the entire agreement and
understanding between the parties. There are no oral understandings, terms, or
conditions, and neither party has relied upon any representation, express or
implied, not contained in this lease or the simultaneous writings heretofore
referred to. All prior understandings, terms, or conditions are deemed merged in
this lease. This lease cannot be changed or supplemented orally.
36. MODIFICATION
This lease may not be changed orally, but only by an agreement in
writing and signed by the party against whom enforcement of any waiver, change,
modifications, or discharge is sought.
37. SEVERABILITY
If any provision of this lease shall be declared invalid or
unenforceable, the remainder of the lease shall continue in full force and
effect.
38. ATTORNEYS' FEE
In the event that it becomes necessary for either party to bring suit
to enforce the terms of this lease, then the prevailing party shall be entitled
to recover all costs, including reasonable attorneys' fees, against the
non-prevailing party.
39. CONSTRUCTION
Landlord and Tenant hereby acknowledge that each has participated
equally in the drafting of this lease and, accordingly, no court construing this
lease shall construe it more stringently against one party than the other.
40. HAZARDOUS WASTE
a. TENANT'S RESTRICTIONS. ~ Tenant shall not cause or permit to occur:
(1) Any violation of any federal, state or local law,
ordinance or regulation now or hereafter enacted, related to environmental
conditions on, under or about the Demised Premises, arising from Tenant's use or
occupancy of the Demised Premises, including but not limited to, soil
-15-
<PAGE>
and ground water conditions; or
(2) The use, generation, release, manufacture, refining,
production, processing, storage, or disposal of any hazardous substances on,
under, or about the Demised Premises, or the transportation to or from the
Demised Premises of any hazardous substances, except as may be permitted by
applicable law and regulation.
41. HOLD HARMLESS
Tenant shall indemnify, defend and hold Landlord harmless from any and
all claims, liabilities, damages and costs, including attorneys' fees, incurred
by Landlord which may arise from Tenant's use of the Demised Premises or from
the conduct of its business or from any activity, work or things which may be
permitted or suffered by Tenant in, on or about the Demised Premises to the
extent not caused by the Landlord, and shall further indemnify, defend and hold
Landlord harmless from and against any and all claims, liabilities, damages and
costs, including attorneys' fees, incurred by Landlord which may arise from any
negligence of Tenant or any of its agents, representatives, customers,
employees, or invitees.
IN WITNESS WHEREOF, the parties have executed this lease as of the day
and year first above written.
Witnesses: TENANT:
FIRST TEAM FORD, LTD., A FLORIDA
LIMITED PARTNERSHIP
By: First Team Management, Inc.,
__________________________________ General Partner
__________________________________ By:____________________________________
-16-
<PAGE>
Witnesses: LANDLORD:
__________________________________ PLANT FRUIT COMPANY
__________________________________ By:____________________________________
STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing instrument was acknowledged before me this _____ day of
April, 1996, by _______________, as _____________ of FIRST TEAM MANAGEMENT,
INC., General Partner of FIRST TEAM FORD, LTD., a Florida limited partnership,
on behalf of the partnership, who is personally known to me or who has produced
________________________ as identification and who did (did not) take an oath.
_________________________________________
(Signature)
_________________________________________
(Printed name)
NOTARY PUBLIC - STATE OF FLORIDA
SERIAL NO.:
STATE OF FLORIDA
COUNTY OF _____________
The foregoing instrument was acknowledged before me this ____ day of
April, 1996, by ____________________, as _______________ of PLANT FRUIT COMPANY,
a Florida corporation, on behalf of the corporation, who is personally known to
me or who has produced ________________________ as identification and who did
(did not) take an oath.
_________________________________________
(Signature)
_________________________________________
(Printed name)
NOTARY PUBLIC - STATE OF FLORIDA
SERIAL NO.:
-17-
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION OF "DEMISED PREMISES"
-18-
EXHIBIT 10.3
LEASE
E. W. RICHARDSON, JR., FRANK S. SHAW, JR., and SARAH C. SHAW, his wife,
and MARY LOWRY SHAW, widow, the Lessors, and TALLAHASSEE MOTORS, INC., the
Lessee, each in consideration of the agreements to be performed by the other,
hereby, on this 1 day of July, 1988, agree:
1. PROPERTY AND TERM: The Lessors hereby lease to the Lessee the real
property in Leon County, Florida, described as:
Commence at the Northwest corner of the Southeast One-Quarter of
Section 31, Township 1 North, Range 1 East, and run East along the
North boundary line of said southeast Quarter of said Section 31, which
is the centerline of Park Avenue 2,192.6 feet to the centerline of
Satsuma Street (now Magnolia Drive); thence East along said North
boundary of said Southeast Quarter 50 feet; thence North 00 degrees 14
minutes East along the East right-of-way line of Magnolia Drive 835
feet to a point of beginning. From said POINT OF BEGINNING continue
thence along the East right-of-way line of Magnolia Drive North 0
degrees 14 minutes East 251.35 feet to a point of curve of a 2 degrees
27 minutes curve, having a delta angle of 15 degrees 45 minutes and a
radius of 2,342.01 feet; thence along said curve 249.1 feet; thence
North 89 degrees 53 minutes East 469.9 feet; thence south 00 degrees 14
minutes West 500 feet; thence south 89 degrees 53 minutes West 456.5
feet to the POINT OF BEGINNING; containing 5.3 acres, more or less.
Said land lying and being partly in the Northeast Quarter of the
Northeast Quarter; and the Southeast Quarter of the Northeast Quarter
of Section 31, Township 1 North, Range 1 East; partly in the Northwest
Quarter of the Northwest Quarter of Section 31, Township 1 North, Range
1 East, Leon County, Florida.
ALSO:
<PAGE>
Commence at the Northwest corner of the Southeast Quarter of Section
31, Township 1 North, Range 1 East, and run East along the North
boundary line of said Southeast Quarter of said Section 31, which is
the centerline of Park Avenue 2192.6 feet to the centerline of Satsuma
Street (now Magnolia Drive); thence East along said North boundary of
said Southeast Quarter 50 feet; thence North 00 degrees 14 minutes East
along the East right-of-way line of Magnolia Drive 1086.35 feet to a
point of curve of a 2 degree 27 minutes curve having a delta angle of
15 degrees 45 minutes and a radius of 2342.01 feet; thence along
said-curve 249.1 feet to the POINT OF BEGINNING. From said POINT OF
BEGINNING continue thence along said curve 25.14 feet; thence North 89
degrees 53 minutes East 472.55 feet; thence South 00
degrees 14 minutes West 25.0 feet; thence South 89 degrees 53 minutes
West 469.9 feet to the POINT OF BEGINNING. Said land lying and being
partly in the Northeast Quarter of the Northeast Quarter of Section 31,
Township 1 North, Range 1 East; and partly in the Northwest Quarter of
the Northwest Quarter of Section 32, Township 1 North, Range 1 East,
Leon County, Florida.
STREET ADDRESS: 243 North Magnolia Drive, Tallahassee, FL (the
"Property")
for the term beginning at 12:01 a.m. on June 1, 1988, or if later, the Closing
as defined in that certain Contract for Sale between Lessors and First Team
Management, Inc., dated March 23, 1988 (the "Agreement"), and ending at 11:59
p.m. on May 31, 1998, or such later date ten (10) years after the Closing.
2. RENT: The Lessee will pay to the Lessors, as rent for the property
leased during the term, the total amount of TWO MILLION EIGHT HUNDRED EIGHTY
THOUSAND DOLLARS ($2,880,000.00), subject to a termination of such payments if
Lessee exercises its Option set forth in paragraph 17, in which case the lease
term and the monthly payments shall end as of the date of closing said option as
set forth herein, paying that amount in the following manner:
2
<PAGE>
The sum of Twenty Four Thousand Dollars ($24,000.00) a month in
advance, the first such payment to be due at the commencement of the
term of this Lease and continuing each month throughout the term of the
lease, each payment being payable one-half (1/2) to each Lessor.
3. USE: The Lessee will use the leased property only for an automobile
dealership, or such other business or businesses as may be connected therewith,
and will make no unlawful, improper, or offensive use of the leased property.
Lessors represent and warrant that Lessors' current use of the Property is in
conformity with all applicable ordinances and regulations, building, zoning,
environmental and other laws and the conditions of any special use or similar
permits as of the commencement of the Lease Term.
4. ASSIGNMENT OR SUB-LEASING: No assignment of this lease or
sub-leasing of any part of the leased property by the Lessee or any assignee or
sub-Lessee shall be valid without the written consent of the Lessors, but that
consent shall not be unreasonably withheld. No assignment or sub-leasing shall
relieve the assignor or sub-lessor of any obligation under this lease. Each
assignee or sub-lessee shall, by assuming that status, become obligated to
perform every agreement of this lease to be performed by the Lessee, except that
a sub-lessee shall be obligated to perform them only insofar as they relate to
the part of the property sub-leased and the rent required by the sub-lease, and
shall be obligated to pay rent directly
3
<PAGE>
to the Lessors only after default in payment by the sub-lessor and written
demand from the Lessors to pay rent directly to the Lessors.
5. ACCESS BY LESSORS: The Lessors may enter and inspect the leased
property at all reasonable times.
6. REPAIRS: The Lessee shall maintain the entire leased property in
good and substantial repair, including the interior and exterior of all
buildings, roofs, parking areas, roadways, fences, air conditioning and heating
and plumbing. Such repairs and replacements, interior and exterior, ordinary as
well as extraordinary, shall be made promptly, as and when necessary. All
repairs and replacements shall be in quality and class at least equal to the
original work. The agreements to repair in this paragraph also apply to any
damage caused by fire or other casualty (See Paragraph 8). In the event of
damage to the building which invades the structural integrity of same (including
the structural integrity of the roof), not caused by an act or failure to act on
the part of the Lessee, and not insurable under fire and extended coverage
insurance as may be written in Florida, the Lessors shall be responsible for any
such damages in excess of $10,000.00.
7. ALTERATIONS: No alteration, addition, or improvement to the leased
property shall be made by the Lessee without the written consent of the Lessors,
which consent shall not be unreasonably withheld. Any alteration, addition, or
improvement made, and any fixtures installed, by the Lessee after such consent
4
<PAGE>
is given shall at the Lessors' option become the property of the Lessors upon
the expiration or other termination of this lease, provided, however, that the
Lessors shall have the right to require the Lessee to remove such fixtures at
the Lessee's cost upon such termination of this lease, or notwithstanding the
above, that the Lessee shall have the right to remove such fixtures at the
Lessee's cost upon such termination of this lease if such removal can be
effected a) without damage to Lessors' Property or b) if Lessee either restores
the leased property in a good and workmanlike manner after such removal or pays
Lessors acceptable sums to accomplish such repair.
8. DAMAGE BY FIRE OR OTHER CASUALTY. If the leased property is damaged
by fire or other casualty to any extent, the Lessee shall rebuild and repair the
leased property. In the event of damage by fire or other casualty, the rent
payable under this lease shall abate, in proportion to the impairment of the use
that can reasonable be made of the property for the purpose permitted by this
lease, until the property is rebuild and repaired. In no event shall such
abatement be for more than six (6) months of the total term of this lease.
Lessee shall be entitled to receive any insurance proceeds payable to it as a
result of such fire or casualty and shall apply such proceeds to the
reconstruction of the leased property to specifications not less than the
building or buildings as they existed prior to said fire.
5
<PAGE>
9. EMINENT DOMAIN: If the leased property, or any part thereof, is
taken by eminent domain, this lease shall expire on the date when the leased
property shall be so taken, and the rent shall be apportioned as of that date.
No part of any award shall belong to the Lessee. Notwithstanding the provisions
of this lease, Lessee shall have the right to make a separate claim with the
condemning authority for the value of Lessee's property and/or moving and
relocation expenses; provided, however, that such separate claim shall not
reduce or adversely affect the amount of Lessors' award.
10. WAIVER OF EXEMPTION: Any constitutional or statutory exemption of
the Lessee or any assignee or sub-lessee of any property usually kept on the
leased premises from distress or forced sale is waived.
11. ADDRESSES: All rent payable and notice given under this lease to
the Lessors shall be paid and given at Post Office Box 510, Tallahassee, FL
32302, or such other place as the Lessors shall specify in writing. All notices
given under this lease to the Lessee or any assignee or sub-lessee of the Lessee
shall be given at the leased premises with a copy to W. Warner Peacock, First
Team Management, Inc., 2628 Edgewater Drive, Orlando, Florida 32804, or such
other place as Lessee shall specify in writing. Any notice properly mailed by
certified mail, postage and fee prepaid, shall be deemed delivered when mailed,
whether received or not.
6
<PAGE>
12. REMEDIES FOR FAILURE TO PAY RENT: If any rent required by this
lease shall not be paid within thirty (30) days of the due date, the Lessors
shall have the option to:
a. Terminate this lease, resume possession of the property for
their own account, and recover immediately from the Lessee the difference
between the total rent specified in the lease and the fair rental value of the
property for the remainder of the term, reduced to present worth.
b. Resume possession and re-lease or rent the property for the
remainder of the term for the account of the Lessee and recover f rom the
Lessee, at the end of the term or at the time each payment of rent comes due
under this lease as the Lessors may choose, the difference between the rent
specified in the lease and the rent received on the re-leasing or renting.
In either event, the Lessors shall also recover all expenses incurred
by reason of the breach, including a reasonable attorney's fee.
13. REMEDIES FOR BREACH OF AGREEMENT: If either the Lessors or the
Lessee shall fail to perform or shall breach any agreement of this lease other
than the agreement of the Lessee to pay rent for thirty (30) days after a
written notice specifying the performance required shall have been given to the
party failing to perform, the party so giving notice may institute action in a
court of competent jurisdiction to terminate this lease or to compel performance
of the agreements arid the prevailing party in that litigation shall be paid by
the losing
7
<PAGE>
party all expense of such litigation including a reasonable attorney's fee.
14. TERMINATION OF LEASE: This lease shall be terminated immediately if
the Lessee shall become insolvent or bankrupt (including a reorganization) or
make an assignment for the benefit of creditors.
15. INSURANCE AND LIABILITY: It is agreed that the Lessee will keep in
force adequate fire and extended coverage insurance covering the leased property
and the Lessors shall be named as an additional insured and shall be furnished a
certificate of insurance in an amount equal to the replacement cost coverage of
the leased property.
The Lessee covenants and agrees not to do or suffer anything to be done
by which persons or property in or about or adjacent to the leased premises may
be injured or endangered; and the Lessee agrees to indemnify and save the
lessors harmless from any claims of any persons for injuries to life, person or
property by reason of anything done, or permitted to be done or suffered, or
omitted to be done by the Lessee in and about the occupation of said premises.
In addition, the Lessee shall furnish the Lessors with a certificate of
insurance showing liability insurance covering the premises to be in force in an
amount not less than $4,000,000.00 per occurrence, said coverage to be afforded
by an insuror approved by the Lessors, but such approval shall not be
unreasonably withheld.
8
<PAGE>
16. TAXES AND UTILITIES: The Lessee agrees to pay all accounts for
water, lights, telephone, gas and any and all other utilities used in connection
with the leased premises. Lessor represents and warrants all such utilities are
available to the leased property in sufficient force and quantity for its
intended use.
The Lessee will pay all ad valorem taxes levied against the leased
premises when due, and shall furnish to the Lessors official receipts of the
appropriate taxing authority or other proof satisfactory to the Lessors
evidencing payment.
The Lessee shall pay any and all sales or use taxes due or assesses
because of this lease.
17. OPTION TO PURCHASE: In consideration of the sum of TEN DOLLARS
($10.00) and other good and valuable consideration in hand paid by Lessee to
Lessors and in further consideration of the mutual promises and benefits flowing
between the parties hereto, it is hereby agreed between Lessors and Lessee as
follows:
a. OPTION GRANT. The Lessors hereby grant unto the Lessee the
exclusive right to purchase the Property on the terms and conditions set forth
below.
b. OPTION TERM. The term of this option shall commence on the
eighth (8th) anniversary of the date of execution of this Lease and shall
continue until the end of the lease term.
c. EXERCISE OF OPTION. If the Lessee elects to exercise the option
granted herein, it shall furnish at least
9
<PAGE>
sixty (60) days advance written notice.
d. PURCHASE PRICE AND METHOD OF PAYMENT. In the event Lessee elects
to purchase the Property, the purchase price to be paid by the Lessee to the
Lessors shall be THREE MILLION ONE HUNDRED THOUSAND DOLLARS ($3,100,000.00). The
purchase price shall be paid to the Lessors at the time of Closing by cash,
certified check, cashier's check drawn on a bank situated in Tallahassee,
Florida, acceptable to the Lessors, or by wire transfer of funds.
e. EVIDENCE OF TITLE. Not later than thirty (30) days after the
execution of the Agreement, Lessors shall, at Lessee's sole option and expense,
deliver a commitment for a policy of Leasehold Title Insurance (the
"Commitment") in an amount insuring Lessee under this Lease, which shall be
written on a title insurance company satisfactory to the Lessee. Copies of all
documents constituting the exceptions referred to in the Commitment shall be
attached thereto. Other than taxes for the year 1988 and all subsequent years,
Lessee shall have the unqualified right to approve all exceptions and matters of
tittle, which shall in all respects be satisfactory to Buyer. Within five (5)
days after receipt, Lessee's counsel. shall notify Lessors' counsel in writing
of any matters in the binder which are unacceptable. Lessors shall then have
twenty (20) days to cure defects or otherwise satisfy Lessee's valid objections
or to notify Lessee that the alleged defects cannot be cured by the exercise of
reasonable diligence and/or the expenditure
10
<PAGE>
of not more than $25,000. If Lessors so notify the Lessee, Lessee shall have
ten (10) days to cancel the Agreement or waive the defects.
g. SURVEY. At any time while this Lease is in effect, Lessee may
have the Property surveyed at Lessee's sole cost and expense.
h. EXPENSES, PRORATION AND CONVEYANCE. The Lessors shall pay for
documentary stamps on the Deed and the Lessee shall pay for recording the deed.
At Closing Lessee shall deliver the cash required to close and Lessors shall
convey title to Lessee by general warranty deed.
i. REPRESENTATION OF OWNERSHIP. The Lessors covenant that Lessors
are the fee simple owners of the Property subject to no liens or encumbrances of
any type.
j. HAZARDOUS WASTE. At the commencement of the term of this lease,
there are no pollutants, contaminants, petroleum products or by-products,
asbestos or other substances, whether hazardous or not, on or beneath the
surface of the Property, which Lessors or any other person or entity have
placed, caused or allowed to be placed upon the Property, and which have caused
or may cause any investigation by any agency or instrumentality of government,
which are or may be on the Property in violation of any law or regulation of any
local, state or federal government or which are or may be a nuisance or health
threat to occupants of the Property or other residents of the area. Lessors
hereby agree to indemnify Lessee against any claim, loss, liability,
11
<PAGE>
or obligation which may accrue against Lessee as a result of the breach of any
representation or warranty set forth in this agreement.
k. CLOSING DATE. This option shall be closed at the offices of
Douglass, Cooper, Coppins & Powell, 211 East Call Street, Tallahassee, FL 32301
not later than one hundred twenty (120) days after notice of exercise.
l. CLOSING PROCEDURE. At the Closing, the parties shall deliver the
following duly executed documents and funds:
(1) By Lessors:
(i) A statutory Warranty deed conveying fee simple title to
the Property to Lessee.
(ii) A no-lien affidavit in a form satisfactory to Lessee's
attorney.
(iii) An Owner's Title Commitment showing no change from the
Commitment to be issued under Paragraph 17(e), in the amount of THREE MILLION
ONE HUNDRED THOUSAND DOLLARS ($3,100,000.00).
(iv) Such other instruments and documents provided in this
Option and as may be reasonable required in order to consummate the transaction
herein contemplated.
(2) By Lessee:
(i) A certified check or a cashier's check drawn on a bank
situated in Tallahassee, Florida, acceptable to the Lessors, payable to the
order of Lessors for the cash to close or a wire transfer of said funds to a
bank account
12
<PAGE>
designated by Lessors.
18. QUIET ENJOYMENT: The Lessors covenant and agree that Lessee, on
paying said monthly rent and performing the covenants herein, shall and may
peaceably and quietly hold and enjoy the Property for the term aforesaid.
19. HAZARDOUS WASTE: Beginning on the date of the execution of this
lease and continuing throughout the lease term, no pollutants, contaminants,
petroleum products or by-products, asbestos or other substances, whether
hazardous or not, shall be placed, caused or allowed to be placed on or beneath
the surface of the Property by Lessee or any other person or entity, which such
substances are in violation of any law or regulation of any local state or
federal government or which are or may be a nuisance or health threat to
occupants of the Property or other residents of the area. Lessee hereby agrees
to indemnify Lessors against any claim, loss, liability, obligation which may
accrue against Lessors as a result of the breach of any representation or
warranty set forth in this
agreement.
Signed in the presence of: LESSORS:
/s/ Janis W. Piotrowski /s/ E.W. Richardson, Jr. (SEAL)
- ----------------------------- ----------------------------------------
E. W. RICHARDSON, JR.
/s/ [illegible] /s/ Frank S. Shaw, Jr. (SEAL)
- ----------------------------- ----------------------------------------
As to E. W. Richardson, Jr. FRANK S. SHAW, JR.
and Frank S. Shaw, Jr.
/s/ Augusta Durden /s/ Sarah C. Shaw (SEAL)
- ----------------------------- ----------------------------------------
SARAH C. SHAW
/s/ Janis W. Piotrowski /s/ Mary Lowry Shaw (SEAL)
- ----------------------------- ----------------------------------------
As to Sarah C. Shaw and MARY LOWRY SHAW
Mary Lowry Shaw
13
<PAGE>
LESSEE:
/s/ [illegible] TALLAHASSEE MOTORS, INC.
- -----------------------------
/s/ [illegible] By /s/ R. Higginbotham
- ----------------------------- ----------------------------------------
President
STATE OF FLORIDA
COUNTY OF LEON
The foregoing instrument was acknowledged before me this 1st day of
July, 1988, by E. W. RICHARDSON, JR. and FRANK S. SHAW, JR.
/s/ Janis W. Piotrowski
-----------------------------------------
Notary Public
JANIS W. PIOTROWSKI
Notary Public, State of Florida at Large
My Commission Expires July 21, 1988
Bonded Thru Troy Fain Insurance, Inc.
STATE OF FLORIDA
COUNTY OF LEON
The foregoing instrument was acknowledged before me this 30th day of
June, 1988, by SARAH C. SHAW and MARY LOWRY SHAW.
/s/ Janis W. Piotrowski
-----------------------------------------
Notary Public
JANIS W. PIOTROWSKI
Notary Public, State of Florida at Large
My Commission Expires July 21, 1988
Bonded Thru Troy Fain Insurance, Inc.
STATE OF FLORIDA
COUNTY OF LEON
The foregoing instrument was acknowledged before me this 1st day of
July, 1988, by Richard Higginbotham, President of TALLAHASSEE MOTORS, INC.,
a Florida corporation, on behalf of the corporation.
/s/ Janis W. Piotrowski
-----------------------------------------
Notary Public
JANIS W. PIOTROWSKI
Notary Public, State of Florida at Large
My Commission Expires July 21, 1988
Bonded Thru Troy Fain Insurance, Inc.
14
<PAGE>
GUARANTY
Performance of the foregoing lease by Tallahassee Motors, Inc., is
fully guaranteed by the undersigned.
Signed in the presence of: SERRA INVESTMENTS, INC.
/s/ [illegible] BY /s/ Albert Serra (SEAL)
- ------------------------------- --------------------------------
ALBERT SERRA, as
/s/ Patricia J. Goodson President
- -------------------------------
/s/ [illegible] /s/ Don Mealey (SEAL)
- ------------------------------- ---------------------------------------
DON MEALEY
/s/ [illegible]
- -------------------------------
STATE OF MICHIGAN
COUNTY OF Collin
The foregoing instrument was acknowledged before me this 14th
day of July, 1988, by ALBERT SERRA, President of SERRA INVESTMENTS, INC., a
Michigan corporation.
/s/ Kenneth W. Coleman
-----------------------------------------
Notary Public
KENNETH W. COLEMAN
Notary Public, State of Texas
My Commission Expires July 31, 19__
STATE OF FLORIDA
COUNTY OF Orange
The foregoing instrument was acknowledged before me this 12th
day of July, 1988, by DON MEALEY.
/s/ [illegible]
------------------------------------------
Notary Public
Notary Public State of Florida at Large
My Commission expires Feb. 17, 1990
This instrument prepared by:
W. Dexter Douglass
Douglass, Cooper, Coppins & Powell
Post Office Box 1674
Tallahassee, FL 32302
15
EXHIBIT 10.4
CERTIFICATION OF GROUND LEASE
CHEVROLET WORLD, INC., a Delaware corporation, as Lessee in that
certain Ground Lease dated January 3, 1991, with AUTO AIR, INC., a Delaware
corporation, as Lessor, hereby certifies the following to GENERAL MOTORS
ACCEPTANCE CORPORATION:
1. A true and correct copy of the Lease (and all addendums and
modifications) is attached hereto as Exhibit "A".
2. The Lease is in full force and effect in accordance with its terms
with no offsets, defenses or claims whatsoever.
3. Lessee has accepted and is in full and exclusive occupancy and
possession of the real property described in the Lease.
4. Lessor has performed all of its obligations due to be performed
under the Lease and there are no defenses, counterclaims, deductions, offsets
outstanding or other defaults existing in favor of Lessee.
5. The Lease has not been modified, altered or amended in any respect
and constitutes the entire agreement between Lessor and Lessee.
6. The Lessee's interest under the Lease has not been previously
assigned or pledged.
7. All rent or other sums or charges due and payable under the Lease
have been paid and no rent or other sums or charges due by Lessee to Lessor have
been forgiven or prepaid nor has Lessee been granted any discounts, concessions
or other credits against the rent or other sums or charges due under the Lease.
8. There is no security deposit held by Lessor under the terms of the
Lease.
9. Lessee has no right or option to purchase the Property, whether by
verbal or written agreement, except as expressly set forth in the Lease.
10. There has not existed and there does not now exist any default by
Lessee or Lessor under any of the terms of the Lease.
11. Lessee acknowledges that GMAC will be relying on the information in
this Letter in deciding whether to complete the consummation of its anticipated
loan transaction.
CHEVROLET WORLD, INC., a
Florida Corporation
By: /s/ Donald C. Mealey
----------------------------
Donald C. Mealey, President
<PAGE>
LESSOR: AUTO AIR
LESSEE:
LEASE DATE:
LOCATION: Orlando Airport (Lee Vista) Orlando, Florida
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
INDEX
ARTICLE PAGE
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<S> <C> <C>
1. Premises 1
2. Term 1
3. Rent and Rent Equivalent 1
4. Taxes and Assessments; Net Lease 2
5. Security Deposit 3
6. Commencement Date 3
7. Use of the Leased Premises; Covenant to Open and Operate 3
8. Construction of Improvements By Lessee 4
9. Compliance with Florida Motor Vehicle Franchise Laws 5
10. Permitted Encumbrances 5
11. Mechanics Liens and Other Encumbrances 6
12. Insurance 6
13. Condemnation 7
14. Fire or Other Casualties 7
15. Waiver of Subrogation 7
16. Alterations 7
17. Repairs 7
18. Assignment and Subletting 8
19. Lessee's Covenants 8
20. Lessor's Covenants and Representations 10
21. Lessor's Covenant of Quiet Enjoyment 11
22. Inspection of the Leased Premises 11
23. Insolvency of Lessee or Dealer 11
24. Default 12
25. Indemnity 13
<PAGE>
ARTICLE PAGE
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26. Accord and Satisfaction 13
27. Delays 14
28. Delivery of Premises Upon Expiration 14
29. Hold Over 14
30. Non-Liability of Lessor 14
31. Notices 15
32. Waiver of Trial by Jury and Counterclaim 15
33. No Partnership 15
34. Attorneys' Fees 13
35. Non-Waiver 15
36. Partial Invalidity 16
37. Divestiture; Option to Purchase or Lease 16
38. Representation and Warranties of Lessor 18
39. Binding on Successors 19
40. Complete Agreement 19
41. Survival 19
</TABLE>
-2-
<PAGE>
GROUND LEASE
THIS LEASE, made by and between AUTO AIR, INC., a Delaware corporation,
whose address is c/o Motors Holding Division, General Motors Corporation, 3044
West Grand Boulevard, Detroit, Michigan 48202 "LESSOR" and CHEVROLET WORLD,
INC., a Florida corporation, whose address is c/o First Team Management, 350
South Lake Destiny Drive, Orlando, Florida 32810, "LESSEE".
W I T N E S S E T H:
ARTICLE 1. PREMISES
In consideration of the rents, covenants and agreements hereinafter set
forth, Lessor does hereby devise and lease to Lessee, and Lessee does hereby
take and lease from Lessor the land situated within the City of Orlando, County
of Orange, State of Florida, more particularly described on Exhibit "A" attached
hereto and made a part hereof, together with all rights, privileges, easements,
appurtenances and amenities belonging to or in any way pertaining to the land,
together hereinafter referred to as the "Leased Premises", to have and to hold,
subject to the terms, covenants, agreements and conditions in this Lease.
ARTICLE 2. TERM
A. INITIAL TERM. The initial term of this Lease shall be for a period
of five (5) years (the "Initial Term") commencing on the Commencement Date, as
hereinafter defined and ending on the last day of the sixtieth (60th) month
following the Commencement Date.
B. EXTENDED TERM. If Lessee shall not be in default under any provision
or condition of this Lease and there shall not have been a cumulative total of
twenty thousand (20,000) Motor Vehicle Sales (as that term is defined below)
from the Leased Premises, then lessee shall have the option to renew and extend
this Lease for an additional term of three (3) years (the "Extended Term")
commencing upon the expiration of the Initial Term of the Lease as provided in
this Article 2.A. above, which option is exercisable only by Lessee giving
notice of such exercise to lessor not earlier than eighteen (18) months nor
later than twelve (12) months prior to the date of expiration of the Initial
Term; provided however, that all of the terms, covenants, promises, conditions
and provisions of this Lease shall apply fully and completely to such Extended
Term of this Lease, except as may otherwise set forth in Article 3 below.
ARTICLE 3. RENT AND RENT EQUIVALENT
During the Initial Term of this Lease, the annual fixed rental payments
to be made by lessee for the lease of the Leased Premises have been based upon
Lessee's forecast of vehicle sales during each consecutive twelve (12) month
period of such Initial Term. "Motor Vehicle sales" shall mean retail sales or
leases excluding fleet sales or fleet leases, during each consecutive twelve
(12) month period of the term of this Lease, of new, previously unregistered
cars or trucks offered by the Chevrolet Motor Division, General Motors
Corporation ("Chevrolet"). Lessee has provided Lessor with the following
forecast:
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 TOTAL
------ ------ ------ ------ ------ -----
Vehicle
Sales 1,728 1,853 2,060 2,205 2,355 10,201
The total rent and rent equivalent to be paid by Lessor for the Leased
Premises is based upon a sum equal to Three Hundred Dollars ($300.00) per motor
vehicle sale per year (the "Rent Equivalent"). It is specifically agreed by
Lessor and Lessee that, for the purposes of this Lease, the definition of Rent
Equivalent shall be those expenses reported by Dealer on lines 36-42, inclusive,
on page 1 of the monthly operating report provided
<PAGE>
by Dealer to Chevrolet Motors Division, General Motors Corporation. The fixed
annual rent for the Leased Premises to be paid directly to Lessor by Lessee
during each consecutive twelve (12) month period of the Initial Term of the
Lease, and which shall remain unadjusted during such Initial Term, shall be the
following:
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 TOTAL
------ ------ ------ ------ ------ -----
Annual
Rent $40,000 $80,000 $140,000 $180,000 $235,000 $675,000
In the event this Lease is extended for an additional three (3) year
term, the actual rent for the Leased Premises to be paid by Lessee to Lessor
during each year of the Extended Term shall be the greater of $235,000 per year
or the Rent Equivalent, as defined hereinabove, applicable to the Leased
Premises for each year of the Extended Term of this Lease. During each year of
the Extended Term, Lessee shall pay to Lessor annual rent in a fixed amount of
$235,000. Within sixty (60) days after the end of each year of the Extended Term
of this Lease, Lessor, upon receipt and review of Dealer's operating statements,
shall calculate the actual Rent Equivalent for each such year and shall give
Lessee written notice thereof. Lessee shall pay the difference, if any, between
the Rent Equivalent and the actual rent paid during the preceding year within
thirty (30) days after receipt of the written notice from Lessor. This provision
shall survive the termination of this Lease.
Fixed rent payments, together with all applicable Florida sales tax,
shall be paid by Lessee to Lessor in equal monthly installments on the first day
of each calendar month succeeding the Commencement Date. Payment of rent shall
be sent to Lessor at Auto Air, Inc., P.O. Box 50255, Atlanta, Georgia 30302.
Notwithstanding the foregoing, the annual fixed rent shall be increased by
lessor in accordance with the provisions of Article 7 A. below in the event
Lessee or Dealer, or any permitted assignee thereof, uses or operates the Leased
Premises for the sale or lease of new motor vehicles other than Chevrolet.
Lessee shall utilize such other funds of Lessee as may be required to
pay and satisfy all other costs and expenses for servicing of the construction
mortgage indebtedness, real estate taxes and assessments, personal property
taxes, insurance, maintenance, building depreciation and other related items and
operating expenses.
ARTICLE 4. TAXES AND ASSESSMENTS; NET LEASE
The purpose and intent of this Lease is that the rental provided herein
shall be an absolutely net return to Lessor and shall continue unreduced and
unabated, except as otherwise provided herein, throughout the entire term of
this Lease and that all taxes, assessments, charges of every kind and nature in
connection with the maintenance, repair, payment of utilities and preservation
of the Improvements and the Leased Premises and of Lessee's leasehold interest
therein during the Initial Term of this Lease, and as the same may be extended,
shall be borne by and paid for by Lessee, except for any federal income taxes
now imposed or which may hereinafter be imposed upon the rents accruing under
the terms of this Lease. All real estate taxes imposed upon the Leased Premises
or personal property tax imposed upon any of the Improvements, other personal
property, or vehicles in the possession of Lessee or Dealer, shall be paid
directly by Lessee to the taxing authority not later than fifteen (15) days
prior to the delinquency date thereof and Lessee shall deliver to Lessor, within
five (5) days after the payment of such taxes, paid tax receipts relating
thereto.
It is further understood and agreed that all ad valorem taxes assessed
during the first and last years of the term of this Lease shall be prorated and
Lessee shall only be liable for such portions of such taxes assessed for said
first and last years as its days of occupancy during any of said years shall
bear to the total of three hundred sixty five (365) days. Lessee shall have the
right in its name or in Lessor's name, whichever shall be appropriate, but at
its own cost and expense, to file and prosecute applications for reduction of
assessed valuation and to institute legal proceedings for the reduction thereof.
Lessor agrees to promptly deliver copies of all tax notices and tax bills to
Lessee so that Lessee may timely
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<PAGE>
contest any proposed tax increase and promptly pay the tax due so as to take
advantage of any discounts allowed for timely payment. Further, upon request of
Lessee, Lessor shall obtain from the taxing authorities a separate assessment
for the Leased Premises if the Leased Premises are part of a larger parcel.
Notwithstanding the foregoing, in the event that during any calendar
year of the term of this Lease ad valorem taxes exceed the sum of $110,000 (the
"Tax Increase"), and a payment by Lessee of the Tax Increase would increase the
Rent Equivalent to an amount In excess of $315.00 per Motor Vehicle sale per
year then should Lessor elect to purchase the Improvements, as hereinafter
provided, Lessor shall reimburse Lessee the cumulative Tax increase paid by
Lessee above $315.00 per Motor Vehicle at closing.
Lessor and Lessee acknowledge that the Leased Premises may be assessed
for transportation, mass transit and related costs and charges. During the
Initial Term and Extended Term of this Lease, Lessee shall be obligated to pay
any costs, charges or assessments arising out of any such obligations imposed
upon the Leased Premises; provided, however, should Lessor elect to purchase the
Improvements, as hereinafter provided, Lessor shall reimburse Lessee for such
costs, charges or assessments at closing.
ARTICLE 5. SECURITY DEPOSIT
Simultaneously with the execution and delivery of this Lease, Lessee
has deposited with Lessor the sum of Twenty Thousand Dollars ($20,000.00) (the
"Deposit") to be retained as a security deposit for the faithful performance of
all covenants, conditions and agreements of this Lease. Upon commencement of the
term of this Lease and receipt by Lessor of the first payment of fixed rent,
Lessor shall return the Deposit to Lessee; provided however, that in the event
Lessee defaults under any term or provision of this Lease prior to the first
payment of fixed rent, Lessor shall, in addition to all other remedies, retain
the Deposit and apply such Deposit and at its option, towards any damages
sustained or suffered by Lessor as a result of Lessee's default. Lessor shall
not be obligated to keep the Deposit an a separate fund but may commingle the
Deposit with its own funds.
ARTICLE 6. COMMENCEMENT DATE
The commencement date of this Lease (the "Commencement Date") shall be
(a) ten (10) days after Lessee has received a permanent Certificate of Occupancy
from the Building Department of the City of Orlando, Florida, authorizing the
use of occupancy of the Improvements to be constructed on the Leased Premises or
(b) no later than thirty (30) days after the execution of a Dealer Sales and
Servicing Agreement between the Chevrolet Motor Division, General Motors
Corporation and an entity to be formed and controlled by Donald C. Mealey (the
"Dealer") whichever to later to occur; provided, however, in the event the
Commencement Date does not occur by March 31, 1992, Lessor, at its sole and
exclusive option, may terminate this Lease and shall retain the Deposit as
liquidated damages, but not as a penalty, for Lessee's failure to comply with
its obligations hereunder.
Notwithstanding the foregoing, Lessee may operate a GM Dealership (as
hereinafter defined) with temporary facilities upon the Leased Premises prior to
the Commencement Date. Lessee shall pay to Lessor fixed rent in the amount of
$3,333.33 for each thirty (30) day period of temporary occupancy and Lessee
shall be obligated to pay for all other costs and expenses of such occupancy,
including but not limited to, utility charges, insurance premiums and real
estate taxes and assessments, as otherwise provided in this Lease. Temporary
occupancy and use of the Leased Premises shall not extend any other provision or
term of this Lease.
ARTICLE 7. USE OF THE LEASED PREMISES; COVENANT TO OPEN AND OPERATE
A. USE OF THE LEASED PREMISES. Lessee shall use and operate the Leased
Premises solely and exclusively for the operation of an authorized motor vehicle
dealership selling, leasing and servicing automobiles sold by the Chevrolet
Motor Division of General Motors Corporation or, with the written consent of the
Chevrolet Motor Division, any other division or
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<PAGE>
affiliate of the General Motors Corporation, ("GM Dealership Use") including the
sales, leasing, servicing and storage of new and used cars and trucks and all
accessory uses in connection therewith, including a body shop and any other
lawful purpose appurtenant thereto. Lessor and Lessee agree that the rent
required to be paid by Lessee to Lessor is particular and unique for this Lease
and that, but for the identity, experience and reputation of Lessee and the
personal services to be performed by Dealer and the principals of Lessee and
Dealer pursuant to the Dealer Sales and Servicing Agreement, Lessor would not
enter into this Lease and, accordingly and notwithstanding any other term or
provision of this Lease to the contrary, in the event that, during the term of
this Lease, the Leased Premises are occupied by any person or entity other than
Lessee or Dealer or used for any purpose other than for a GM Dealership use
then, in addition to any and all other rights and remedies to which Lessor may
be entitled, the rent to be paid by Lessee to Lessor hereunder shall, as of the
date of such use, be automatically increased to the fair market rate for the
Leased Premises, such fair market rent to be determined by the highest and beat
use of the Leased Premises as unencumbered by this Lease. In the event Lessee or
Dealer violates the terms or conditions of this Article 7A, Lessor may, with
five (5) days notice, exercise the rights granted under Article 24.D below.
B. COVENANT TO OPEN AND OPERATE. Lessee covenants to open the Leased
Premises for Motor Vehicle sales not later than thirty (30) days after the
Commencement Date and to operate the Leased Premises solely for GM Dealership
Use. In the event Lessee vacates or abandons the Leased Premises, Lessor may,
without notice, exercise any of the rights granted under Article 24 below.
ARTICLE 8. CONSTRUCTION OF IMPROVEMENTS BY LESSEE
A. PLANS AND SPECIFICATIONS. Lessee shall erect and complete, at
Lessee's sole expense improvements on the Leased Property (the "Improvements")
in accordance with plans and specifications (the "Plans and Specifications") to
be prepared by Lessee and approved by Lessor. Lessee shall present Plans and
Specifications utilizing Lessor's Guide as set forth in Exhibit "B", with
approved modifications thereof, and shall present such Plans and Specifications
to Lessor within thirty (30) days from the effective date of this Lease. Lessor
shall have thirty (30) days after receipt thereof to review the Plans and
Specifications and either approve them or submit written objections thereto to
Lessee. Lessee shall have fifteen (15) days after Lessor's written objections,
if any, to revise such Plans and Specifications and resubmit them to Lessor.
Upon resubmission, Lessor shall have fifteen (15) days to either approve the
Plans and Specifications or make additional written objections thereto. This
procedure shall continue until Lessor has approved the Plans and Specifications.
Lessor agrees not to unreasonably withhold its consent to the Plans and
Specifications. Upon receipt of Lessor's written approval of the Plans and
Specifications, Lessee shall have ninety (90) days in which to obtain necessary
permits and approvals to proceed with the construction of the Improvements upon
the Leased Premises. Thereafter Lessee shall have until March 31, 1992 for the
Improvements to be constructed on the Leased Premises, to complete said
Improvements and receive a temporary or permanent Certificate of Occupancy
therefor. Lessee agrees to proceed diligently with the completion of the
Improvements. The Lessor shall have the right to designate representatives to
inspect the construction of the Improvements during the period of construction;
such inspection or inspections shall be done during normal business hours and in
a manner so as not to interfere with Lessee's performance of its obligations
under this Lease. All work to be performed in the construction of the
Improvements shall be done by contractors selected by Lessee and all work shall
meet or exceed the requirements of all public authorities. All work shall be
done in a good and workmanlike manner and in accordance with applicable law.
B. ZONING LICENSES AND PERMITS. Lessee, its principals and agents,
will, within the Review Period as provided in Article 20 A. below, verify that
Lessee can obtain all licenses and permits for the construction and use of the
Improvements upon the Leased Premises including, but not limited to, those
pertaining to the occupancy and use of the Leased Premises for
-4-
<PAGE>
Lessee's business as contemplated by this Lease. Lessee shall obtain and pay for
all permits, licenses, variances and approvals pertaining to the construction,
use and occupancy of the Leased Premises and the Improvements to be constructed
thereon. Lessee shall pursue all of the aforesaid permits, licenses, variances
and approvals with due diligence and promptness.
C. COMPLETION BOND. Prior to commencement of construction of the
Improvements upon the Leased Premises, Lessee shall deliver to Lessor a
contractor's completion bond of a surety licensed to do business in the State of
Florida naming Lessor and Lessee an co-obligees insuring that the Improvements
will be completed in accordance with the Plans and Specifications approved by
Lessor, free and clear of all mechanical or other liens. The completion bond
shall be in an amount and in a form written by a company as Lessor shall
approve, which approval Lessor shall not unreasonably withhold. The bond my also
include, as obligee, as its interest may appear, any leasehold mortgagee acting
as the construction lender for the financing of the cost of the Improvements to
be constructed on the Leased Premises. In lieu of a completion bond, Lessee may
deliver to Lessor a payment and performance bond of a surety licensed to do
business in the State of Florida naming Lessor, Lessee and any leasehold
mortgagee as co-obligees, such payment bond guaranteeing the full performance of
the contract for the construction of the Improvements to be constructed upon the
Leased Premises in accordance with the Plans and Specifications approved by
Lessor.
D. Not later than five (5) days after receipt of a temporary or
permanent Certificate of Occupancy, whichever is first to occur, and within
thirty (30) days after the completion of any additional improvements approved by
Lessor, Lessee shall furnish Lessor with a recapitulation of all construction
costs of the Improvements certified by Lessee's architect and a principal
officer of Lessee. Lessor shall give written notice thereof to Lessee.
ARTICLE 9. COMPLIANCE WITH FLORIDA MOTOR VEHICLE FRANCHISE LAWS
Lessor and Lessee acknowledge that a Protest was filed in connection
with the establishment of the GM Dealership upon the Leased Premises and that
such Protest has been resolved satisfactorily for the benefit of Lessor and
Lessee; however, so as to minimize the risk of an additional Protest, Lessee
agrees to take such action prior to December 31, 1990, in compliance with
Chapter 320, FLORIDA STATUTES, as is necessary to extend the compliance date for
completion of the Improvements to be constructed upon the Leased Premises and
the use and occupancy thereof for the purposes set forth herein. Lessee shall
provide Lessor written notice of the filing of such application for extension
not later than thirty (30) days after the execution of this Lease.
In the event Lessee's application to extend the compliance date results
in an additional Protest, Lessee's period to comply with its obligations
hereunder shall be extended during the period of such Protest.
ARTICLE 10. PERMITTED ENCUMBRANCES
A. LEASEHOLD MORTGAGE. Lessee may at any time mortgage,
encumber, pledge or assign, as security for a CONSTRUCTION LOAN to
construct the Improvements thereon not in excess of Two Million
Five Hundred Thousand Dollars ($2,500,000.00), its right title and
interest in and to the leasehold estate created hereby upon the
following conditions:
a) if Lessee shall mortgage its leasehold estate,
Lessee shall provide Lessor with notice of the
leasehold mortgage, together with a true copy of
the leasehold mortgage and the name and address of
the mortgagee or any assignee thereof;
b) such leasehold mortgage shall provide that in the
event of any default thereunder by Lessee, the
leasehold mortgagee will provide notice thereof to
Lessor and in the event Lessee shall not cure or
remedy any default or breach of covenant under the
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<PAGE>
leasehold mortgage Lessor shall be entitled to
notice thereof and the right to cure or remedy any
default or breach of covenant in said leasehold
mortgage within thirty (30) days after receipt of
such notice;
c) if Lessee shall not cure or remedy any default or
breach of covenant by Lessee under the Lease within
the period provided for such cure or remedy, Lessor
shall give notice to that effect to such leasehold
mortgagee which shall thereupon be entitled to
exercise any one or more of the following rights:
(i) to cure or remedy, or cause to be cured or
remedied, within a time period equal to the
period of time allowed to Lessee, such
breach or breach of covenant and Lessor
shall accept such cure or remedy; and/or
(ii) to acquire by foreclosure or otherwise the
leasehold estate created hereby and assume
the obligations of Lessee under this Lease,
including those in default and in such event
Lessor shall not exercise its right of
termination with respect to such default.
d) No future advance shall be permitted under the
Leasehold Mortgage without Lessor's written consent,
which consent may be unilaterally, at Lessor's sole
discretion, withheld.
Lessor agrees to subordinate its interest in the Leased Premises to
Lessee's leasehold mortgagee in order to induce the leasehold mortgagee to make
loans, extensions of credit or other accommodations to or for the account of
Lessee in connection with the Improvements. Lessor shall execute documents as
may be reasonably required by Lessee's leasehold mortgagee in order to evidence
this subordination of its interest in the Leased Premises to such party. Lessor
shall acknowledge that its interest in the Leased Premises shall be junior and
subordinate to the leasehold mortgagee's obligations and any lien, mortgage or
other form of security interest which secures the leasehold mortgagee's
obligations. Lessee acknowledges that it shall use its best efforts to obtain as
a condition of its leasehold mortgagee's obligations, that Lessor shall be given
the right to cure any default in connection with Lessee's obligations to its
leasehold mortgagee and to require the leasehold mortgagee to provide Lessor
with notice of any such defaults. Any default by Lessee in any obligation to
Lessee's leasehold mortgagee shall be deemed a default under this Lease
whereupon Lessor may exercise, without notice, any of the rights granted under
Article 24.
B. SECURITY INTEREST IN FIXTURES. Lessee shall have the right at any
time to grant a security interest in any trade fixtures or other personal
property of a removable nature owned by Lessee and installed or kept upon the
Leased Premises not exceeding eighty percent (80%) of the cost of such trade
fixture or item of personal property; provided, however, such limitation shall
not be applicable in the event trade fixture and other personal property is
financed by a construction loan and secured by the Leasehold Mortgage.
ARTICLE 11. MECHANICS LIENS AND OTHER ENCUMBRANCES
Lessee will at all times keep the Leased Premises free from all
mechanics liens and other liens, except as otherwise set forth in Article 10
above.
ARTICLE 12. INSURANCE
A. Lessee shall obtain a comprehensive general liability insurance policy
which shall insure Lessor and Lessee as named insureds for personal liability
with a $1,000,000.00 combined single limit policy for bodily injury and property
damage together with an umbrella policy in an amount not less than
$10,000,000.00. Such insurance shall include coverage against assumed or
contractual liability under this Lease with respect to the Leased
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<PAGE>
Premises and Lessee's operations upon the Leased Premises. As evidence of such
coverage Lessee shall supply Lessor with Certificates of Insurance which shall
name Lessor as an additional insured and shall contain a provision for fifteen
(15) days written notice to Lessor by the insurer prior to any cancellation of
such policies.
B. Lessee shall, at all times during the term of this Lease, carry
all-risk property insurance written at replacement cost in an adequate amount to
avoid co-insurance, and a replacement cost endorsement on all Improvements and
fixtures in or affixed to the Leased Premises with a responsible insurance
company qualified to do business in the State of Florida, and shall deliver to
Lessor a Certificate of Insurance as evidence thereof. No cancellation shall be
effective until at least fifteen (15) days after receipt by Lessor of written
notice thereof. Lessor shall be named as an additional insured on such policy.
All proceeds payable under such insurance relating to the Leased Premises shall
be payable to Lessor.
C. Lessee shall, at all times during the term of this Lease carry business
interruption insurance with coverage in an amount equal to a minimum of twelve
(12) months fixed rent. Such business interruption insurance shall be renewed on
an ANNUAL basis to reflect the increase in rent required hereunder. Such
insurance shall be issued by a responsible insurance company qualified to do
business in the State of Florida and shall name Lessor as an additional insured.
A Certificate of Insurance shall be delivered to Lessor prior to the
Commencement Date and ten (10) days prior to the expiration of each twelve (12)
month period of the terms of this Lease and shall contain a provision for
fifteen (15) days written notice to Lessor by the insurer prior to any
cancellation of such policy.
ARTICLE 13. CONDEMNATION
A. The parties hereto agree that, should the whole of the Leased Premises
be taken or condemned by any competent authority for any public or quasi-public
use or purpose during the term of this Lease and Lessee has not elected to
exercise its option to purchase the Leased Premises as provided in Article 37
below, this Lease shall terminate as of the time when possession thereof is
required for public use and from that day on the parties shall be released from
further obligations hereunder. Lessee reserves unto itself the right to
prosecute its claim for an award based upon its leasehold interest, including
the value of the Improvements for such taking, without impairing any rights of
Lessor for the taking.
In the event that a part of the Leased Premises shall be taken or
condemned and (a) the part so taken includes the Improvements on the Leased
Premises or any part thereof, or (b) the part so taken shall remove from the
Leased Premises ten percent (10%) or more of the front depth of the parking area
thereof or more than a depth of ten (10) feet, whichever is greater, or (c) the
part so taken shall consist of twenty percent (20%) or more of the total parking
area, and such parking cannot be relocated on other portions of the Leased
Premises, or (d) such partial taking shall result in cutting off direct access
from the Leased Premises to any adjacent public street or highway, then and in
any such event, Lessee may, at any time either prior to or within a period of
ninety (90) days after the date when possession of the Leased Premises shall be
required by the condemning authority, elect to terminate this Lease or, Lessee
may, as an alternative to such termination of this Lease, elect to purchase the
Leased Premises in accordance with its purchase option, except that there shall
be deducted from the purchase price to be paid for the Leased Premises all of
Lessor's award from the condemnation proceedings
B. In the event of a taking which does not give rise to an option to
terminate or an option to purchase the Leased Premises, or in the event of a
taking which does give rise to such options but Lessee does not elect to
exercise same, Lessor shall, to the extent of Lessor's award from such taking
(which word "award" shall include any settlement, or purchase price under a sale
in lieu of condemnation), promptly restore, replace or repair the Leased
Premises to the same condition as existed immediately prior to such taking
insofar as is reasonably possible. If the award shall exceed the amount spent or
to be spent promptly to effect such restoration, repair
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<PAGE>
or replacements, such excess amount shall be divided between Lessor and Lessee
so that Lessee shall receive a portion of the award which shall be attributable
to (i) the value of the trade fixtures lost and/or damaged as a result of the
condemnation; (ii) the cost of removal of the fixtures, and equipment; (iii)
that percentage of the award attributable to the value of the Improvements on
the Leased Premises the cost of which was contributed by Lessee; and (iv) the
value of Lessee's leasehold estate hereunder had the property not been condemned
so long as Lessee does not elect to exercise its option to purchase the Leased
Premises.
ARTICLE 14. FIRE OR OTHER CASUALTY
In case of fire or other damage to the Leased Premises, Lessee shall
give immediate notice to Lessor. If such damage is partial, Lessor will
thereupon cause the Leased Premises to be repaired as promptly as possible, but
if the Leased Premises shall be substantially destroyed, either party may
serve notice upon the other, within ten (10) days after such destruction, of its
intention to terminate this Lease and upon the receipt of such notice, this
Lease shall terminate and Lessee shall surrender the Leased Premises and pay to
Lessor all accrued rent to the date of such surrender. In the event the proceeds
of the insurance to be maintained by Lessee pursuant to Article 12 are
insufficient to fully restore the Leased Premises after such destruction
(whether or not this Lease has been terminated), Lessee shall pay such
deficiency in full to Lessor; provided, however, that Lessee shall have the
right to apply the proceeds of any insurance to the restoration of the
Improvements, in which case, the Lease shall remain in full force and effect for
the remainder of its term.
ARTICLE 15. WAIVER OF SUBROGATION
Lessor and Lessee waive all rights, each against the other, for damages
caused by fire or other perils covered by insurance where such damages are
sustained in connection with the occupancy of the Leased Premises.
ARTICLE 16. ALTERATIONS
Lessee will not make any alterations or add any construction whatsoever to
the Leased Premises without the prior written consent of Lessor in each
instance, and if Lessee makes any alterations or adds any construction which
shall not have been previously approved by Lessor, such additional construction
or alterations shall, at Lessor's option, be removed at the expiration of the
term of this Lease and the Leased Premises shall be restored at the sole expense
of Lessee to the condition existing as of the date of this Lease, wear and tear
excepted.
Subsequent to completion of the Improvements, Lessor shall maintain design
control on any and all additional leasehold improvements Lessee shall make to
the Improvements or the Leased Premises. All additional leasehold improvements
proposed to be made by Lessee shall only be permitted provided Lessee submits
such plans to Lessor for approval. Such plans will include architectural
drawings as well as detailed Plans and Specifications. Lessor shall have thirty
(30) days from date of receipt of such Plans and Specifications to review same
and advise Lessee of its approval or disapproval for the proposed additional
improvements.
To the extent additional improvements are required in connection with the
GM Dealership Use, Lessee shall make such improvements subject to Lessor's prior
written consent, which consent shall not be unreasonably withheld.
ARTICLE 17. REPAIRS
Lessee shall make all repairs necessary to keep the Leased Premises and
the Improvements located thereon in good order and repair including all
structural portions thereof, the roofs, driveways, sidewalks, parking areas,
lighting, landscaping, fencing, ditches, drains, sewers, utility lines and other
appurtenant portions of the Leased Premises.
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ARTICLE 18. ASSIGNMENT AND SUBLETTING
A. ASSIGNMENT. Except to the Dealer, or to any assignee which has been
pre-approved by Lessor as provided hereinbelow, neither the Lease, nor any
interest of Lessee in the Lease, shall be sold, assigned, or otherwise
transferred, directly or indirectly, whether by operation of law or otherwise,
nor shall any of the issued or outstanding capital stock of any corporation
which, directly or indirectly, is or controls Lessee under the Lease or which is
a "general partner" of any partnership that is or controls Lessee's interest
under the Lease, be sold, assigned or transferred, nor shall additional stock be
issued which will result in a change of the controlling stock ownership of such
corporation as held by the shareholders thereof on the date hereof (or on the
date that Lessor approved the transfer of the holder of Lessee's leasehold
interest in the Lease), nor shall any general partner's interest in a
partnership which is Lessee under the Lease be sold, assigned or transferred
without Lessor's prior written approval. Lessor shall not withhold its consent
as to any proposed assignee provided, in Lessor's sole judgment, such proposed
assignee (a) is of good moral character, (b) has sufficient experience in the
automobile business, (c) has above average performance at all other dealerships
at which he or she has been involved with respect to sales, services, and
customer satisfaction and, (d) would not adversely affect interbrand
competition. Lessee, from time to time during the term of this Lease, may
request Lessor to pre-approve a prospective assignee of Lessee's interest in
this Lease, which approval shall not be unreasonably withheld. Lessor shall be
entitled to deny or revoke such approval if, prior to such assignment, the acts
or actions of such prospective assignee are contrary, in Lessor's sole judgment,
to the standards set forth in this Article 18A.
For purposes of this Article 18 Article 37 below, the terms "control" or
"controlling" shall mean possession, direct or indirect, of the power to direct,
or cause the direction of, the management and policies of any person or entity,
whether through the ownership of voting securities, or partnership interest, by
contract or otherwise.
B. SUBLETTING. Lessee shall not sublet the Leased Premises or any part
thereof at any time during the term of this Lease to any subtenants, licensees,
or other occupants, except that Lessee may enter into such short-term licenses
for incidental use of limited portions of the Leased Premises (e.g., dealer
preparation) with the prior written approval of Lessor, which approval shall not
be unreasonably withheld.
C. NO MORTGAGE OR PLEDGE. Except with respect to the Leasehold Mortgage,
in no event shall Lessee mortgage, encumber, pledge, grant a security interest
in, collaterally assign or conditionally transfer the Lease, any Lessee owned
equipment or fixtures incorporated in or used in connection with the Leased
Premises or any of the rents, issues and profits therefrom without the written
consent of Lessor, which consent may be withheld in Lessor's sole discretion.
ARTICLE 19. LESSEE'S COVENANTS
A. Lessee shall not consent to any unlawful use of the Leased Premises and
shall comply promptly with all statutes, ordinances, rules, orders, regulations
and requirements of the Federal, State and Municipal Governments, and of any of
their departments and bureaus applicable to said Leased Premises. Lessee shall
also comply promptly with all rules and regulations of the fire insurance
underwriters insuring the Leased Premises.
B. (i) Lessee warrants and agrees that Lessee, including Lessee's
employees, agents and contractors, shall not treat, store or dispose of any
hazardous substances, hazardous wastes or toxic substances, as those terms are
defined under CERCIA, 42. U.S.C. ss.9601 ET SEQ., RCRA, 42 U.S.C. ss.6901 ET
SEQ., or TSCA, 15 U.S.C. ss.2601 ET SEQ., on or below the Leased Premises;
provided, however, that Lessee may accumulate and dispose of such wastes as
allowed under applicable laws and regulations so long as such wastes are
generated on-site.
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(ii) Lessee warrants and agrees that it will comply with all
applicable federal, state and local environmental laws, regulations and
ordinances, including those governing underground storage tanks and including
satisfying any reporting requirements in connection with its use of, or
operations conducted at, the Leased Premises.
(iii) Lessee acknowledges and agrees that Lessor has the right
to inspect the Leased Premises from time to time to observe Lessee's compliance
with applicable federal, state and local laws, regulations and ordinances. This
right of inspection does not constitute a duty on Lessor's part to so inspect
and in no event relieves Lessee of its compliance obligations under this Lease
or under law.
(iv) Lessee warrants and agrees that it shall obtain any
necessary federal, state and local permits, licenses, registrations and
authorizations required to conduct its operations at or use of the Leased
Promises and further warrants and agrees to comply with all such requirements.
(v) Lessee warrants and agrees that it shall not introduce
any PCB-containing fluids in any equipment used at or operations conducted at
the Leased Premises.
(vi) Lessee warrants and agrees that it shall promptly notify
the appropriate agency as required and Lessor in writing of any releases of
hazardous substances, hazardous wastes, or toxic substances, as herein defined,
which may constitute a violation of any federal, state or local environmental
laws, regulations or ordinances. Lessee warrants and agrees that it shall
promptly undertake cleanup or remediation of such releases and shall document to
Lessor's reasonable satisfaction, including providing Lessor with copies of any
correspondence with appropriate agencies and any data, test results or
environmental reports generated, that such cleanup or remediation has been
properly completed.
(vii) Lessee shall indemnify and hold Lessor harmless from and
against any liability, damage, penalties, losses or fines ("Claims") to which
Lessor may be subjected to the extent such Claims result from Lessee's breach of
any warranties contained herein.
ARTICLE 20. LESSOR'S COVENANTS AND REPRESENTATIONS
A. DELIVERY OF INFORMATION RELATING TO LEASED PREMISES; REVIEW PERIOD.
Within twenty (20) days of the effective date of this Lease, Lessor shall
deliver to Lessee all engineering plans, drawings, surveys, plats, site plans,
title commitments and policies, soils reports, letters on availability of
utilities, correspondence with state or local government agencies or departments
regarding the Leased Premises, zoning, proof of zoning and documentary evidence
of the existing land use plan designations, Development Orders, Binding' Letters
of Interpretation, artist renderings and economic and financial studies which
Lessor has in its possession, if any, relating to the Leased Premises. Lessee
shall have until January 31, 1991 (the "Review Period") to examine the aforesaid
information and to notify Lessor that Lessee elects to terminate this Lease. In
the event Lessee fails to so notify Lessor by 5:00 p.m. E.S.T. on the last day
of the Review Period, such election to terminate this Lease shall be deemed to
have been waived.
B. TITLE. Lessor covenants and represents that it has good, insurable and
marketable title to the Leased Premises. Within thirty (30) days after full
execution of this Lease, Lessor, at Lessor's expense, shall furnish Lessee with
a commitment to issue a leasehold title insurance policy (the "Commitment")
committing the title insurance company to ensure Lessee's leasehold interest in
the Leased Premises, such Commitment to be issued by Chicago Title Insurance
Company. The Commitment and the resulting title insurance policy (the "Policy")
shall be in an amount equal to the actual cost of the Improvements to be
constructed on the Leased Premises. The Commitment and Policy shall be in such
form as is authorized by the Insurance Commissioner, State of Florida. The
Commitment shall be delivered to Lessee's attorney who shall have fifteen (15)
days to give written notice to Lessor of any objections to title except as to
the matters of title as
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set forth on Exhibit "B" attached hereto, which matters shall be deemed
"Permitted Exceptions." Failure of Lessee's attorney to object to any title
matter within such fifteen (15) day period shall be conclusive as to Lessee's
acceptance of all matters of title. After due notice of any objection to title,
Lessor shall have a reasonable time, not to exceed ninety (90) days to cure any
title defect. If Lessor falls to cure any title defect as to which due notice Is
given, Lessor shall have the option to cancel and terminate this Lease or to
notify Lessor that It vill valve such defect(s), accept all matters of title and
proceed to comply with all terms and conditions of this Lease. Upon the request
of Lessee at Lessee's expenses Lessor shall furnish to Lessee's leasehold
mortgagee, at promulgated simultaneous issue rates, a commitment to issue a
leasehold mortgagee's title insurance policy in the amount of the Leasehold
Mortgage.
C. SURVEY. Within thirty (30) days after full execution of this Lease,
Lessor, at Lessor's expense, shall furnish Lease& vith a current survey of the
Leased Premises (the "Survey"). The Survey shall be certified to Lessor, Lessee
and the title insurance company insuring Lessee's leasehold interest in the
Leased Premises. The Survey shall be prepared in accordance with Chapter 21HH-6,
Florida Administrative Code and Section 472.027, Florida Statutes.
D. ENVIRONMENTAL MATTERS. Lessor covenants that during its period of
ownership the Leased Premises have not been in violation of or subject to any
existing, pending or, to the best of its knowledge, threatened investigation or
inquiry by any governmental authority or agency or any obligation under
applicable laws, rules or regulations of any federal, state or local
governmental authority. Further, there are no facts, conditions or circumstances
known to Lessor which, if fully disclosed, would result in any such
investigation or violation. Within thirty (30) days after full execution of this
Lease, Lessor, at Lessor's expense, shall furnish to Lessee a Phase I
Environmental audit report prepared by a qualified engineer licensed in the
State of Florida. Lessee shall have fifteen (15) days to review such audit and
to provide written notice to Lessor of any objection thereto and its option, if
any, to cancel and terminate this Lease. Lessor shall not be required to cure
any objection to the environmental condition of the Lease Premises. Failure to
object to any environmental matter or to exercise its option to terminate this
Lease within such fifteen (15) day period shall be Conclusive an to Lessee's
acceptance of all environmental matters.
ARTICLE 21. LESSOR'S COVENANT OF QUIET ENJOYMENT
Lessor covenants that Lessee on paying the rent and performing the
covenants herein contained may peacefully and quietly have, hold and enjoy the
Leased Premises for the term of this Lease or as the same may be extended.
ARTICLE 22. INSPECTION OF THE LEASED PREMISES
Lessor and its representatives shall have the right to enter upon the
Leased Premises or any part thereof at all reasonable hours for the purpose of
examining the same or making such repairs or alterations thereof, and in the
event Lessee fails to exercise its option to purchase the Leased Premises or
renew this Lease in accordance with the terms hereof, Lessee also agrees to
permit Lessor or its representatives to show the Leased Premises to persons
interested in purchasing or leasing the Leased Premises and to place upon the
Leased Premises the usual notices "To Let" and "For Sale," which notices Lessee
shall permit to remain without molestation.
ARTICLE 23. INSOLVENCY OF LESSEE OR DEALER
If at any time proceedings in bankruptcy, or pursuant to any other act for
the relief of debtors, shall be instituted by or against Lessee or Dealer which
remains undischarged for a period of more than sixty (60) days, or if Lessee or
Dealer shall compound Lessee's or Dealer's debts, or assign over Lessee's or
Dealer's estate, or effects, for payment thereof, or if any
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execution shall issue against Lessee or Dealer, or any of Lessee's or
Dealer's effects whatsoever, or if a receiver or trustee shall be appointed of
Lessee's or Dealer's property, or if this Lease shall by operation of law
devolve upon or pass to any person or persons other than Lessee, then and in
each of said cases, Lessor may terminate this Lease forthwith by notifying
Lessee as herein provided. Upon such termination, all sums due and payable or to
become due and payable by Lessee pursuant to this Lease, shall at once become
due and payable to Lessor.
If, as a matter of law, Lessor has no right upon the bankruptcy of Lessee
or Dealer to terminate this Lease, then, if Lessee or Dealer, as debtor, or its
trustee wishes to assume or assign this Lease, in addition to curing or
adequately assuring the cure of all defaults existing under this Lease on
Lessee's of Dealer's part on the date of filing of the proceeding, Lessee or
Dealer, as debtor, or the trustee or assignee must also furnish adequate
assurances of future performance under this Lease (as defined below). Solely for
the purpose of this Article 23, adequate assurance of curing defaults means the
posting with Lessor of a sum in cash sufficient to def ray the cost of such a
cure. Adequate assurance of future performance under this Lease means posting a
deposit equal to three (3) months rent at the rental rate in effect at such time
as the request for the assumption or assignment is made, plus all other charges
payable by Lessee hereunder, and, in the case of an assignee, assuring Lessor
that the assignee is financially capable of assuming this Lease and performing
all of the obligations, promises, covenants, and agreements of Lessee hereunder.
In a reorganization under Chapter 11 of the Bankruptcy Code, the debtor or
trustee must assume this Lease or assign it within sixty (60) days from the
filing of the proceeding, or he shall be deemed to have rejected and terminated
this Lease. Further, any person or entity who or which has assumed this Lease or
to which this Lease may be assigned pursuant to the provision of the Bankruptcy
Code shall be deemed, from and after the date of such assumption or assignment,
without further act or deed, to have assumed all of the obligations and be
subject to all of the conditions arising under or resulting from this Lease, and
shall upon demand of Lessor execute and deliver to Lessor an instrument
confirming such assumption.
ARTICLE 24. DEFAULT
A. In the event Lessee shall fail to pay the rent reserved herein when
due, Lessor shall give Lessee written notice of such default and if Lessee shall
fail to cure such default within ten (10) days after receipt of such notice,
Lessor shall, in addition to its other remedies provided by law, have the
remedies set forth in this Article 24.C below.
B. If Lessee shall be in default in performing any of the terms of this
Lease other than the payment of rent, or shall be in default under any term or
provision of the Dealer Sales and Servicing Agreement referenced in Article 6
hereinabove, Lessor shall give Lessee written notice of such default, and if
Lessee shall fail to cure such default within twenty (20) days after the receipt
of such notice, or if the default is of such a character as to require more than
twenty (20) days to cure, then if Lessee shall fail within said twenty (20) day
period to commence and thereafter proceed diligently to cure such default, then
and in either of such events, Lessor may (at its option and in addition to its
other legal remedies) cure such default for the account of Lessee and any sum so
expended by Lessor shall be additional rent for all purposes hereunder and shall
be paid by Lessee with the next monthly installment of rent.
C. If:
(i) any rent shall be due and unpaid as set forth in
Article 24(A) hereinabove; or
(ii) Lessee shall not have cured any default as set
forth in Article 24(B) hereinabove; or
(iii) there shall be an existing default in the
Dealer Sales and Servicing Agreement
referenced in Article 6 hereinabove or such
Agreement is terminated or not renewed; or
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(iv) the Leased Premises shall be vacated or abandoned;
or
(v) Lessee or Dealer, or their permitted assignees
cease to exist as business entities; or
(vi) Lessee shall become-insolvent; or
(vii) Lessee is in default under any other term,
provision, covenant or obligation under this
Lease,
then Lessor, in addition to its other remedies, shall have the immediate right
of re-entry. Should Lessor elect to re-enter or take possession of the Leased
Premises pursuant to legal proceedings or any notice provided for by law, Lessor
may either terminate this Lease or from time to time, without terminating this
Lease, relet the Leased Premises or any part thereof on such terms and
conditions as Lessor shall, in its sole, discretion, deem advisable. The avails
of such reletting shall be applied: first, to the payment of any indebtedness of
Lessee to Lessor other than rent due hereunder; second, to the payment of any
reasonable costs of such reletting, including the cost of any reasonable
alterations and repairs to the Leased Premises; third, to the payment of rent
due and unpaid hereunder; and the residue, if any, shall be held by Lessor and
applied in payment of future rent as the same may become due and payable
hereunder. Should the avails of such reletting during any month be less than the
monthly rent reserved hereunder, then Lessee shall, during each such month, pay
such deficiency to Lessor.
D. If Lessee or Dealer shall be in default under Article 7A of this Lease,
in addition to its other remedies, Lessor shall have the immediate right to
purchase the Improvements at a purchase price equal to the fair market value of
the Improvements. The fair market value for automotive use shall be determined
in accordance with the provisions of Article 37(D).
E. All rights and remedies of Lessor hereunder shall be cumulative and
none shall be exclusive of any other rights and remedies allowed by law.
F. If Lessor shall be in default under any provision of this Lease, Lessee
shall give Lessor written notice of such default and Lessor shall have a period
of thirty (30) days, or such other reasonable period of time as may be
appropriate, to cure such default. If Lessor fails to cure such default, Lessee
may, upon notice to Lessor proceed to cure such default, at Lessor's reasonable
expense; provided, however, Lessor's failure to cure a default, except for a
defect in title, shall not entitle Lessee to terminate or cancel this Lease.
ARTICLE 25. INDEMNITY
Lessee shall indemnify Lessor, its officers, directors, stockholders,
representatives, agents and employees and save them harmless from and against
any and all claims, actions, damages, liability, cost and expense, including
reasonable attorneys' fees, in connection with all losses, including but not
limited to all Claims, as defined in Article 19 B(vii) above, for loss of life,
personal injury and/or damage to property arising from or out of any occurrence
in, upon or at the Leased Promises or the occupancy or use by Lessee of the
Leased Premises, or any other part thereof, or arising from or out of Lessee's
failure to comply with any provision of this Lease or occasioned wholly or in
part by any act or omission of Lessee, its agents, contractors, suppliers,
employees, servants, customers or licensees and any person conducting business
in the Leased Premises.
ARTICLE 26. ACCORD AND SATISFACTION
Payment by Lessee or receipt by Lessor of a lesser amount than the rent or
other charges herein stipulated may be, at Lessor's sole option, deemed to be on
account of the earliest due stipulated rent or other charges, or deemed to be on
account of rent owing for the current period only, notwithstanding any
instructions by or on behalf of Lessee to the contrary,
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which instructions shall be null and void, and no endorsement or statement on
any check or any letter accompanying any check payment as rent or other charges
shall be deemed an accord and satisfaction, and Lessor shall accept such check
or payment without prejudice to Lessor's right to recover the balance of such
rent or other charges or pursue any other remedy in this Lease or in law or in
equity against Lessee.
ARTICLE 27. DELAYS
In the event that either party hereto shall be delayed in the performance
of its maintenance and/or repair obligations by reason of strikes, lockouts,
labor troubles, inability to procure materials or shall at any time be so
delayed by reason of failure of power, restrictive governmental laws or reasons
of similar nature not the fault of the party delayed in performing work or doing
acts required under the terms of this Lease, then performance of such act shall
be excused for the period of the delay and the period for the performance of any
such act shall be extended for a period equivalent to the period of such delay.
The provisions of this Article 27 shall not operate to excuse Lessee from
payment of rent, or any other payments required by the terms of this Lease.
ARTICLE 28. DELIVERY OF PREMISES UPON EXPIRATION
Upon the expiration or earlier termination of this Lease, Lessee agrees to
vacate and deliver up possession of the Leased Premises and the Improvements on
the expiration date, free and clear of any liens (other than the Leasehold
Mortgage) and shall remove its personal property and equipment prior to such
expiration date. If Lessee damages the Leased Premises or the Improvement in the
removal of its equipment and property, Lessee shall forthwith repair such damage
to the reasonable satisfaction of Lessor. Lessee shall deliver the Leased
Premises and the Improvements to Lessor in a broom clean condition.
ARTICLE 29. HOLD OVER
Notwithstanding any provision of law or any judicial decision to the
contrary, no notice shall be required from either party to terminate this Lease
on the expiration date herein specified and, anything herein contained or
implied to the contrary notwithstanding, a holding over by Lessee, its assignee
or sublessee beyond the expiration of said term shall give rise to a tenancy
from month-to-month only. Further, in the event Lessee continues to occupy the
Leased Premises on a month-to-month tenancy, it is understood that all of the
provisions of this Lease, together with rent at a rental rate which shall be the
greater of (a) twice the rental rate for the month preceding the expiration
hereof, or (b) an amount equal to the fair market rental value of the Leased
Premises as deter-mined by an appraiser (M.A.I.) licensed in the State of
Florida selected by Lessor, shall remain effective for all purposes, except for
the provisions of Article 37 which shall be deemed to have expired.
ARTICLE 30. NON-LIABILITY OF LESSOR
A. In the event of any transfer or transfers of Lessor's interest in the
Leased Premises, the transferor shall be automatically relieved of any and all
obligations on the part of Lessor accruing from and after the date of such
transfer.
B. If Lessor shall fail to perform any covenant, term or condition of this
Lease upon Lessor's part to be performed and if, as a consequence of such
default, Lessee shall recover a money judgment against Lessor, such judgment
shall be satisfied only out of the proceeds of sale received upon execution of
such judgment and levied thereon against the right, title and interest of Lessor
in the Leased Premises and out of rents or other income from the Leased Premises
receivable by Lessor or out of the consideration received by Lessor from the
sale or other disposition of all or any part of
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Lessor's right, title and interest in the Leased Premises and Lessor shall not
be liable for any deficiency.
ARTICLE 31. NOTICES
All notices to be given hereunder by either party shall be in writing and
given by personal delivery, and if to Lessor, to one of the executive officers
of Lessor, or shall be sent by telegram or by registered mail addressed to the
party intended to be notified at the post office address of such party last
known to the party giving such notice and notice given as aforesaid shall be a
sufficient service thereof, and shall be deemed given an of the date when
deposited in any post office, or in any post office box regularly maintained by
the Federal Government, or, in the case of a telegram, when given to an employee
of the telegraph company for transmission. Notices to LESSEE shall be sent to
350 South Lake Destiny Drive, Orlando, Florida 32810, Attn: Donald C. Mealey, or
to such other address as Lessee shall notify Lessor in writing. Provided,
however, that it is mutually agreed that LESSOR appoints the Investment Manager
and Divisional Comptroller General Motors Corporation, Motors Holding Division,
3044 West Grand Boulevard, Detroit, Michigan 48202, Division Controller.
Chevrolet Motor Division, General Motors Corporation, 30007 Van Dyke Avenue,
Warren, Michigan 48090, and Argonaut Realty, 485 West Milwaukee Avenue, Detroit,
Michigan 48202, as its agents and that notices shall be sent to both of said
agents and not otherwise. The right is hereby reserved by Lessor to countermand
such appointments and make others consistent herewith. due notice of which shall
be given by Lessor to Lessee.
ARTICLE 32. WAIVER OF TRIAL BY JURY AND COUNTERCLAIM
Lessor and Lessee hereby waiver trial by jury in any action, proceeding,
or counterclaim brought by Lessor or Lessee against the other on any matter
whatsoever arising out of or in any way connected with this Lease, the
relationship of Lessor to Lessee, the use or occupancy of the Leased Premises by
Lessee or any person claiming through or under Lessee, any claim of injury or
damage, and any emergency or other statutory remedy; provided, however, the
foregoing waiver shall not apply to any action for personal injury or property
damage. If Lessor commences any summary or other proceeding for nonpayment of
rent or the recovery of possession of the Leased Premises, Lessee shall not
interpose any counterclaim of whatever nature or description in any such
proceeding, unless the failure to raise the same would constitute a waiver
thereof.
ARTICLE 33. NO PARTNERSHIP
The execution of this Lease does not, in any way or for any purpose,
create a franchise (including, specifically, for the purpose of compliance with
the Florida Motor Vehicle Act, Chapter 320, FLORIDA STATUTES), partnership,
joint venture or joint enterprise by and between Lessor and Lessee or Lessor and
Dealer for the conduct of Lessee's or Dealer's business on the Leased Premises.
ARTICLE 34. ATTORNEYS' FEES
In the event of any dispute or litigation arising under this Lease, the
prevailing party shall be entitled to recover all reasonable attorneys' fees
paralegals' fees and costs including those at trial, on appeal and in bankruptcy
proceedings.
ARTICLE 35. NON-WAIVER
The failure of Lessor to insist upon a strict performance of any of the
terms, conditions and covenants contained herein shall not be deemed a waiver of
any rights or remedies that Lessor may have and shall not be deemed a waiver of
any subsequent breach or default in the terms, conditions and covenants. This
instrument may not be changed, modified or discharged orally.
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ARTICLE 36. PARTIAL INVALIDITY
If any covenant, provision or condition of this Lease shall be held
invalid or unenforceable by any court having jurisdiction, the remainder of the
covenants, provisions or conditions of this Lease shall remain valid and
enforceable to the fullest extent permitted by law; provided, however, that if
the provisions of Article 24 shall be unenforceable for any reason, Lessor may
terminate this Lease upon ninety (90) days' written notice to Lessee.
ARTICLE 37. DIVESTITURE; OPTION TO PURCHASE OR LEASE
A. DIVESTITURE. Upon the expiration of the Initial Term and the Extended
Term, or within thirty (30) days after the Dealer has sold or leased at retail a
cumulative total of twenty thousand (20,000) new Chevrolet motor vehicles,
whichever is first to occur, Lessee shall have the option to (i) divest its
ownership in its current Chevrolet Motor Division Dealership located at 3707
Colonial Drive, Orlando, Florida (the "Downtown Dealership") and purchase the
Leased Premises or continue to lease the Leased Premises from Lessor upon terms
and conditions to be agreed upon by Lessor and Lessee within sixty (60) days
after its election to continue this Lease or (ii) divest its ownership of the
Improvements and sell such Improvements to Lessor or Lessor's assignee;
provided, however, the option granted in this Article 37(A)(i) above may be
exercised at any time after the Commencement Date so long as Lessee is not in
default under any provision of this Lease.
B. PURCHASE PRICE UPON DIVESTITURE OF DOWNTOWN DEALERSHIP. In the event
Lessee elects to divest the Downtown Dealership and purchase the Leased
Premises, the purchase price for the Leased Premises shall be Three Million
Dollars ($3,000,000.00). Lessee shall exercise such right, If at all, upon sixty
(60) days' prior written notice to Lessor.
Promptly after exercising its right to purchase the Leased Premises
pursuant to this Article 37 Lessor, at its expense, shall obtain a title
insurance commitment covering the Leased Premises from a title insurance company
selected by Lessee and shall cause a survey of the Leased Premises to be
prepared, each at Lessee's cost. Lessee shall provide Lessor with a copy of such
title commitment and survey within thirty (30) days after providing written
notice of Lessee's intent to purchase the Leased Premises. Within ten (10)
business days after receipt of such title insurance commitment and survey,
Lessee shall advise Lessor of any title defects except for those exceptions
permitted in the leasehold title insurance policy previously provided to Lessee,
disclosed thereby which Lessee requires to be removed. Lessor shall promptly
remove such items or cause the title insurance company to Insure over such
matters in a manner approved by Lessee, which approval shall not be unreasonably
withheld; provided, however, that any mortgage encumbrance of the Mortgagee
shall not be deemed a title defect. In the event Lessor is unable to remove such
title matters or cause the title insurance company to Insure over such matters
in a manner approved by Lessee, Lessor shall so notify Lessee and Lessee shall
have the right to accept title to the Leased Premises subject to such title
defects or way terminate its right to purchase the Leased Premises; provided,
however, that with respects to defects in a liquidated amount, Lessee shall have
the right to pay the same and deduct the amount thereof from the purchase price.
At Closing, Lessor shall pay for documentary stamps an the Deed and Lessee
shall pay for recording of the Deed. At Closing, the parties shall deliver the
following duly executed documents and funds:
(1) By Lessor:
(i) A statutory warranty deed conveying fee simple title
to the Leased Premises to Lessee.
(ii) A no-lien affidavit in a form satisfactory to
Lessor's attorney.
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<PAGE>
(iii) An Owner's Title Policy showing no change from the
Commitment to be issued pursuant to this Article 37 B. in the amount of Three
Million Dollars ($3,000,000-00).
(iv) Such other instruments and documents provided in
this Option and as may be reasonably required in order to
consummate the transaction herein contemplated.
(2) By Lessee:
(i) A cashier's check payable to the order of Lessor in the
sum of Three Million Dollars ($3,000,000.00) subject to prorations or
adjustments or a wire transfer of said funds to a bank account designated by
Lessor, at Lessor's option.
Simultaneously with the execution of this Lease the parties hereto
shall execute a Memorandum of Option solely for the purpose of recording in the
public records evidence of the right to purchase granted herein.
C. CLOSING OF SALE OF LEASED PREMISES UPON DIVESTITURE OF DOWNTOWN
DEALERSHIP. Lessor and Lessee shall close the purchase and sale of the Leased
Premises not later than sixty (60) days after the exercise of such right by
Lessee pursuant to this Article 37 but not later than ten (10) days after the
removal of all required title defects or Lessee's agreement to take the Leased
Premises subject to such title defects. Lessor shall convey the Leased Premises
by warranty deed subject only to those title exceptions as shown on the
leasehold title insurance policy previously provided to Lessor and then
exceptions otherwise accepted by Lessee; PROVIDED, HOWEVER, such warranty deed
shall contain provisions which (a) shall restrict the use of the Leased Premises
for a period of fifteen (15) years from and after the closing of the sale and
purchase of the property to Lessee to the exclusive use for an authorized
dealership engaged in the sale, leasing, storage and service of new motor
vehicles and products offered for sale or lease by General Motors Corporation or
any subsidiary thereof and (b) reserves Lessor the right to repurchase the
Leased Premises and the Improvements as set forth in Article 37D below in the
event (i) Lessee offers to sell the Leased Property and/or the Improvements (the
"Offer to Sell") to an unrelated third party (a copy of an Offer to Sell shall
be furnished to Lessor simultaneously with delivery thereof to such third party)
or (ii) Lessee, Dealer or any assignee or transferee of Lessee or Dealer
violates the use restrictions as set forth in Article 7 of this Lease (the "Use
Violation"). Lessee shall have the right at its option to cause Lessor to pay
any leasehold mortgage indebtedness on the Leased Promises from the purchase
price to be paid to Lessor at closing or to take the Leased Premises subject to
such leasehold mortgage indebtedness, in which event, Lessee shall be granted a
credit against the purchase price for the outstanding balance of such leasehold
mortgage indebtedness. Real estate taxes relating to the Leased Premises shall
be prorated in accordance with the custom in Orange County, Florida.
D. PURCHASE PRICE UPON DIVESTITURE INTEREST IN LEASED PREMISES, DEFAULT,
OFFER TO SELL OR USE VIOLATION. In the event Lessee elects to divest its
interest in the Leased Premises or in the event of a default under Article 24,
Lessor shall purchase the Improvements together with such additional leasehold
improvements that have been approved by Lessor for an amount equal to the
replacement cost thereof. In no event shall the replacement cost exceed the
original construction costs of such Improvements or the net book value thereof,
whichever is greater, except, in the event of a default under Article 24, the
replacement cost shall not exceed the net book value or current market value,
whichever is less. The replacement cost of the Improvements shall be determined
by an appraiser (M.A.I.) licensed in the State of Florida selected by Lessor
with the approval of Lessee, which approval shall not be unreasonably withheld.
Title to the Improvements shall be conveyed to Lessor free and clear of all
liens and mortgage encumbrances.
In the event of an Offer to Sell or a Use Violation and Lessor elects to
exercise its right to repurchase the Leased Premises and the Improvements (the
"GM Repurchase Right"), Lessor shall give Lessee notice thereof within sixty
(60) days after (1) receipt of an Offer to Sell or (2) actual
-17-
<PAGE>
knowledge of a Use Violation. Lessor shall repurchase the Leased Premises and
Improvements located thereon in an amount equal to the average appraised value
of the Leased Premises and the Improvements for use as an automotive dealership
as determined by three (3) appraisers (M.A.I.) licensed in the State of Florida
(the "Appraised Value"). Lessor and Lessee shall each select one (1) appraiser
and the two (2) appraisers selected by Lessor and Lessee shall select the third
(3rd) appraiser who shall provide Lessor and Lessee with such appraisals (the
"Appraisals") within thirty (30) days after such appointment. The closing of the
sale and purchase shall be not later than sixty (60) days after Lessor's receipt
of the Appraisals upon notice thereof by Lessor to Lessee; provided, however, in
the event the Appraised Value exceeds, by ten percent (10%), the lowest
appraisal provided by the three (3) appraisers. the two Appraisals closest in
valuation shall be averaged to determine the Appraised Value. The purchase price
shall be paid by wire transfer of funds. The documents to be executed by Lessee
conveying all of Lessee's right, title and interest in and to the Leased
Premises and Improvements to Lessor shall be in such form and substance as
approved by Lessor and Lessor's counsel. Title to the Leased Premises and
Improvements shall be reconveyed to Lessor free and clear of all liens and
mortgage encumbrances.
Upon a purchase of the Improvements or upon exercise of the GM Repurchase
Right, Lessor shall purchase all of the furniture, fixtures and equipment (the
"Personal Property") used in connection with the operation of the Leased
Premises for a GM Dealership for a purchase price equal to the then current
market value of such Personal Property (the "Current Market Value"). Current
Market Value shall be determined by three (3) appraisers licensed in the State
of Florida and who are qualified to appraise and value personal property. Lessor
and Lessee shall each select one (1) appraiser and the two (2) appraisers
selected by Lessor and Lessee shall select a third (3rd) appraiser. Each
appraisal shall provide an appraisal of the Personal Property within thirty (30)
days after the appointment of the third (3rd) appraiser. The Current Market
Value of the Personal Property shall be the average appraised value of the three
appraisals.
E. SALE TO THIRD PARTY. In the event Lessee elects not to purchase the
Leased Premises at the expiration of the Initial Term and Extended Term of this
Lease, Lessee may request Lessor to sell the Improvements to a bonafide third
party purchaser approved by the Chevrolet Motor Division of the General Motors
Corporation, and Lessor will agree to extend the term of this Lease to such
bonafide third party purchaser on terms and conditions as shall be mutually
agreed to by Lessor and such third party purchaser. Lessor will have the sole
and exclusive option to reject any such third party purchaser and to exercise
the GM Repurchase Right as set forth herein.
ARTICLE 38. REPRESENTATION AND WARRANTIES OF LESSOR
To induce Lessee to enter into this Agreement, Lessor, makes the following
representations and warranties, each of which is material and is being relied
upon Lessee and which shall survive the execution and termination of this
Agreement.
A. Lessor owns fee simple, marketable record title to the Leased Premises,
free and clear of all liens, special assessments, easements, reservations,
restrictions and encumbrances other than the Permitted Exceptions, and there are
no tenancy, rental, signage or other occupancy agreements affecting the Leased
Premises.
B. Lessor has not received any notice, and has no knowledge, that the
Leased Premises or any portion or portions thereof is or will be subject to or
affected by (i) any special assessments, whether or not presently a lien
thereon, or (ii) any condemnation, eminent domain, change in grade of public
streets or similar proceeding.
C. To the best of Lessor's knowledge, there are no actions, suits or
proceedings of any kind or nature whatsoever, legal or equitable, affecting the
Leased Premises or any portion or portions thereof or relating to or arising out
of the ownership of the Leased Premises, in any court or before any federal,
state, county or municipal department, commission, board,
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<PAGE>
bureau or agency or other governmental instrumentality; provided, however,
Lessor makes no representation nor gives any warranty with respect to license
applications for Lessee's operation of a motor vehicle dealership an the Leased
Premises.
D. Lessor has no knowledge or notice that any present default or breach
exists under any mortgage or any other encumbrance encumbering the Leased
Premises or any covenants, conditions, restrictions, rights-of-way or easements
which may affect the Leased Promises or any portion or portions thereof, and
Lessor has no knowledge that a condition or circumstance exists which, with the
passage of time and/or the giving of notice, or otherwise, would constitute or
result in a default or breach under any such covenants, conditions,
restrictions, rights-of-way or easements.
E. No commitments have been made by Lessor to any governmental authority,
utility company, school board, church or other organization, group or
individual, relating to the Property which would impose an obligation upon
Lessee or its money or land or to construct, install or maintain any
improvements of a public or private nature on or off the Leased Premises, and to
the best of Lessor's knowledge, without independent investigation, no
governmental authority has imposed any requirement that any developer of the
Leased Premises pay directly or indirectly any special fees or contributions or
incur any expenses or obligations in connection with any development of the
Leased Premises or any part thereof. The provisions of this subsection shall not
apply to any general real estate taxes.
F. No person, firm or other legal entity has any right or option
whatsoever to acquire the Leased Premises or any portion or portions thereof or
any interest or interests therein, except as set forth herein.
G. Upon payment of any deposit, Lessor shall also transfer, assign and
convey to Lessee for the term of this Lease, all of Lessor's right, title and
interest in and to all utilities and utility commitments which service or
pertain in any manner to the Leased Premises including, without limitation, any
water or sewer connections which have been allocated in any manner to the Leased
Premises or Lessor as owner of the Leased Premises and Lessor's position on any
waiting list relating to any such water or sewer connections.
ARTICLE 39. BINDING ON SUCCESSORS
The covenants and agreements contained in this Lease are binding upon the
parties hereto and their respective heirs, executors, administrators,
successors, legal representatives and assigns and nothing herein grants any
greater right of assignment as set forth and as limited elsewhere in this Lease.
ARTICLE 40. COMPLETE AGREEMENT
There are no oral agreements between Lessor and Lessee affecting this
Lease, and this Lease supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between Lessor
and Lessee with respect to the subject matter of this Lease. There are not
representations between Lessor and Lessee other than those contained in this
Lease and all reliance with respect to any representations is solely upon such
representations herein contained.
ARTICLE 41. SURVIVAL
The covenants, conditions and provisions of Articles 7, 19, 22, 25, 37,
38 B., 38 D., 38 E., 38 F., and 39 shall survive the termination of this Lease.
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<PAGE>
IN WITNESS WHEREOF, Lessor has signed and sealed this instrument this 3rd
day of January, 1991, and Lessee has signed and seal this instrument this 3rd
day of January, 1991.
IN PRESENCE OF:
AUTO AIR, INC., a Delaware
corporation
/s/ [illegible] By: /s/ [illegible]
- -------------------------- ------------------------------
/s/ [illegible] Attest: /s/ [illegible]
- -------------------------- -------------------------
IN PRESENCE OF:
CHEVROLET WORLD, INC., a
Florida corporation
/s/ [illegible] By: /s/ [illegible]
- -------------------------- ------------------------------
/s/ [illegible] Attest: /s/ [illegible]
- -------------------------- -------------------------
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<PAGE>
LEGAL DESCRIPTION
(To be attached)
<PAGE>
EXHIBIT 8A
ORLANDO - OPEN POINT
ORLANDO, FL
NO OF
SALES FACILITY OFFICES SQ. FT.
- -------------- ------- -------
- -SHOWROOM DISPLAY * 2,000
- -CLOSING OFFICES 14 900
(SALESPERSONS)
- -F & I 2 200
- -DEALER 1 180
- -SALES MANAGER 1 120
- -OFFICE MANAGER 1 80
- -BUSINESS OFC. 8 480
- -REST ROOMS 2 160
- -COMPUTER/FAX RM 1 150
- -CONFERENCE RM 18 360
- -TRUCK/FLEET MGR 1 80
- -USED CAR MGR 1 80
-----
SUBTOTAL 4,790
*REPRESENTS (5) DISPLAY SPACES @ 400 SQ. FT. EACH.
PERCENT TO CURRENT GUIDE:
BUILDING 71.6
LAND 64.3
COMBINED 65.3
<PAGE>
ORLANDO - OPEN POINT
ORLANDO, FL
SERVICE FACILITY STALLS SQ. FT.
- ---------------- ------ -------
- -MECHANICAL 17 8,500
- -CUST. RECEPTION 5 1,500
- -UNIT REPAIR 1 240
(SPECIAL TOOLS)
- -WASHROOM (TECH.) - 500
- -CASHIER 1 80
- -SERVICE MANAGER 1 100
- -CSI MANAGER 1 100
- -SHOP FOREMAN 1 80
- -CUSTOMER LOUNGE 10 200
- -REST ROOMS 2 160
-----
SUBTOTAL 11,460
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<PAGE>
ORLANDO, FL
CONT'D
PARTS FACILITY
*AREA 3,900 (1st Level)
RETAIL PARTS COUNTER 100
WHOLESALE PARTS
COUNTER 100
COMPUTER/FAX (1) 150
PARTS MGR. (1) 100
RECV'G AREA (PARTS) 500
CONF. ROOM
(LUNCH ROOM) 700
-----
SUBTOTAL 5,550
BODY SHOP FACILITY STALLS SQ. FT.
- ------------------ ------ -------
(OPTIONAL)
- -SERVICE - BODY 11 4,400
- -BODY SHOP MGR 1 100
-----
SUBTOTAL 4,500
*SUGGEST PARTS DEPARTMENT BE BUILT WITH A 18' - 20'
CEILING HEIGHT FOR DOUBLE DECKING IN THE FUTURE
<PAGE>
ORLANDO - OPEN POINT
ORLANDO, FL
SALES - EXTERIOR
- ----------------
SPACES SQ. FT
------ ------
OUTDOOR DISPLAY (PATIO) 21 8,400
CUSTOMER PARKING 20 6,000
EMPLOYEE PARKING 28 8,400
USED CAR DISPLAY 71 21,300
------
SUBTOTAL 44,100
<PAGE>
ORLANDO - OPEN POINT
ORLANDO, FL
SERVICE,PARTS & BODY SHOP-EXTERIOR
- ----------------------------------
STALLS SQ. FT.
------ -------
NEW VEHICLE STORAGE 213 53,250
CUSTOMER PARKING 32 9,600
EMPLOYEE PARKING (MISC.) 27 8,100
------
SUBTOTAL 70,950
<PAGE>
ORLANDO - OPEN POINT
ORLANDO, FL
OVERVIEW OF BUILDING AND LAND SQ. FT. RECOMMENDATIONS
OUTSIDE
BUILDING LAND ACCESS AREA TOTAL
(SQ. FT.) (SQ. FT.) (SQ. FT.) (SQ. FT.)
- --------- --------- ----------- ---------
26,300 115,050 23,010 164,360
TOTAL BUILDING & LAND REQUIREMENT
164,360 SQ. FT.
(3.77 ACRES)
EXHIBIT 10.5
LEASE
THIS AGREEMENT, made this _____ day of _____________, 1997, by and
between RAY TATUM, hereinafter called "Landlord," and ROYAL CHRYSLER PLYMOUTH,
JEEP-EAGLE, INC., whose principal place of business is located in Orange County,
Florida, hereinafter called "Tenant."
1. PREMISES
a. Landlord leases and demises to Tenant for the purpose of operating a
new and used automotive sales and service business, and such retail and
professional uses as are not inconsistent with the zoning for the Demised
Premises, and for no other purpose without Landlord's prior written consent and
Tenant hereby leases and rents from Landlord the following described premises,
hereinafter sometimes referred to as the "Demised Premises," located in Orange
County, Florida, and more particularly described on EXHIBIT "A" attached hereto
and made a part hereof, together with all incidental rights and privileges in
and about the Demised Premises as may be necessary or convenient to Tenant's
business.
b. The above-described Demised Premises includes all buildings,
structures and other improvements constructed and to be constructed thereon, and
all easements, rights and appurtenances thereto.
2. TERM OF LEASE
a. The term and duration of this lease shall be for a period of fifteen
(15) years, commencing from the commencement date herein provided.
b. The commencement date shall be the date of Closing as that term is
defined in that certain Contract for Sale between RAY TATUM. and MEALEY
ACQUISITIONS, INC. dated March _____, 1997.
3. RENT
a. Tenant's liability for rent shall commence to accrue on the
commencement date as defined in paragraph 2.b above, provided that this lease
has not been terminated prior thereto. If the rent commencement date begins on a
date other than the first of the month, the rent for such partial initial month
shall be prorated and shall be due and payable on the first day of the first
full calendar month of the term hereof. The annual minimum rent to be paid by
Tenant to Landlord shall be Four Hundred Eighty Thousand Dollars ($480,000.00)
plus applicable sales taxes. Such rental shall be payable in equal monthly
installments on the first day of each calendar month during the term hereof.
b. All payments of rent hereunder shall be made to Landlord as the same
become due in lawful money of the United States, at such places as hereinafter
may be designated. Nothing
<PAGE>
contained in this lease shall be construed to be or create a partnership or
joint venture between Landlord and Tenant.
c. In addition to the payments required herein as rent to the Landlord,
the Tenant shall also pay the following:
(1) All occupational licenses and other licenses necessary in
the operation of the business to be carried on in the Demised Premises.
(2) All utility services provided to the Demised Premises and
used by Tenant, including, but not limited to, water, gas, electric, and
telephone, as they from time to time shall accrue and be due and payable during
the term of this lease.
(3) Tenant shall pay to the appropriate governmental agencies
ad valorem taxes with respect to the Demised Premises and the improvements
thereon during the term of this lease or any extension thereof. It is further
understood and agreed that all ad valorem taxes assessed during the first and
last years of the term of this lease shall be prorated and that Tenant shall
only be liable for such portions of such taxes assessed for said first and last
years as its months of occupancy during any of said years shall bear to the
total of twelve (12) months. Should Tenant fail to pay any tax when due and
payable, Landlord may, if Landlord so desires, pay the same and the amount
together with any penalties which Landlord may have paid, shall immediately
become due and payable to Landlord as additional rent. Tenant shall have the
right in its name or in Landlord's name, whichever shall be appropriate, but at
its own cost and expense, to file and prosecute applications for reduction of
assessed valuation and to institute legal proceedings for the reduction thereof.
In no event shall Tenant be liable for payment of any income, estate or
inheritance taxes imposed upon the Landlord or the estate of the Landlord with
respect to the Demised Premises. Landlord agrees to promptly deliver copies of
all tax notices and tax bills to the Tenant so that Tenant may timely contest
any proposed tax increase and promptly pay the tax due as to take advantage of
any discounts allowed for timely payment. In the event of any special assessment
with respect to the Demised Premises levied during the term of this Lease, the
Tenant shall have no obligation with respect to payment of such assessment and
Landlord shall be obligated to pay same.
Landlord shall use reasonable efforts, if requested by Tenant, to
obtain from the taxing authorities a separate assessment for the Demised
Premises if said premises are part of a larger parcel. If such separate
assessment shall be obtained, the real estate taxes payable by Tenant shall be
paid by Tenant directly to the taxing authority. If Landlord shall be unable to
obtain such separate assessment, and the tax bill covering the Demised Premises
shall include property in addition to the Demised Premises, Tenant shall pay its
proportionate share of said tax bill to Landlord, which proportionate share
shall equal the product obtained by multiplying the amount of the tax bill by a
fraction, the numerator of which is the acreage contained within the Demised
Premises and the denominator of which is the total land owned by the Landlord
and assessed in the tax bill. Tenant shall pay its share by the later of (i)
thirty (30) days after Landlord notifies Tenant of the amount
-2-
<PAGE>
thereof and furnishes Tenant with a copy of the tax bill and the calculations by
which Tenant's share has been determined, or (ii) ten (10) days prior to the due
date of the tax. Landlord shall pay said tax bill when due. In no event shall
Tenant be liable for interest or penalties, if Tenant shall pay such taxes
within such period. Landlord will furnish Tenant with a copy of the receipted
tax bill promptly after demand therefor.
4. CONSTRUCTION OF IMPROVEMENTS -- REPAIRS
a. The Tenant, during the term of this lease or any extension or
renewal of this lease, shall, at its expense, make all such routine repairs as
shall be reasonably necessary to keep the Demised Premises and Equipment in good
condition and repair. The Tenant further agrees that all damage or injury done
to the Demised Premises and any equipment by the Tenant or by any person who may
be in or upon the Demised Premises, except the Landlord, Landlord's agents,
servants and employees, shall be repaired by the Tenant at its expense. The
Tenant agrees at the expiration of this lease or upon the earlier termination
thereof, to quit and surrender said Demised Premises and Equipment in good
condition and repair, reasonable wear and damage by act of God or fire or other
causes beyond the control of Tenant excepted.
b. Tenant shall be permitted to install and use on and about the
Demised Premises at any time or times all such buildings, additions to
buildings, equipment, exterior and interior signs, trade fixtures, and other
personal property, and make such alterations and improvements in and about the
Demised Premises as it may desire.
c. Landlord shall maintain the Demised Premises in good structural
condition and repair, shall make all structural repairs and replacements
necessitated to the roof, foundation, walls, and other structural elements of
the Demised Premises by any cause other than Tenant's negligence, and shall make
all repairs or replacements necessitated by any peril covered by a Standard Fire
and Extended Coverage insurance policy to the extent of the proceeds received
from such insurance policy, whether or not caused by Tenant's negligence.
Tenant may make alterations, additions and improvements to the Demised
Premises from time to time during the term of this lease with the prior written
consent of Landlord and shall have the right to erect and install such other or
additional improvements, signs and equipment on the Demised Premises as Tenant
may deem desirable for conducting its business thereon or for such other
business as Tenant may deem advisable consistent with the permissible uses as
provided in Section 1 above. Tenant shall have no authority to create or place
any lien or encumbrance of any kind whatsoever upon, or in any manner to bind,
the interest of Landlord in the Demised Premises, and Tenant covenants and
agrees to pay all sums legally due and payable by it within forty-five (45) days
on account of any labor performed by it on the Demised Premises upon which any
lien is or can be asserted against the Demised Premises or the improvements
thereon. Tenant shall notify any contractor making improvements to the Demised
Premises that the Landlord's interest shall not be subject to any liens or
encumbrances as provided in ss.713.10, Florida Statutes.
-3-
<PAGE>
5. TIME OF THE ESSENCE
It is agreed that time is of the essence in respect to the provisions
contained in this lease.
6. DELIVERY OF POSSESSION
The Landlord shall deliver possession of the Demised Premises to the
Tenant at the beginning of the lease term provided, however, that if the
Landlord cannot deliver possession of the leased property on the commencement
date, the Tenant shall be entitled to terminate this lease.
7. WARRANTIES AND TITLE INSURANCE
a. Tenant shall be entitled to receive a good and marketable first
leasehold interest in and to the Demised Premises, free and clear of all liens,
encumbrances and other exceptions, except such as Tenant may waive.
b. Landlord covenants and warrants that Landlord has good and
marketable title in fee simple to the Demised Premises free and clear of all
liens, encumbrances and easements and has full power and authority to make this
lease. Tenant shall have and enjoy full, quiet and peaceful possession of the
Demised Premises, its appurtenances and all rights and privileges incidental
thereto during the term hereof and all extensions and renewals thereof.
c. Landlord hereby represents and warrants to Tenant that the
character, materials, design, construction and location of the improvements on
the Demised Premises, are in full compliance with all applicable building and
zoning laws and ordinances and requirements of Tenant. Landlord further hereby
represents and warrants to Tenant that Tenant will have the unrestricted right,
subject to deed restrictions, and applicable governmental regulations, to place
upon the Demised Premises at the locations now in use a pylon-sign of a type
selected by Tenant, and to use all parking areas and all driveways and means of
access to public roads.
d. Landlord makes no representation with respect to the buildings
located on the Demised Premises and to be leased by Tenant pursuant to this
lease (the "Buildings").
8. COMPLIANCE WITH LAWS AND ORDINANCES
a. Tenant shall comply with all federal, state, county and city laws
and ordinances and all rules and regulations of any duly constituted authority
present and future affecting or respecting the use or occupancy of the Demised
Premises by Tenant, or the business at any time thereon transacted by Tenant or
any assignee or subtenant of Tenant, after the commencement of the term of this
lease.
b. Tenant shall at all times keep the Demised Premises, the building
thereon and all appurtenances in a clean and sanitary condition, according to
the applicable statutes, city ordinances,
-4-
<PAGE>
and the directions or regulations of the proper public authorities.
9. COVENANT OF QUIET ENJOYMENT
The Tenant, upon the payment of the rent herein reserved and upon the
performance of all of the terms of this lease, shall at all times during the
lease term and during any extension or renewal term peaceably and quietly enjoy
the Demised Premises without any disturbance from the Landlord or from any other
person claiming through the Landlord.
10. TERMINATION
The Tenant shall vacate the Demised Premises in the good order and
repair in which such premises are at the time of commencement of the term
hereof, ordinary wear and tear, depreciation, damage and loss from the elements,
loss covered by insurance, and other occurrences beyond the reasonable control
of Tenant excepted, and shall remove all of its property therefrom so that the
Landlord can repossess the Demised Premises not later than noon on the day upon
which this lease or any extension thereof ends, whether upon notice or by
holdover or otherwise. The Landlord shall have the same rights to enforce this
covenant by ejectment and for damages or otherwise as for the breach of any
other condition or covenant of this lease. The Tenant may at any time, provided
that Tenant is not in default hereunder, prior to or upon the termination of
this lease or any renewal or extension thereof remove from the Demised Premises
all materials, equipment and property of every other sort or nature the cost of
which was paid for by the Tenant, provided that such property is removed without
substantial injury to the Demised Premises and that Tenant repairs any damage to
the Buildings resulting from such removal. No injury shall be considered
substantial if it is promptly corrected by restoration to the condition prior to
the installation of such property, if so requested by the Landlord. Any such
property not removed shall become the property of the Landlord.
11. INSURANCE
a. The Tenant shall, at its sole cost and expense, cause to be placed
in effect immediately upon commencement of the term of this lease, and shall
maintain in full force and effect during said term (i) fire and extended
coverage insurance covering all improvements, structures and their contents on
the Demised Premises on a full replacement cost basis, insuring all risks of
direct physical loss, and excluding unusual perils such as nuclear attack, earth
movement, civil disturbance, riot, flood and war, with deductibles or self
insurance consistent with insurance industry practices, and (ii) bodily injury
and property damage comprehensive public liability insurance with a combined
single limit of not less than $2,000,000.00 including deductibles consistent
with normal insurance industry practices.
b. The Tenant shall deliver to Landlord a duplicate original of each
such policy, or in lieu thereof, a certificate issued by the carrier. Each such
policy or certificate shall provide that the same shall not be canceled without
at least thirty (30) days prior written notice to Landlord, and shall name
Landlord and any mortgagee as an additional insured thereunder.
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12. UTILITIES
The Tenant agrees to pay for all water, fuel, gas, oil, heat,
electricity, power, materials, and services which may be furnished to it or,
used by it in, or about the Demised Premises and to keep said Demised Premises,
free and clear of any lien, or encumbrance of any kind whatsoever created by
Tenant's act or omission.
13. CONDEMNATION
a. The parties hereto agree that, should the whole of the Demised
Premises be taken or condemned by any competent authority for any public or
quasi-public use or purpose during the term of this lease and Tenant does not
elect to exercise its option, this lease shall terminate as of the time when
possession thereof is required for public use and from that day on the parties
shall be released from further obligations hereunder. Tenant reserves unto
itself the right to prosecute its claim for an award based upon its leasehold
interest for such taking, without impairing any rights of Landlord for the
taking.
In the event that a part of the Demised Premises shall be taken or
condemned and (a) the part so taken includes the building on the Demised
Premises or any part thereof, or (b) the part so taken shall remove from the
Demised Premises ten percent (10%) or more of the front depth of the parking
area thereof or more than a depth of ten (10) feet, whichever is greater, OR (c)
the part so taken shall consist of twenty percent (20%) or more of the total
parking area, or (d) such partial taking shall result in cutting off direct
access from the Demised Premises to any adjacent public street or highway, then
and in any such event, the Tenant may, at any time either prior to or within a
period of ninety (90) days after the date when possession of the Demised
Premises shall be required by the condemning authority, elect to terminate this
lease or, Tenant may, as an alternative to such termination of this lease, elect
to purchase the Demised Premises in accordance with its purchase option, except
that the purchase price to be paid for the Demised Premises shall be the lesser
of Three Million Three Hunded Thousand and No/100 Dollars ($3,300,000.00) or an
M.A.I. appraisal of the Demised Premises obtained from an appraiser mutually
satisfactory to the Landlord and the Tenant. In the event that the means of
ingress and egress to the Demised Premises are in any way blocked or partially
blocked as a result of any road construction or other improvements and Tenant's
business is adversely affected thereby, Landlord agrees to waive an equitable
portion of Tenant's obligations during such period of construction or
improvement.
b. In the event of a taking which does not give rise to an option to
terminate or an option to purchase the Demised Premises, or in the event of a
taking which does give rise to such options but Tenant does not elect to
exercise same, Landlord shall, to the extent of Landlord's award from such
taking (which word "award" shall include any settlement, or purchase price under
a sale in lieu of condemnation), promptly restore, replace or repair the Demised
Premises to the same condition as existed immediately prior to such taking
insofar as is reasonably possible. If the award shall exceed the amount spent or
to be spent promptly to effect such restoration, repair or replacements, such
excess amount shall be divided between Landlord and Tenant so that Tenant shall
receive a
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portion of the award which shall be attributable to (i) the value of the trade
fixtures lost and/or damaged as a result of the condemnation; (ii) the cost of
removal of the fixtures, equipment and inventory; (iii) that percentage of the
award attributable to the value of the improvements on the Demised Premises the
cost of which was contributed by the Tenant; and (iv) the value of Tenant's
leasehold estate hereunder had the property not been condemned so long as Tenant
does not elect to exercise its option to purchase. Tenant hereby acknowledges it
shall have no right to any settlement proceeds or award attributable to the
existing condemnation Case No. _________.
14. ASSIGNMENT AND SUBLETTING
The Tenant may not assign this lease or let or underlet the whole or
any part of said Demised Premises without the prior written consent of the
Landlord which consent shall not be unreasonably withheld. Any such assignment
or subletting shall not relieve Tenant of its obligations under this lease
except as provided in Section 15 below.
15. OPTION TO PURCHASE
In consideration of the amounts payable hereunder during the term, the
Landlord and Tenant agree as follows:
a. OPTION GRANT. ~ The Landlord hereby grants unto the Tenant the
non-assignable exclusive right to purchase the property set forth on EXHIBIT "A"
hereto (the "Property") on the terms and conditions set forth below.
b. EXERCISE OF OPTION. ~ If the Tenant elects to exercise the option
granted herein, it shall furnish at least thirty (30) days advance written
notice to Landlord.
c. PURCHASE PRICE AND METHOD OF PAYMENT. ~ In the event Tenant elects
to purchase the Property, the purchase price to be paid by the Tenant to the
Landlord shall be Three Million, Three Hundred Thousand and No/100 Dollars
($3,300,000.00) plus the cost of any special assessments affecting the Demised
Premises which have been paid by the Landlord and which will benefit the Demised
Premises after the expiration of the term of this Lease.
The purchase price shall be paid to the Landlord at the time of closing
by cash, certified check, or by wire transfer of funds.
d. SURVEY. ~ At any time while this Lease is in effect, Tenant may have
the Property surveyed at Tenant's sole cost and expense. Landlord agrees to
deliver a copy of any surveys in Landlord's possession upon request by Tenant.
e. EXPENSES, PRORATION AND CONVEYANCE. ~ The Tenant shall pay for
documentary stamps on the Deed and for recording the deed. At closing Tenant
shall deliver the cash required to close and Landlord shall convey title to
Tenant by general warranty deed.
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f. REPRESENTATION OF OWNERSHIP. ~ The Landlord covenants that Landlord
is the fee simple owner of the Property subject to no liens or encumbrances of
any type. Landlord covenants that it shall not encumber the Property during the
term hereof in an amount greater than Two Million Five Hundred Thousand and
No/100 Dollars ($2,500,000.00), so long as Landlord's lender agrees in writing
to acknowledge Tenant's rights hereunder so long as Tenant is not in default of
its obligations pursuant to this Lease.
g. HAZARDOUS WASTE. ~ At the commencement of the term of this Lease,
there are no pollutants, contaminants, petroleum products or by-products,
asbestos or other substances, whether hazardous or not, on or beneath the
surface of the Property, except for 3 underground tanks on the Property, one of
which is in use and as otherwise disclosed on EXHIBIT "B", which Landlord or any
other person or entity has placed, caused or allowed to be placed upon the
Property, and which has caused or may cause any investigation by any agency or
instrumentality of government, which is or may be on the Property in violation
of any law or regulation of any local, state or federal government or which is
or may be a nuisance or health threat to occupants of the Property or other
residents of the area. In the event Tenant exercises its option, Tenant shall
take the Demised Premises subject to the conditions disclosed in EXHIBIT "B" or
any other condition which may exist at the time of exercise of the option.
Landlord hereby agrees to indemnify Tenant against any claim, loss, liability or
obligation which may accrue against Tenant as a result of the breach of any
representation or warranty set forth in this Lease.
h. CLOSING DATE. ~ This Option shall be closed at the offices of
Landlord's attorney not later than one hundred twenty (120) days after notice of
exercise.
i. CLOSING PROCEDURE. ~ At the Closing, the parties shall deliver the
following duly executed documents and funds:
(1) By Landlord:
(i) A statutory warranty deed conveying fee simple
title to the Property to Tenant.
(ii) A no-lien affidavit in a form satisfactory to
Tenant's attorney.
(iii) Such other instruments and documents provided
in this Option and as may be reasonably required in order to consummate the
transaction herein contemplated.
(2) By Tenant:
(i) A certified check or a cashier's check payable to
the order of Landlord for the cash to close or a wire transfer of said funds to
a bank account designated by Landlord.
(ii) An Owner's Title Commitment showing no change
from the Leasehold
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Commitment delivered pursuant to the Agreement in the amount of Three Million,
Three Hundred Thousand and No/100 Dollars ($3,300,000.00).
j. MEMORANDUM OF OPTION. ~ Simultaneously with the execution of this
lease the parties hereto shall execute a Memorandum of Option Agreement
including Landlord's right to purchase solely for the purpose of recording in
the public records.
16. HOLDING OVER
In the event Tenant continues to occupy the Demised Premises after the
last day of the term hereby created, or after the last day of any extension of
said term, and the Landlord elects to accept rent thereafter, a tenancy from
month to month only shall be created and not for any longer period.
17. DESTRUCTION OF PREMISES
In the event of a total or partial destruction of the Buildings or
related improvements to be located on the Demised Premises during said term from
any cause, the Landlord shall forthwith repair the same, unless same was caused
by the negligence of Tenant, its employees or business invitees, provided such
repairs can be made within one hundred twenty (120) days under the laws and
regulations of state, federal, county or municipal authorities, but such total
or partial destruction shall in no wise annul or void this lease, except that
the minimum rent to be paid hereunder shall be equitably adjusted according to
the amount and value of the undamaged space.
Should the total or partial destruction result from causes covered by
the fire and extended coverage insurance furnished by the Tenant, the insurance
proceeds shall be made available to the Landlord to effect the required repairs.
In the interests of expediency, the Tenant may, at its option, elect to make the
necessary repairs, in which event the insurance proceeds shall be made available
to the Tenant for such purpose.
If such repairs cannot be made within one hundred twenty (120) days,
this lease may be terminated at the option of Tenant.
18. WAIVER OF SUBROGATION
Landlord and Tenant do hereby waive any and all claims against the
other for damage to or destruction of any improvements upon the Demised Premises
(whether or not resulting from the negligence of Tenant) which is covered by
insurance which Tenant is obligated to carry under the terms of this lease;
provided, however, that this waiver shall not be applicable if it has the effect
of invalidating the Landlord's or Tenant's insurance coverage.
19. RELATIONSHIP OF PARTIES
It is understood and agreed that the relationship of the parties hereto
is strictly that of
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Landlord and Tenant and that this lease shall not be construed as a joint
venture or partnership. The Tenant is not and shall not be deemed to be the
agent or representative of the Landlord.
20. PERSONAL PROPERTY
The Landlord acknowledges that Landlord has no interest in any personal
property or equipment or furniture and fixtures which may be presently located
or installed by the Tenant upon the Demised Premises, and the Landlord agrees in
the future to furnish the Tenant, upon request, such Landlord's Waiver or
Mortgagee's Waiver or similar document as may be reasonably required by an
institutional lender or equipment lessor in connection with the Tenant's
acquisition or financing respecting such personal property, equipment, furniture
and fixtures. The Tenant shall have the right to remove same at the termination
of this lease, and, notwithstanding anything to the contrary contained in this
lease, Tenant shall be permitted five (5) days after the effective date of
termination of the term or any renewal or hold-over term within which to
accomplish the removal, and shall be obligated to repair any damage caused by
removal.
21. DEFAULT AND INSOLVENCY
a. The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease by Tenant:
(1) The failure by Tenant to make any payment of Rent or any
other payment required to be made by Tenant hereunder, as and when due provided
Landlord has given five (5) days' written notice to Tenant of non-payment; or
(2) More than three defaults by Tenant within any one year of
the term of the lease for the nonpayment of rent hereunder, necessitating that
Landlord, because of such defaults, shall have served upon Tenant within said
year more than three written notices. This default shall be deemed a non-curable
default; or
(3) The failure by Tenant to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
Tenant, other than paragraph (1) above, where such failure shall continue for a
period of thirty (30) business days after written notice thereof from Landlord
to Tenant; or
(4) The insolvency of the Tenant or the execution by Tenant of
an assignment for the benefit of creditors; or
(5) The filing by or for reorganization or arrangement under
any law relating to bankruptcy or insolvency if said petition remains
undischarged for ninety (90) days; or
(6) The appointment of a receiver or trustee to take
possession of substantially all of Tenant's assets located at the Demised
Premises or of Tenant's interest in this Lease; or
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<PAGE>
(7) The vacating or abandonment of the Demised Premises for a
period of three (3) days or more.
b. Upon the occurrence of any event of default, Landlord shall have the
right at any time thereafter to pursue any one or more of the following remedies
with or without notice or demand. Pursuit of any of the following remedies shall
not preclude pursuit of any of the other remedies herein provided by law, nor
shall pursuit of any remedy herein provided constitute a forfeiture or waiver of
any rents due to Landlord hereunder or of any damages accruing to Landlord by
reason of the Tenant's violation of any of the terms, conditions or covenants
herein contained.
(1) Terminate this Lease, in which event Tenant shall
immediately surrender the Demised Premises to Landlord, and if Tenant fails to
do so, Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in rents, enter upon and take possession of the Demised
Premises and expel or remove Tenant and any other person who may by occupying
the Demised Premises or any part thereof, by force if necessary, without being
liable for prosecution or any claim or damages therefor. Tenant agrees to pay to
Landlord on demand the amount of all loss and damage which Landlord may suffer
by reason of such termination, whether through inability to relet the Demised
Premises on satisfactory terms or otherwise.
(2) Enter upon and take possession of the Demised Premises and
expel or remove Tenant and any other person who may be occupying the Demised
Premises, without being liable for prosecution or any claim for damages
therefor, and relet the Demised Premises and receive the rents therefrom. Tenant
agrees to pay to Landlord on demand any deficiency that may arise by reason of
such reletting.
(3) Enter upon the Demised Premises without being liable for
prosecution or any claim for damages therefor, and do whatever Tenant is
obligated to do under the terms of this Lease. Tenant agrees to reimburse
Landlord on demand for expenses which Landlord may incur in effecting compliance
with Tenant's obligations under this Lease, and Tenant further agrees that
Landlord shall not be liable for any damages resulting to the Tenant from such
action.
(4) At its option, declare the rents for the entire remaining
term of the Lease, and other indebtedness, if any, immediately due and payable
without regard to whether or not possession shall have been surrendered to or
taken by Landlord, and may commence action immediately thereupon and recover
judgment therefor provided same shall not relieve Landlord of its duty to
mitigate its damages by reasonable action.
Any rents which may be due Landlord, whether by acceleration or
otherwise, as provided herein, shall include the minimum rent, and any
additional amounts provided for herein.
c. In the event of any default under this lease by Landlord, Tenant
may, without being judged in default hereunder, withhold payments of rent or
other sums due Landlord (provided that Tenant has given Landlord written notice
and thirty (30) days to cure such default unless a shorter
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period is required to prevent Tenant from suffering damage or loss) by Tenant,
and apply same to cure any such default by Landlord. In addition to the
foregoing rights, each party shall have such other and further rights as are
allowed by law or in equity. Failure to exercise any right hereunder on any one
or more occasions shall not be deemed a waiver of such right or any subsequent
right. In the event either party is in default in the performance of any term,
covenant, agreement or condition contained in this lease, the defaulting party
shall reimburse the non-defaulting party for all costs and expense, including
without limitation, court costs and reasonable attorneys' fees incurred by it in
protecting the interests, whether or not litigation is involved.
22. RADON GAS
Radon is a naturally occurring radioactive gas which, when accumulated
in a building in sufficient quantities, may present health risks to persons who
are exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit. (Pursuant to ss.404.056(8), Florida Statutes.)
23. ESTOPPELS
Landlord and Tenant do each hereby agree at any time and from time to
time that within not more than ten (l0) days after written request by the other,
to execute, acknowledge and deliver to Landlord a written statement in such form
as may be required by a potential or existing lender or buyer certifying that
its lease is unmodified and in full force and effect (or, if there have been
modifications, that the same are in full force and effect as modified and
stating the modifications) and the dates to which the rent and other charges
have been paid in advance, if any, it being intended that any such statement may
be relied upon by any prospective purchaser of the fee or mortgage or assignee
of any mortgage upon the fee of the Demised Premises.
24. ACCESS
The Landlord hereby warrants, represents and covenants to the Tenant
that Tenant has access to all street fronts and adjoining rights-of-way. If any
street, adjoining right-of-way, or all or any part of the parking area is
obstructed or blocked for repairs, reconstruction or otherwise, to the extent
the operation of Tenant's business is substantially adversely affected, a fair
and reasonable reduction of rent shall be made. If customer access to Tenant's
store is blocked, rent shall abate; provided, however, rent shall not abate if
access is blocked due to acts of Tenant.
25. ENTRY AND INSPECTION
The Tenant shall permit Landlord and its agents to enter the Demised
Premises at all reasonable times for any of the following purposes: to inspect
the same; to maintain the building in which the said Demised Premises are
located; to make such repairs to the Demised Premises as the Landlord is
obligated or may elect to make; to post notices of nonresponsibility for
alterations
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or additions or repairs. The Landlord shall have such right of entry and the
right to fulfill the purpose thereof without any rebate of rent to the Tenant
for any loss of occupancy or quiet enjoyment of the Demised Premises thereby
occasioned.
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<PAGE>
26. NOTICES
All notices to be given to the Tenant shall be in writing, deposited in
the United States mail, certified or registered, return receipt requested or by
hand delivery or overnight courier service, with postage prepaid, and addressed
to the Tenant at __________________________ ___________________________, Attn:
_________________, with a copy to J. Gregory Humphries, Esq., Shutts & Bowen,
LLP, 20 North Orange Ave., Suite 1000, Orlando, Florida 32801-4626. Notices by
the Tenant to Landlord shall be in writing, deposited in the United States mail,
certified or registered, return receipt requested, with postage prepaid, and
addressed to the Landlord at
____________________________________________________, Attn:
_________________________., with a copy to ____________________________________
____________________________________. Notices shall be deemed delivered the day
after same are deposited in the United States mail or when delivered, as above
provided. Change of address by either party must be by notice given to the other
in the same manner as above specified.
27. LICENSING
The Landlord agrees upon request by Tenant to sign promptly and without
charge therefore to the Tenant, any application for occupational licenses and
permits as may be required by the Tenant for the conduct and operation of the
business herein authorized or for the proper use of the Demised Premises, this
to include, without limitation, applications for occupational licenses, signs,
and any other licenses where the signature of the Landlord or owner is required
by the applicable laws of the state, county, or municipality in which the
Demised Premises are located that are in effect and in force at the time, the
cost of any such licenses and permits to be borne by the Tenant.
28. COOPERATION
Landlord shall fully cooperate with Tenant throughout the term of this
lease and all extensions and renewals to secure and maintain proper zoning,
building and other permits and compliance with all applicable laws, and Landlord
shall execute all such petitions, requests and the like as Tenant shall
reasonably request for such purposes.
29. FORCE MAJEURE
If Landlord or Tenant is delayed or prevented from performing any of
their respective obligations under this lease by reason of strike or labor
troubles or any outside cause whatsoever (other than inability to obtain
financing) beyond Landlord's or Tenant's reasonable control, the period of such
delay or such prevention shall be deemed added to the time herein provided for
the
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30. SUCCESSORS AND ASSIGNS
The covenants, terms, conditions, provisions, and undertakings in this
lease or in any renewals thereof shall extend to and be binding upon the heirs,
executors, administrators, successors, and assigns of the respective parties
hereto, as if they were in every case named and expressed, and shall be
construed as covenants running with the land; and wherever reference is made to
either of the parties hereto, it shall be held to include and apply also to the
heirs, executors, administrators, successors, and assigns of such party, as if
in each and every case so expressed.
31. DECLARATION OF GOVERNING LAW
This lease shall be governed by, construed and enforced in accordance
with the laws of the State of Florida.
32. GRAMMATICAL USAGE
In construing this lease, feminine or neuter pronouns shall be
substituted for those masculine in form and vice versa, and plural terms shall
be substituted for singular and singular for plural in any place in which the
context so requires.
33. ADDITIONAL INSTRUMENTS
The parties agree to execute and deliver any instruments in writing
necessary to carry out any agreement, term, condition, or assurance in this
lease whenever occasion shall arise and request for such instruments shall be
made.
34. MARGINAL NOTES
The captions and marginal notes of this lease are inserted only as a
matter of convenience and for reference and in no way define, limit, or describe
the scope or intent of this lease, nor in any way affect this lease.
35. ENTIRE AGREEMENT
This lease, together with any written agreements which shall have been
executed simultaneously herewith, contains the entire agreement and
understanding between the parties. There are no oral understandings, terms, or
conditions, and neither party has relied upon any representation, express or
implied, not contained in this lease or the simultaneous writings heretofore
referred to. All prior understandings, terms, or conditions are deemed merged in
this lease. This lease cannot be changed or supplemented orally.
36. MODIFICATION
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This lease may not be changed orally, but only by an agreement in
writing and signed by the party against whom enforcement of any waiver, change,
modifications, or discharge is sought.
37. SEVERABILITY
If any provision of this lease shall be declared invalid or
unenforceable, the remainder of the lease shall continue in full force and
effect.
38. ATTORNEYS' FEE
In the event that it becomes necessary for either party to bring suit
to enforce the terms of this lease, then the prevailing party shall be entitled
to recover all costs, including reasonable attorneys' fees, against the
non-prevailing party.
39. CONSTRUCTION
Landlord and Tenant hereby acknowledge that each has participated
equally in the drafting of this lease and, accordingly, no court construing this
lease shall construe it more stringently against one party than the other.
40. HAZARDOUS WASTE
a. TENANT'S RESTRICTIONS. ~ Tenant shall not cause or permit to occur:
(1) Any violation of any federal, state or local law,
ordinance or regulation now or hereafter enacted, related to environmental
conditions on, under or about the Demised Premises, arising from Tenant's use or
occupancy of the Demised Premises, including but not limited to, soil and ground
water conditions; or
(2) The use, generation, release, manufacture, refining,
production, processing, storage, or disposal of any hazardous substances on,
under, or about the Demised Premises, or the transportation to or from the
Demised Premises of any hazardous substances, except as may be permitted by
applicable law and regulation.
41. HOLD HARMLESS
Tenant shall indemnify, defend and hold Landlord harmless from any and
all claims, liabilities, damages and costs, including attorneys' fees, incurred
by Landlord which may arise from Tenant's use of the Demised Premises or from
the conduct of its business or from any activity, work or things which may be
permitted or suffered by Tenant in, on or about the Demised Premises to the
extent not caused by the Landlord, and shall further indemnify, defend and hold
Landlord harmless from and against any and all claims, liabilities, damages and
costs, including attorneys' fees, incurred by Landlord which may arise from any
negligence of Tenant or any of its agents, representatives,
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customers, employees, or invitees.
IN WITNESS WHEREOF, the parties have executed this lease as of the day
and year first above written.
Witnesses: TENANT:
ROYAL CHRYSLER PLYMOUTH, JEEP-EAGLE, INC.,
___________________________
___________________________ By:__________________________________
Print Name:__________________________
Title:_______________________________
Witnesses: LANDLORD:
___________________________
___________________________ _______________________________________
RAY TATUM
STATE OF FLORIDA
COUNTY OF __________________________
The foregoing instrument was acknowledged before me this _____ day of
_____________, 1997, by _______________, as _____________ of ROYAL CHRYSLER
PLYMOUTH, JEEP-EAGLE, INC., on behalf of the corporation, who is personally
known to me or who has produced ________________________ as identification and
who did (did not) take an oath.
_______________________________________
(Signature)
________________________________________
(Printed name)
NOTARY PUBLIC - STATE OF FLORIDA
SERIAL NO.:
STATE OF FLORIDA
COUNTY OF _____________
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The foregoing instrument was acknowledged before me this ____ day of
_______________, 1997, by RAY TATUM, who is personally known to me or who has
produced ________________________ as identification and who did (did not) take
an oath.
_______________________________________
(Signature)
________________________________________
(Printed name)
NOTARY PUBLIC - STATE OF FLORIDA
SERIAL NO.:
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EXHIBIT "A"
LEGAL DESCRIPTION OF "DEMISED PREMISES"
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EXHIBIT "B"
EXCEPTION TO NO POLLUTANTS, CONTAMINANTS, ETC.
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EXHIBIT 10.6
LEASE
THIS AGREEMENT, made this 14th, day of June, 1991, by and between XWAY,
Inc. d/b/a Interstate Park, hereinafter called "Landlord," and First Team
Management, Inc., whose principal place of business is located in Orange County,
Florida, hereinafter called "Tenant."
1. PREMISES
a. Landlord leases and demises to Tenant for any lawful
purpose, and Tenant hereby leases and rents from Landlord the following
described premises, hereinafter sometimes referred to as the "Demised Premises,"
located in Orange County, Florida, and more particularly described on Exhibit
"A" attached hereto and made a part hereof, together with all incidental rights
and privileges in and about the Demised Premises as may be necessary or
convenient to Tenant's business.
b. The above-described Demised Premises includes all buildings,
structures and other improvements constructed and to be constructed, if any,
thereon, and all easements, rights and appurtenances thereto.
2. TERM OF LEASE
a. The primary term and duration of this lease shall be for a period
of five (5) years (plus the first partial month, if any), commencing from the
commencement date herein provided.
b. The commencement date shall be July 15th, 1991.
c. Tenant shall have until the commencement date (here referred to as
the "Inspection Period"), to determine, in Tenant's sole and absolute
discretion, that the Demised Premises are suitable and satisfactory for Tenant's
intended use. In the event Tenant notifies Landlord in writing within the
Inspection Period that Tenant does not intend to proceed with the leasing of the
Demised Premises, then this Agreement shall automatically terminate and be null
and void and neither party shall have any further liability or obligation
hereunder.
3. RENT
a. Tenant's liability for rent shall commence to accrue on the
commencement date as defined in paragraph 2b above, provided that this lease has
not been terminated prior thereto. If the rent commencement date begins on a
date other than the first of the month, the rent for such partial initial month
shall be prorated and shall be due and payable on the first day of the first
full calendar month of the term hereof. The annual minimum rent to be paid by
Tenant to Landlord for the first twelve (12) months of the term of this lease
shall be $92,984 plus Florida sales tax. Such rental shall be payable in equal
monthly installments on the first day of each calendar month during the term
hereof.
<PAGE>
The parties further agree that the annual minimum rent shall be increased yearly
to reflect fluctuations in the consumer price index. The parties hereto adopt as
a standard for measuring fluctuations in the Consumer Price Index (revised using
the 1982-84 averages as equal to 100), United States average on all items and
commodity groups issued by the Bureau of Labor Statistics of the United States,
hereinafter referred to as the "Price Index." The Average of the Price Index for
the three (3) months prior to the commencement date shall be taken as the Basic
Standard and that figure will therefore be the Basic Standard, as the term is
hereinafter used. These adjustments shall be made in the rent by multiplying the
initial annual minimum rent charged hereunder by a fraction, the numerator of
which shall be the new Price Index figure, and the denominator of which shall be
the Basic Standard. The new Price Index figure to be used shall be the Price
Index for the month immediately preceding the relevant anniversary date of the
Lease, provided however, that such adjustment shall not increase the annual
minimum rent more than eight percent (8%) during any twelve (12) month period.
In the event that the Price Index ceases to use the 1982-84 average of 100 as
the basis of calculation, or if a substantial change is made in the terms or
particular items contained in the Price Index, then the Price Index shall be
adjusted to the figure that would have been arrived at, had the change in the
manner of computing the Price Index in effect at the commencement of the full
term of this Lease not be effected. In the event that such Price Index (or a
successor or substitute Price Index) is not available, a reliable governmental
or other nonpartisan publication evaluating the information theretofore used in
determining the Price Index shall be used.
b. All payments of rent hereunder shall be made to Landlord as the
same become due in lawful money of the United States, at such places as
hereinafter may be designated. Nothing contained in this lease shall be
construed to be or create a partnership or joint venture between Landlord and
Tenant.
c. In addition to the payments required herein as rent to the
Landlord, the Tenant shall also pay the following:
(1) All association fees, occupational licenses and other
licenses necessary in the operation of the business to be carried on in the
Demised Premises.
(2) All utility services provided to the Demised Premises,
including, but not limited to, water, gas, electric, and telephone, as they from
time to time shall accrue and be due and payable during the term of this lease.
(3) Tenant shall pay to the appropriate governmental
agencies ad valorem taxes and special assessments with respect to the Demised
Premises and the improvements thereon during the term of this lease or any
extension thereof. It is further understood and agreed that all ad valorem taxes
assessed during the first and last years of the term of this lease shall be
prorated and that Tenant shall only be liable for such portions of such taxes
assessed for said first and last years as its months of occupancy during any of
said years shall bear to the total of twelve (12) months. In the
<PAGE>
event of the imposition of any special assessment or assessments which may be
paid in annual installments, at Tenant's option exercisable by written notice to
Landlord, Landlord shall advise the appropriate governmental agency of its
intention to elect payment in annual installments and Tenant shall be liable for
only such annual installments as shall be due and payable during the term of
this lease, or, if the option to extend shall be exercised, the extended term
hereof. Should Tenant fail to pay any tax or special assessment when due and
payable, Landlord may, if Landlord so desires, pay the same and the amount
together with any penalties which Landlord may have paid, shall immediately
become due and payable to Landlord as additional rent. Tenant shall have the
right in its name or in Landlord's name, whichever shall be appropriate, but at
its own cost and expense, to file and prosecute applications for reduction of
assessed valuation and to institute legal proceedings for the reduction thereof.
In no event shall Tenant be liable for payment of any income, estate or
inheritance taxes imposed upon the Landlord or the estate of the Landlord with
respect to the Demised Premises. Landlord agrees to promptly deliver copies of
all tax notices and tax bills to the Tenant so that Tenant may timely contest
any proposed tax increase and promptly pay the tax due as to take advantage of
any discounts allowed for timely payment. Notwithstanding anything to the
contrary herein, this Lease shall be deemed a triple net lease.
Landlord shall use reasonable efforts to obtain from the taxing
authorities a separate assessment for the Demised Premises if said premises are
part of a larger parcel. If such separate assessment shall be obtained, the real
estate taxes payable by Tenant shall be paid by Tenant directly to the taxing
authority. If Landlord shall be unable to obtain such separate assessment, and
the tax bill covering the Demised Premises shall include property in addition to
the Demised Premises, Tenant shall pay its proportionate share of said tax bill
to Landlord, which proportionate share shall equal the product obtained by
multiplying the amount of the tax bill by a fraction, the numerator of which is
the acreage contained within the Demised Premises and the denominator of which
is the total land owned by the Landlord and assessed in the tax bill less the
fair market value of any improvements not located on the Demised Premises.
Tenant shall pay its share within thirty (30) days after Landlord notifies
Tenant of the amount thereof and furnishes Tenant with a copy of the tax bill
and the calculations by which Tenant's share has been determined. Landlord shall
pay said tax bill when due. In no event shall Tenant be liable for interest or
penalties, if Tenant shall pay such taxes within such thirty (30) day period.
Landlord will furnish Tenant with a copy of the receipted tax bill promptly
after demand therefor.
d. The Tenant shall have a five (5) year option to renew this lease
upon the terms and conditions as herein provided, providing that it shall give
Landlord notice in writing at least one hundred eighty (180) days prior to the
expiration of the primary term of this lease, that it intends to renew the same.
The extension shall be upon the same terms and conditions as the primary term of
the Lease; provided, however, that the annual minimum rental shall continue to
be adjusted pursuant to the provisions of Section 3.
<PAGE>
4. CONSTRUCTION OF IMPROVEMENTS -- REPAIRS
a. The Tenant, during the term of this lease or any extension or
renewal of this lease, may, at its expense, make such improvements to the
Demised Premises as shall be reasonably desired by Tenant (the "Improvements").
Tenant shall notify Landlord of its desire to have such Improvements constructed
and the parties shall mutually agree upon the plans and specifications for such
Improvements. The Tenant agrees that all damage or injury done to the Demised
Premises by the Tenant or by any person who may be in or upon the Demised
Premises, except the Landlord, Landlord's agents, servants and employees, shall
be repaired by the Tenant at its expense. The Tenant agrees at the expiration of
this lease or upon the earlier termination thereof, to quit and surrender said
Demised Premises in good condition and repair, reasonable wear and damage by act
of God or fire or other causes beyond the control of Tenant excepted.
b. Tenant shall be permitted to install, use on and about, and remove
from the Demised Premises at any time or times all such buildings, additions to
buildings, equipment, exterior and interior signs, trade fixtures, and other
personal property, and make such alterations and improvements, at its cost, in
and about the Demised Premises as it may desire.
c. Tenant shall maintain the Improvements on the Demised Premises in
good structural condition and repair, shall make all structural repairs and
replacements necessitated by any cause other than Landlord's negligence, and
shall make all repairs or replacements necessitated by any peril covered by a
Standard Fire and Extended Coverage insurance policy to the extent of the
proceeds received from such insurance policy, whether or not caused by
Landlord's negligence.
Tenant shall have no authority to create or place any lien or
encumbrance of any kind whatsoever upon, or in any manner to bind, the interest
of Landlord in the Demised Premises, and Tenant covenants and agrees promptly to
pay all sums legally due and payable by it on account of any labor performed by
it on the Demised Premises upon which any lien is or can be asserted against the
Demised Premises or the improvements thereon.
5. TIME OF THE ESSENCE
It is agreed that time is of the essence in respect to the provisions
contained in this lease.
6. DELIVERY OF POSSESSION
If for any reason the Landlord cannot deliver possession of the Demised
Premises with the Improvements to the Tenant on the commencement date this lease
shall not be voided, but the term hereof shall commence at such time as the
Landlord is able to deliver possession, provided, however, that if the Landlord
cannot deliver possession of the leased property by August 1, 1991 the Tenant
shall be entitled to terminate this lease.
<PAGE>
7. WARRANTIES AND TITLE INSURANCE
a. Tenant shall be entitled to receive a good and marketable first
Leasehold interest in and to the Demised Premises and Improvements free and
clear of all liens, encumbrances and other exceptions, except such as Tenant may
waive. This lease is subject to Tenant, at its expense, being able to procure,
within thirty (30) days of the date hereof, a leasehold title insurance binder
from a reputable title insurance company satisfactory to Tenant agreeing to
issue a valid title insurance policy insuring Tenant's leasehold interest. Said
title binder must show that Landlord's title to the Demised Premises is good and
marketable, free, clear and unencumbered, and subject to no liens, encumbrances
or exceptions (other than current real estate taxes not delinquent), except such
as Tenant may, at its option, waive, and that Tenant has a valid and binding
first leasehold interest without exception other than such taxes and waived
exceptions. Without in any way limiting the generality of the foregoing, said
title binder shall contain no exceptions for (i) rights or claims of parties in
possession not shown by the public records, (i) boundary line disputes,
encroachments or other exceptions to be covered by the survey or surveyor's
certificate required hereinbelow, (iii) easements or claims of easements not
shown by the public records, (iv) any lien or right to a lien for services,
labor or material heretofore or hereafter furnished, imposed by law and not
shown by the public records, and (v) taxes or special assessments which are not
shown as existing liens by the public records. In the event the binder or
commitment fails to show such good and marketable title, subject only to the
aforesaid permitted exceptions, Tenant shall notify Landlord of the exceptions
or defects in such title within ten (10) days of its receipt of said binder and
Landlord shall have sixty (60) days to cure such exceptions and defects and
render the title marketable; provided that all such exceptions and defects shall
be cured no later than the commencement date hereunder, unless extended by
Tenant to permit Landlord additional time in which to cure. Tenant shall also
have the right to attempt to cure at its expense any exceptions or defects in
title, but there shall be no obligation on Tenant to do so. Landlord shall
diligently pursue the curing of title exceptions and defects, the satisfaction
of all conditions and requirements hereunder and shall cooperate with Tenant in
the satisfaction of conditions and elimination of other difficulties. In the
event that Landlord is unable to cure defects in title by the commencement date,
Tenant shall have the right to terminate this lease and the parties hereto shall
thereafter be relieved of any obligations, liabilities or responsibilities
arising hereunder.
b. Landlord covenants and warrants that Landlord has good and
marketable title in fee simple to the Demised Premises free and clear of all
liens, encumbrances and easements, except with respect to the existing mortgage
to Southeast Bank, N.A. which shall not be considered a title defect pursuant to
7a above or any subsequent mortgage, provided however, during the term of this
lease, Landlord shall not increase the amount of indebtedness on the Demised
Premises in excess of the purchase option contained hereinbelow, and has full
power and authority to make this lease. Tenant shall have and enjoy full, quiet
and peaceful possession of the Demised Premises, their appurtenances and all
rights and privileges incidental thereto during the term hereof and all
extensions and renewals thereof.
c. Landlord has no knowledge of any anti-pollution, environmental
laws, rules,
<PAGE>
regulations, ordinances, orders of directives which would hinder, prevent or
substantially obstruct the construction, access to or operation of an automobile
dealership.
8. COMPLIANCE WITH LAWS AND ORDINANCES
a. Tenant shall comply with all federal, state, county and city laws
and ordinances and all rules and regulations of any duly constituted authority
present and future affecting or respecting the use or occupancy of the Demised
Premises by Tenant, or the business at any time thereon transacted by Tenant or
any assignee or subtenant of Tenant, after the commencement of the term of this
lease.
b. Tenant shall at all times keep the Demised Premises, the building
thereon and all appurtenances in a clean and sanitary condition, according to
the applicable statutes, city ordinances, and the directions or regulations of
the proper public authorities.
9. COVENANT OF QUIET ENJOYMENT
The Tenant, upon the payment of the rent herein reserved and upon the
performance of all of the terms of this lease, shall at all times during the
lease term and during any extension or renewal term peaceably and quietly enjoy
the Demised Premises without any disturbance from the Landlord or from any other
person claiming through the Landlord.
10. TERMINATION
The Tenant shall vacate the Demised Premises in the good order and
repair in which such premises are at the time of commencement of the term
hereof, ordinary wear and tear, depreciation, damage and loss from the elements,
loss covered by insurance, and other occurrences beyond the reasonable control
of Tenant excepted, and shall remove all of its property therefrom so that the
Landlord can repossess the Demised Premises not later than noon on the day upon
which this lease or any extension thereof ends, whether upon notice or by
holdover or otherwise. The Landlord shall have the same rights to enforce this
covenant by ejectment and for damages or otherwise as for the breach of any
other condition or covenant of this lease. The Tenant may at any time prior to
our upon the termination of this lease or any renewal or extension thereof
remove from the Demised Premises all materials, equipment and property of every
other sort or nature the cost of which was paid for by the Tenant, provided that
such property is removed without substantial injury to the Demised Premises. No
injury shall be considered substantial if it is promptly corrected by
restoration to the condition prior to the installation of such property, if so
requested by the Landlord. Any such property not removed shall become the
property of the Landlord.
11. INSURANCE
a. The Tenant shall, at its sole cost and expense, cause to be placed
in effect immediately upon commencement of the term of this lease, and shall
maintain in full force and effect
<PAGE>
during said term (i) fire and extended coverage insurance covering all
Improvements, structures and their contents on the Demised Premises on a full
replacement cost basis but in no event less than the mortgage and any other debt
financing on the Demised Premises (no deduction for depreciation), Insuring all
risks of direct physical loss, and excluding unusual perils such as nuclear
attack, earth movement, flood and war, with deductibles or self insurance
consistent with insurance industry practices, and (ii) bodily injury and
property damage comprehensive public liability insurance with a combined single
limit of not less than $1,000,000.00 including deductibles or self insurance
consistent with insurance industry practices.
b. The Tenant shall deliver to Landlord a duplicate original of each
such policy, or in lieu thereof, a certificate issued by the carrier. Each such
policy or certificate shall provide that the same shall not be cancelled without
at least ten (10) days prior written notice to Landlord, and shall name Landlord
any mortgagee as an additional insured thereunder.
12. UTILITIES
The Tenant agrees to pay for all water, fuel, gas, oil, heat,
electricity, power, materials, and services which may be furnished to it or,
used by it in, or about the Demised Premises and to keep said Demised Premises,
free and clear of any lien, or encumbrance of any kind whatsoever created by
Tenant's act or omission.
13. CONDEMNATION
a. The parties hereto agree that, should the whole of the Demised
Premises be taken or condemned by any competent authority for any public or
quasi-public use or purpose during the term of this lease and prior to the
Tenant's exercise of its option to purchase the Demised Premises, this lease
shall terminate as of the time when possession thereof is required for public
use and from that day on the parties shall be released from further obligations
hereunder. Tenant reserves unto itself the right to prosecute its claim for an
award based upon its leasehold interest for such taking, without impairing any
rights of Landlord for the taking.
In the event that a part of the Demised Premises shall be taken or
condemned and (a) the part so taken includes the Improvements on the Demised
Premises or any part thereof, or (b) the part so taken shall remove from the
Demised Premises ten percent (10%) or more of the front depth of the parking
area thereof or more than a depth of ten (10) feet, whichever is greater, or (c)
the part so taken shall consist of twenty percent (20%) or more of the total
parking area, or (d) such partial taking shall result in cutting off direct
access from the Demised Premises to any adjacent public street or highway, then
and in any such event, the Tenant may, at any time either prior to or within a
period of ninety (90) days after the date when possession of the Demised
Premises shall be required by the condemning authority, elect to terminate this
lease or, Tenant may, as an alternative to such termination of this lease, elect
to purchase the Demised Premises in accordance with its purchase option, except
that there shall be deducted from the purchase price to be paid for the Demised
Premises all of the Landlord's award from the condemnation proceeding. In the
event that
<PAGE>
the means of ingress and egress to the Demised Premises are in any way blocked
or partially blocked as a result of any road construction or other improvements,
Landlord agrees to waive all of Tenant's obligations during such period of
construction or improvement.
b. In the event of a taking which does not give rise to an option to
terminate or an option to purchase the Demised Premises, or in the event of a
taking which does give rise to such options but Tenant does not elect to
exercise same, Landlord shall, to the extent of Landlord's award from such
taking (which word "award" shall include any settlement, or purchase price under
a sale in lieu of condemnation), promptly restore, replace or repair the Demised
Premises to the same condition as existed immediately prior to such taking
insofar as is reasonably possible. If the award shall exceed the amount spent or
to be spent promptly to effect such restoration, repair or replacements, such
excess amount shall be divided between Landlord and Tenant so that Tenant shall
receive a portion of the award which shall be attributable to (i) the value of
the trade fixtures lost and/or damaged as a result of the condemnation; (ii) the
cost of removal of the fixtures, equipment and inventory; (iii) that percentage
of the award attributable to the value of the improvements on the Demised
Premises the cost of which was contributed by the Tenant; and (iv) the value of
Tenant's leasehold estate hereunder had the property not been condemned.
14. ASSIGNMENT AND SUBLETTING
The Tenant may assign this lease or let or underlet the whole or any
part of said Demised Premises without the prior consent of the Landlord. Any
such assignment or subletting shall not relieve Tenant of its obligations under
this lease.
15. HOLDING OVER
In the event Tenant continues to occupy the Demised Premises after the
last day of the term hereby created, or after the last day of any extension of
said term, and the Landlord elects to accept rent thereafter, a tenancy from
month to month only shall be created and not for any longer period.
16. WAIVER OF SUBROGATION
Landlord and Tenant do hereby waive any and all claims against the
other for damage to or destruction of any improvements upon the Demised Premises
(whether or not resulting from the negligence of Tenant) which is covered by
insurance which Tenant is obligated to carry under the terms of this lease;
provided, however, that this waiver shall not be applicable if it has the effect
of invalidating the Landlord's or Tenant's insurance coverage.
17. RELATIONSHIP OF PARTIES
It is understood and agreed that the relationship of the parties hereto
is strictly that of Landlord and Tenant and that this lease shall not be
construed as a joint venture or partnership. The Tenant is not and shall not be
deemed to be the agent or representative of the Landlord.
<PAGE>
18. RIGHT TO PURCHASE
a. At any time during the term of the lease, Tenant shall have the
option to purchase the Landlord's interest in the Demised Premises upon thirty
(30) days' prior written notice to Landlord. The cash purchase price to be paid
by Tenant to Landlord shall be the amount obtained using the following formula:
10 x Net Rental = Purchase Price
As used herein, the term "Net Rental" shall be defined as the annual
minimum rental due from Tenant to Landlord during the year in which the Tenant
exercises its option to purchase. The Landlord shall convey the Demised Premises
to the Tenant free and clear of all liens and encumbrances.
b. EXERCISE OF OPTION. If the Tenant elects to exercise the option
granted herein, it shall furnish at least thirty (30) days advance written
notice to Landlord.
c. SURVEY. At any time while this lease is in effect, Tenant may have
the Demised Premises surveyed at Tenant's sole cost and expense. Landlord agrees
to deliver a copy of any surveys in Landlord's possession upon request by
Tenant.
d. EXPENSES, PRORATION AND CONVEYANCE. The Landlord shall pay for
documentary stamps on the Deed and the Tenant shall pay for recording the Deed.
At closing Tenant shall deliver the cash required to close and Landlord shall
convey title to Tenant by general warranty deed.
e. CLOSING DATE. This option shall be closed at the offices of
Landlord's attorney not later than one hundred twenty (120) days after notice of
exercise.
f. CLOSING PROCEDURE. At the Closing, the parties shall deliver the
following duly executed documents and funds:
(1) By Landlord:
(i) a statutory warranty deed conveying fee simple
title to the Demised Premises to Tenant.
(ii) a no-lien affidavit in a form satisfactory to
Tenant's attorney.
(iii) an Owner's Title Commitment showing no change,
except for the elimination of the outstanding first mortgage to Southeast Bank,
N.A. or any subsequent Lender, from the Commitment to be issued under paragraph
7 in the amount of the purchase price.
<PAGE>
(iv) such other instruments and documents provided in
this option and as may be reasonably required in order to consummate the
transaction herein contemplated.
(2) By Tenant:
(i) a certified check or a cashier's check payable to
the order of Landlord for the cash to close or a wire transfer of said funds to
a bank account designated by Landlord.
g. MEMORANDUM OF OPTION. Simultaneously with the execution of this
lease the parties hereto shall execute a Memorandum of Option Agreement solely
for the purpose of recording in the public records.
19. PERSONAL PROPERTY
The Landlord acknowledges that Landlord has no interest in any personal
property or equipment or furniture and fixtures which may be installed by the
Tenant upon the Demised Premises, and the Landlord agrees in the future to
furnish the Tenant, upon request, such Landlord's Waiver or Mortgagee's Waiver
or similar document as may be reasonably required by an institutional lender or
equipment lessor in connection with the Tenant's acquisition or financing
respecting such personal property, equipment, furniture and fixtures. The Tenant
shall have the right to remove same at the termination of this lease, and,
notwithstanding anything to the contrary contained in this lease, Tenant shall
be permitted five (5) days after the effective date of termination of the term
or any renewal or hold-over term within which to accomplish the removal, and
shall be obligated to repair any damage caused by removal.
20. DEFAULT AND INSOLVENCY
a. Default in the performance of any covenant, agreement, obligation
or condition herein, or breach of any warranty or representation herein,
voluntary institution of any insolvency proceedings or steps, as debtor or
insolvent, whether such default, breach or institution be on the part of Tenant
or Landlord, or involuntary insolvency proceedings brought against either Tenant
or Landlord which are not dismissed within sixty (60) days, shall entitle the
other party, at its option, to terminate this lease, if, after giving notice by
such other party to the offending party of such intention to terminate, setting
forth the grounds therefor, the offending party does not within thirty (30) days
take prompt and diligent steps to remedy such ground or grounds of termination.
The party which has the option of terminating this lease under the provisions of
the preceding sentence may, at its option, and in lieu of its other rights and
remedies, correct such default and charge the reasonable cost thereof to the
offending party, which said charge shall constitute a legal and valid debt of
the party so charged. In the event of any default under this lease by Landlord,
Tenant may after obtaining a judgment against Landlord, without being judged in
default hereunder, withhold payments of rent or other sums due Landlord by
Tenant, and apply same to cure any such default by Landlord. Upon any such
termination for any default of Tenant, Landlord, its agent or attorney, shall
have the right, without further notice or demand, to reenter and remove all
persons and Tenant's
<PAGE>
property therefrom without being deemed guilty of any manner of trespass, or
Landlord, its agent or attorney, may resume possession of the Demised Premises
and re-let the same for the remainder of the term at the best rent Landlord, its
agent or attorney, may obtain, making reasonable efforts in connection
therewith, for the account of Tenant which shall make good any deficiency. In
addition to the foregoing rights, each party shall have such other and further
rights as are allowed by law or in equity. Failure to exercise any right
hereunder on any one or more occasions shall not be .deemed a waiver of such
right or any subsequent right. In the event either party is in default in the
performance of any term, covenant, agreement or condition contained in this
lease, the defaulting party shall reimburse the non-defaulting party for all
costs and expense, including without limitation, court costs and reasonable
attorneys' fees incurred by it in protecting the interests, whether or not
litigation is involved.
21. SUBORDINATION
a. The Tenant shall subordinate its interest in the Demised Premises
to the lien of any first mortgage placed upon the Demised Premises to finance
the cost of construction of the Improvements and to all terms, conditions and
provisions thereof, to all advances made, and to any renewal, extensions,
modifications or replacement thereof.
b. If the lease is in full force and effect and there are no defaults
hereunder on the part of the Tenant, the right of possession of Tenant to the
Demised Premises and Tenant's rights arising out of this lease shall not be
affected or disturbed by the mortgagee in the exercise of any of its rights
under the mortgage or the note secured thereby, nor shall Tenant be named as a
party defendant to any foreclosure of the lien or mortgage, nor in any other way
be deprived of its rights under this lease. In the event that the mortgagee or
any other person acquires title to the Demised Premises pursuant to the exercise
of any remedy provided for in the mortgage, this lease shall not be terminated
or affected by said foreclosure or sale or any such proceeding, and the
mortgagee shall agree that any sale of the Demised Premises pursuant to the
exercise of any rights and remedies under the mortgage, or otherwise, shall be
made subject to this lease and the rights of the Tenant hereunder. Tenant agrees
to attorn to the mortgagee or such person as its new Landlord and the lease
shall continue in full force and effect as a direct lease between Tenant and
mortgagee or such other person upon all the terms, covenants and agreements set
forth in the lease.
22. ESTOPPELS
Landlord and Tenant do each hereby agree at any time and from time to
time that within not more than ten (10) days after written request by the other,
to execute, acknowledge and deliver to the other a written statement in such
form as may be required by a potential or existing lender or buyer certifying
that its lease is unmodified and in full force and effect (or, if there have
been modifications, that the same are in full force and effect as modified and
stating the modifications) and the dates to which the rent and other charges
have been paid in advance, if any, it being intended that any such statement may
be relied upon by any prospective purchaser of the fee or mortgage or assignee
of any mortgage upon the fee of the Demised Premises.
<PAGE>
23. TENANT'S RIGHTS TO CURE LANDLORD'S DEFAULTS
The Landlord agrees that if the Landlord fails to perform any
obligation, including its obligation to pay any interest, principal, cost or
other charges upon any mortgage or mortgages or other liens and encumbrances
affecting the Demised Premises and to which this lease may be subordinate when
any of the same become due, or if Landlord fails to make any repairs or do any
work required of the Landlord by the provisions of this lease, or in any other
respects fails to perform any covenant or agreement in this lease contained on
the part of the Landlord to be performed, then and in such event after the
continuance of any such failure or default for thirty (30) days after notice in
writing thereof is given by the Tenant to the Landlord, notwithstanding any
delay or forbearance in giving such notice, Tenant may perform any such
obligation or pay said principal, interest cost and other charges, and cure such
defaults, all on behalf of and at the expense of the Landlord. The Tenant may
further do all necessary work and make all necessary payments in connection
therewith including, but not limited to, the payment of any attorney's fees,
costs and charges of or in connection with any legal action which may have been
brought. The Landlord agrees to pay to the Tenant forthwith any amount so paid
by the Tenant, together with interest thereon at the maximum legal rate. All
sums charged to Landlord by Tenant hereunder shall be indebtedness of Landlord
to Tenant payable on demand. If any such indebtedness or any other indebtedness
of Landlord to Tenant is due at any time, Tenant may, in addition to other
remedies, withhold all rent accruing hereunder and apply the same to the payment
of such indebtedness. If all such indebtedness is not fully paid at the
expiration of the original term of this lease or any extension thereof, Tenant
may, at its option, extend this lease on the same covenants and conditions as
herein provided, until such indebtedness is fully paid by application of all
rents thereto.
24. ACCESS
The Landlord hereby warrants, represents and covenants to the Tenant
that Tenant has access to all street fronts and adjoining rights-of-way. If any
street, adjoining right-of-way, or all or any part of the parking area is
obstructed or blocked for repairs, reconstruction or otherwise, by acts of the
Landlord or an affiliated entity, to the extent the operation of Tenant's
business is substantially adversely affected, a fair and reasonable reduction of
rent shall be made. Landlord shall, at its own costs and expense, provide all
access roads and driveways, fully paved, to the property lines of the Demised
Premises.
25. ENTRY AND INSPECTION
The Tenant shall permit Landlord and its agents to enter the Demised
Premises at all reasonable times for any of the following purposes: to inspect
the same; to maintain the building in which the said Demised Premises are
located; to make such repairs to the Demised Premises as the Landlord is
obligated or may elect to make; to post notices of nonresponsibility for
alterations or additions or repairs. The Landlord shall have such right of entry
and the right to fulfill the purpose thereof without any rebate of rent to the
Tenant for any loss of occupancy or quiet enjoyment of the Demised Premises
thereby occasioned.
<PAGE>
26. NOTICES
All notices to be given to the Tenant shall be in writing, deposited in
the United States mail, certified or registered, return receipt requested, with
postage prepaid, and addressed to the Tenant at 350 South Lake Destiny Drive,
Suite 200, Orlando, Florida 32810. Notices by the Tenant to Landlord shall be in
writing, deposited in the United States mail, certified or registered, return
receipt requested, with postage prepaid, and addressed to the Landlord at 997 W.
Kennedy Blvd., Orlando, Florida 32810 Attn: Bernard Kaplan. Notices shall be
deemed delivered the day after same are deposited in the United States mail, as
above provided. Change of address by either party must be by notice given to the
other in the same manner as above specified.
27. ZONING AND LICENSING
The Landlord agrees upon request by Tenant to sign promptly and without
charge therefore to the Tenant, any application for occupational licenses and
permits as may be required by the Tenant for the conduct and operation of the
business herein authorized or for the proper use of the Demised Premises, this
to include, without limitation, applications for occupational licenses, signs,
and any other licenses where the signature of the Landlord or owner is required
by the applicable laws of the state, county, or municipality in which the
Demised Premises are located that are in effect and in force at the time, the
cost of any such licenses and permits to be borne by the Tenant.
28. TENANT'S SIGNS
The Landlord hereby warrants, represents and covenants to the Tenant
that Tenant shall have the right to install and maintain its standard signs
advertising Tenant's business, as revised from time to time. Subject to local
codes, deed restrictions and/or waiver of same.
29. COOPERATION
Landlord shall fully cooperate with Tenant throughout the term of this
lease and all extensions and renewals to secure and maintain proper zoning,
building and other permits and compliance with all applicable laws, and Landlord
shall execute all such petitions, requests and the like as Tenant shall
reasonably request for such purposes.
30. FORCE MAJEURE
If Landlord or Tenant is delayed or prevented from performing any of
their respective obligations under this lease by reason of strike or labor
troubles or any outside cause whatsoever (other than inability to obtain
financing) beyond Landlord's or Tenant's reasonable control, the period of such
delay or such prevention shall be deemed added to the time herein provided for
the performance of any such obligations.
<PAGE>
31. SUCCESSORS AND ASSIGNS
The covenants, terms, conditions, provisions, and undertakings in this
lease or in any renewals thereof shall extend to and be binding upon the heirs,
executors, administrators, successors, and assigns of the respective parties
hereto, as if they were in every case named and expressed, and shall be
construed as covenants running with the land; and wherever reference is made to
either of the parties hereto, it shall be held to include and apply also to the
heirs, executors, administrators, successors, and assigns of such party, as if
in each and every case so expressed.
32. DECLARATION OF GOVERNING LAW
This lease shall be governed by, construed and enforced in accordance
with the laws of the State of Florida.
33. GRAMMATICAL USAGE
In construing this lease, feminine or neuter pronouns shall be
substituted for those masculine in form and vice versa, and plural terms shall
be substituted for singular and singular for plural in any place in which the
context so requires.
34. ADDITIONAL INSTRUMENTS
The parties agree to execute and deliver any instruments in writing
necessary to carry out any agreement, term, condition, or assurance in this
lease whenever occasion shall arise and request for such instruments shall be
made.
35. MARGINAL NOTES
The captions and marginal notes of this lease are inserted only as a
matter of convenience and for reference and in no way define, limit, or describe
the scope or intent of this lease, nor in any way affect this lease.
36. ENTIRE AGREEMENT
This lease, together with any written agreements which shall have been
executed simultaneously herewith, contains the entire agreement and
understanding between the parties. There are no oral understandings, terms, or
conditions, and neither party has relied upon any representation, express or
implied, not contained in this lease or the simultaneous writings heretofore
referred to. All prior understandings, terms, or conditions are deemed merged in
this lease. This lease cannot be changed or supplemented orally.
<PAGE>
37. MODIFICATION
This lease may not be changed orally, but only by an agreement in
writing and signed by the party against whom enforcement of any waiver, change,
modifications, or discharge is sought.
38. SEVERABILITY
If any provision of this lease shall be declared invalid or
unenforceable, the remainder of the lease shall continue in full force and
effect.
39. ATTORNEYS' FEE
In the event that it becomes necessary for either party to bring suit
to enforce the terms of this lease, then the prevailing party shall be entitled
to recover all costs, including reasonable attorneys' fees, against the
nonprevailing party.
40. CONSTRUCTION
Landlord and Tenant hereby acknowledge that each has participated
equally in the drafting of this lease and, accordingly, no court construing this
lease shall construe it more stringently against one party than the other.
41. HAZARDOUS WASTE
Tenant agrees to indemnify and hold Landlord harmless against any loss
or liability resulting from Tenant's use or storage of hazardous waste or any
other containments on the Demised Premises.
42. RADON GAS
Radon is a naturally occurring radioactive gas which, when accumulated
in a building in sufficient quantities, may present health risks to persons who
are exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit. Pursuant to ss.404.056(8), Florida Statutes.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this lease as of the day
and year first above written.
Witnesses: TENANT:
First Team Management, Inc.
General Partner
- -------------------------
- ------------------------- By:
-----------------------------
Witnesses: LANDLORD:
XWAY, Inc. d/b/a Interstate Park
- ------------------------
By:
- ------------------------- --------------------------------
Bernard Kaplan
EXHIBIT 10.8.1
MOTOR VEHICLE
FLOOR PLANNING AGREEMENT AND SECURITY AGREEMENT
THIS MOTOR VEHICLE FLOOR PLANNING AGREEMENT AND SECURITY AGREEMENT (the
"Agreement") is made this 1st day of April, 1996, by and between the following
parties:
I. FIRST TEAM FORD, LTD., a Florida limited partnership ("Dealer"),
whose principal place of business is 3786 Highway 17-92 South, Sanford, Florida
32771.
II. COMERICA BANK, a Michigan banking corporation ("Bank"), whose
address is 411 W. Lafayette Street, P. O. Box 75000, National Dealer Services -
3517, Detroit, Michigan 48275-3517.
RECITALS:
A. Dealer is engaged in the business of buying and selling new and used
motor vehicles, trucks and chassis. For purposes hereof, the term "Vehicle(s)"
shall mean new motor vehicles, trucks and chassis, but NOT used motor vehicles,
trucks and chassis; however the term "Collateral" used herein shall include both
new and used motor vehicles, trucks and chassis, including Demonstrators (as
defined herein).
B. Dealer wants Bank, and Bank agrees, to provide financial
accommodations from time to time to Dealer, to be secured by security agreements
covering personal property pursuant to the Uniform Commercial Code as adopted by
the State of Florida, on the terms and conditions set forth below.
In consideration of the mutual covenants and agreements contained in
this Agreement, the parties agree as follows:
1. RECITALS. The parties agree that the Recitals are true and correct
and are hereby incorporated into and made a part of this Agreement.
2. DEFINITIONS. In addition to other terms defined in this Agreement,
the following defined terms shall be applicable:
(a) COLLATERAL shall mean all of Dealer's interest in and to
accounts receivable, inventory (including but not limited to new, used and
demonstrator Vehicles, parts and accessories), machinery, and equipment,
including additions or accessions thereto and all cash or non-cash proceeds
thereof with said proceeds to include but not be limited to insurance proceeds,
chattel paper, accounts or assignment of accounts with said collateral. The term
"Collateral" is defined with more particularity in the Security Documents (as
defined herein).
(b) DEMONSTRATORS shall mean those Vehicles which Dealer has
selected to be placed in service as demonstration, service rental or loaner
vehicles.
(c) DEFAULT RATE shall mean an annual rate of interest to be
determined by Bank, in its sole discretion, that is higher than the annual rate
of interest charged by Bank to
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Dealer incident to the Facility, but does not exceed a per annum rate of Bank's
prime rate (as announced by Bank from time to time) plus three percent (3%); and
provided, in all events the Default Rate shall be lower than the Legal Rate.
(d) FACILITY shall mean the loan and credit facility between
Bank and Dealer that is the subject matter of this Agreement.
(e) FACILITY DOCUMENTS shall mean the following
instruments:
(1) this Agreement; and
(2) the Note (as defined herein); and
(3) the Security Documents (as defined herein);
and
(4) the Guaranty (as defined herein); and
(5) any other instrument executed and delivered
in connection with the Facility.
(f) GAAP shall mean, as of any applicable date of
determination, generally accepted accounting principles consistently applied.
(g) (intentionally deleted)
(h) (intentionally deleted)
(i) INDEBTEDNESS shall mean all loans, advances, indebtedness,
obligations and liabilities of Dealer to Bank under this Agreement, together
with all other indebtedness, obligations and liabilities whatsoever of Dealer to
Bank, whether matured or unmatured, liquidated or unliquidated, direct or
indirect, absolute or contingent, joint or several, due or to become due, now
existing or hereafter arising.
(j) LEGAL RATE shall mean the maximum rate of interest
(including all payments determined by law to be in the nature of interest)
permitted to be charged by applicable law, as amended from time to time.
3. PURPOSE. The sole purpose of the credit facility provided for in
this Agreement is to provide funding to Dealer for the financing of new motor
vehicles to be obtained as inventory in Dealer's regular course of business
(including limited use for Demonstrators as described herein).
4. (intentionally deleted)
5. MAXIMUM AGGREGATE ADVANCE. During the term of this Agreement, Bank
shall make loans to Dealer on a revolving basis up to an aggregate principal
amount outstanding, at any time, not to exceed that amount as may be determined
by Bank from time to time ("Maximum Aggregate Advance"). The initial amount of
the Maximum Aggregate Advance is TEN MILLION DOLLARS ($10,000,000.00). The
amount of the Maximum Aggregate
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Advance shall not be reduced without the prior written understanding of Dealer.
However, see the provisions hereof where Bank may, for any reason in its sole
and absolute discretion, elect to terminate the credit facility described
herein, in which event the Maximum Aggregate Advance shall automatically become
zero.
6. CANCELLATION OF CREDIT FACILITY; DEMAND. Any provision in this
Agreement or in any of the Facility Documents to the contrary notwithstanding,
the credit facility extended hereunder may be canceled at any time by Bank at
its election without notice; and in such event, the Note executed herewith, and
all sums for which Dealer shall be indebted to Bank under this Agreement, plus
interest, late charges and any other amounts due hereunder, shall become due and
payable. In this regard, the continuing availability of the credit facility to
Dealer is additionally subject to Bank's ongoing satisfaction with Dealer's use
and repayment of the Indebtedness and Dealer's and guarantors' financial
conditions. Bank may, at its option, with or without cause, and as determined by
Bank in Bank's sole and absolute discretion, limit, suspend or cancel the
availability of the credit facility to Dealer. Nothing contained in this
Agreement or in any other documents shall in any way limit or restrict Dealer's
obligation to repay all Indebtedness immediately upon demand by Bank, nor shall
anything contained in this Agreement or in any of the documents restrict Bank's
rights, with or without cause, to demand immediate payment of all Indebtedness.
The demand nature of the loans hereunder shall not be deemed modified by
reference in any related agreement to a default or an event of default. To the
extent there is reference to a default or an event of default, such reference is
for the purpose of permitting Bank to accelerate other indebtedness of Dealer,
if any, not on a demand basis and/or to receive interest at the default rate. It
is expressly agreed that Bank may exercise its demand rights hereunder whether
or not a default or an event of default has occurred.
7. PROMISSORY NOTE AND SECURITY DOCUMENTS.
(a) Prior to the first advance under this Agreement, Dealer
shall execute and deliver to Bank a Master Revolving Note, dated on or about the
date of this Agreement, in form and content acceptable to Bank (the "Note") and
such security agreement(s), security deed(s), mortgage(s) and/or other
collateral document(s) (the "Security Documents") requested by Bank, in form and
content acceptable to Bank, granting Bank a first priority lien and/or security
interest in the Collateral described in the Security Documents. The term
"Security Documents" shall also include the instruments more particularly
described in the Recitals hereto, and at a minimum the Security Documents
include the following instruments:
(1) Security Agreement (Accounts, Chattel Paper
and Inventory);
(2) Security Agreement (Equipment);
(3) UCC-1 Financing Statements.
The Note shall evidence advances under this Agreement and be in a principal
amount equal to the initial Maximum Aggregate Advance and shall be payable on
demand. The Note shall bear interest and shall have such other terms and
conditions as are set forth in the Note, including that the interest rate shall
be a per annum rate that is the sum of: (i) the Bank's prime rate from time to
time in effect, plus (ii) zero percent (0.0 %), with the Bank's "prime rate" is
that annual rate of interest so designated by the Bank and which is changed by
the
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<PAGE>
Bank from time to time; provided, however, that Bank shall periodically offer
Dealer, on a monthly basis, the ability to elect a per annum interest rate that
is the sum of: (i) the then thirty (30) day LIBOR rate (as announced from time
to time) plus (ii) two hundred thirty (230) basis points.
(b) From time to time, in the exercise of Bank's sole and
absolute discretion, there may be an increase in the Maximum Aggregate Advance,
and in such event, Dealer shall, if requested by Bank, promptly execute and
deliver to Bank a new Note in the principal amount of the increased Maximum
Aggregate Advance; provided, however, that Dealer shall remain liable for
payment to Bank on demand (and with interest and upon the other terms as are in
the Note) of all outstanding amounts advanced under this Agreement whether or
not in excess of the face amount of the Note. Nothing contained in this
Agreement shall be construed to obligate Bank to advance in excess of the
Maximum Aggregate Advance nor affect Bank's right to limit advances.
(c) Dealer agrees that until all Indebtedness is paid
hereunder, Bank may in its sole discretion (however, Bank agrees it will not
make this request unless Dealer is in default hereunder) require Dealer to have
Bank listed on all Florida motor vehicle titles as the lienholder on all
Vehicles which constitute Collateral under this Agreement, and may also require
Dealer to deliver all certificates of title, certificates of ownership,
manufacturer's certificates or statements of origin or other documents or
evidence of title to Bank for Collateral purposes. Dealer agrees to execute such
documents as are necessary in order to designate Bank (or Bank's designee) for
purposes of this Section. Dealer authorizes Bank at Dealer's expense to
complete, execute, or otherwise deal with any certificate of title regarding any
Vehicle that is subject to this Agreement which Bank deems appropriate, and
Dealer appoints Bank as Dealer's attorney-in-fact to execute any such
certificate of title or titles (including any application for a duplicate or
lost certificate of title) in Dealer's name and to perform all other acts which
Bank deems appropriate to provide deal with any such certificate of title.
8. (intentionally deleted)
9. ASSIGNMENT BY DEALER OF SALES PROCEEDS. Dealer hereby assigns to
Bank, and authorizes Bank, in its own name, or in the name of Dealer, to do any
and all things necessary and proper to effectuate all of Dealer's rights and
interest in and to any of the proceeds of sales (including vehicle holdbacks,
incentives and rebates) becoming payable with respect to any of the Collateral
under each and every sale; provided, however, that Dealer shall have the right
to receive the proceeds and rentals so long as no uncured default under this or
any other agreement held by Bank occurs. Dealer shall not make any other
assignment of its rights and interest in such sale proceeds or rentals. In the
event that there exists between Dealer and any manufacturer or distributor a
repurchase agreement as to any of the Collateral, Dealer agrees, upon request,
to assign, convey or transfer its rights to such agreement to Bank.
10. ADVANCES.
(a) Advances under this Agreement may be made by Bank on
one or more of the following bases:
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<PAGE>
(1) On Dealer's behalf to manufacturers,
distributors or other sellers
of Vehicles to Dealer;
(2) Directly to Dealer for the purpose of
Dealer's acquisition or
holding of Vehicle inventory; or
(3) On Dealer's behalf to a third party which
has previously financed
Dealer's Vehicle inventory.
(b) Bank is authorized, and requested by Dealer, to deal
directly with manufacturers, distributors or other sellers of Vehicles in
arranging payment on Dealer's behalf. In addition to other advances which may be
made by Bank, Bank may make advances under this Agreement to manufacturers,
distributors or other sellers of Vehicles where Bank is obligated to that party
on Dealer's behalf to make the advance, even if Dealer has requested Bank not to
make the advance. Bank may rely upon any invoice or advice from any
manufacturer, distributor or other seller of Vehicles as being correct in all
respects. Bank is relieved and released from any responsibility or liability for
the correctness, sufficiency, validity or authenticity of any invoice or other
instrument presented to it for payment or for the existence, quantity, quality,
condition, identity, packing, value, title, delivery or any other aspect of the
property purported to be represented by any such invoice or other instrument.
(c) Bank will establish in writing, from time to time, the
procedures, documentation and eligibility requirements for Dealer to obtain an
advance, including without limit the makes, models, types and age of Vehicles
eligible for advances, and the amount to be advanced for each eligible Vehicle.
11. REQUIRED PAYMENTS BY DEALER.
(a) Notwithstanding that Dealer's obligations under this
Agreement are payable upon demand, in order to maintain required
collateralization of its obligations under this Agreement, as each Vehicle upon
which Bank has made an advance is sold or otherwise disposed of by Dealer,
Dealer agrees to pay immediately to Bank, without the need for demand by Bank,
the amount of the outstanding advance by Bank on that Vehicle. Failure to make
this payment the sooner of: (i) the second (2nd) business day after the Cash
Receipt Date (as that term is defined in subsection (c) below) or (ii) ten (10)
days after the sale of the Vehicle, shall constitute a monetary default
hereunder without the need for any notice from Bank to Dealer; and Dealer
specifically acknowledges that a failure of Bank to enforce its rights and
remedies available to Bank as a result of such default shall not constitute a
waiver by Bank of Bank's ability to enforce its rights and remedies thereafter
for that or any other default. Also, Dealer acknowledges and agrees that the
foregoing payment privilege shall not be available if Dealer is in default under
this Agreement, and in such event Dealer agrees that Bank has the right, to be
exercised in Bank's sole discretion, to shorten the foregoing payment privilege
on a day-to-day basis up to and including the requirement that Dealer make
payment to Bank on the date that each Vehicle upon which Bank has made an
advance is sold or otherwise disposed of by Dealer. Also, see the provisions of:
(i) this Section below and (ii) in the Section hereof as to Demonstrators,
regarding certain required curtailments.
(b) In addition to any other payment required under this
Agreement or any related document, in the event that, in the determination of
Bank, the value of any Vehicle
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upon which an advance has been made becomes reduced or the prospect of its sale
is diminished, Bank may require Dealer to pay all or a portion of the advance
attributable to that Vehicle prior to its sale.
(c) The date upon which Dealer has cumulatively received all
or substantially all of the cash or non-cash proceeds from the sale or other
disposition of the Vehicle, which shall include but not be limited to cash,
check, sight draft, assignment of customer rebates, qualification for dealer
incentives, insurance proceeds, and any trade-in vehicle (both from consumers
and other dealers), is hereinafter referred to as the "Cash Receipt Date" or
"Cash Receipted".
(d) In the event that the payment for the Vehicle is not
received by Bank within five (5) days following the Cash Receipt Date of the
Vehicle, Bank may (in addition to pursuing its remedies herein and in the
Facility Documents as a result of such default), at its option, impose a late
charge or fee against Dealer in the sum of $5.00 per Vehicle per day beginning
on the fifth (5th) day following the Cash Receipt Date of the Vehicle for each
day until Bank is paid.
(e) With respect to any Vehicle that is sold and not Cash
Receipted and which remains unpaid at Bank on the tenth (10th) day following the
sale of the Vehicle, Bank may, at its option (in addition to pursuing its
remedies herein and in the Facility Documents as a result of such default),
impose a late charge or fee against Dealer in the sum of $5.00 per Vehicle per
day beginning on the tenth (10th) day following the sale of the Vehicle for each
day until Bank is paid.
(f) After any new Vehicle has been in Dealer's inventory of
new Vehicles for three hundred sixty-five (365) days, that Vehicle shall be
curtailed at the rate of two percent (2%) per month for the next twelve (12)
months, with payment in full with regard to that Vehicle due at the end of the
twenty-fourth (24th) month after that Vehicle has been in Dealer's inventory of
new Vehicles.
12. INSPECTION OF DEALER BY BANK. Dealer hereby confirms, understands
and agrees that, so often as determined necessary by Bank in its sole
discretion, Bank shall be permitted to perform both: (i) floor plan audits of
all motor vehicles and other inventory subject to any security interest or lien
in favor of Bank, which audits will usually be performed about once a month; and
(ii) financial audits of Dealer, which audits will usually be performed about
twice a year. All such audits may be conducted by Bank, at any time and from
time to time during normal business hours, without notice, and Bank shall have
the right to inspect, audit or otherwise examine the Collateral and Dealer's
books and records and may enter upon all premises where the same is kept.
13. GRANT OF SECURITY INTEREST. Notwithstanding anything to the
contrary herein contained, Dealer, in order to secure any and all Indebtedness
now owing or hereafter owing Bank, whether such Indebtedness arises as a part of
the transactions contemplated by this Agreement or otherwise, grants to Bank a
purchase money (as applicable with regard to any funding under the Facility
where the proceeds are used to purchase any part of the Collateral) and first
priority lien (security interest) upon all of the Collateral to be security for
all Indebtedness, including guaranteed obligations, if any, of Dealer to Bank as
set forth in this Agreement or otherwise. This grant of a security interest is
additionally to secure collectively
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the payment by Dealer of the amounts of all advances or obligations to advance
made by Bank to any manufacturer, distributor, or other seller, on behalf of
Dealer, including any initial loan advances, and at Dealer's direction, and the
interest, fees, and costs due thereon. Incorporated by reference herein are any
documents identifying the Collateral financed by Bank, including documents
evidencing floor plan advances. The term "inventory" shall include, but not be
limited to, Dealer's inventory of new and used automobiles, trucks and other
motor vehicles, and accessories and additions thereto, and also Dealer's
inventory of new and used parts and accessories.
14. USE AND PROTECTION OF COLLATERAL.
(a) Dealer shall have possession of the Vehicles financed
under this Agreement (or otherwise included in the Collateral) for the purpose
of exhibition and sale in the ordinary course of business. All proceeds received
by Dealer from the sale or other disposition of any Vehicle which is Collateral
shall be deemed held by Dealer in trust for Bank until delivery of the proceeds
is made to Bank.
(b) Dealer will maintain in good condition the Vehicles
financed under this Agreement and the Collateral, without waste, and free from
encumbrance other than in favor of Bank and will not use Collateral or permit it
to be removed from Dealer's above address (or such other address as may be set
forth in any of the Security Documents) for any purpose without the prior
written consent of Bank, and shall comply with all requirements for the
maintenance, protection, use and removal of the Collateral and all other
obligations set forth in the Security Documents. Notwithstanding the foregoing,
Dealer may permit Vehicles, at any one time, to be temporarily removed from
Dealer's address above for use as demonstration, service rental or loaner
vehicles, for promotional display or for installation of accessories or other
modifications; provided, however, that any Vehicle modifications shall not
adversely affect the value of the Vehicle or Bank's security interest in the
Vehicle.
(c) Dealer shall at all times keep the Collateral free from
all taxes, liens and encumbrances, except those in favor of Bank. Any sums of
money that may be paid by Bank in release or discharge thereof, or for insurance
coverage on the Collateral if Dealer fails to arrange for such coverage or
otherwise, shall be an additional part of the Indebtedness secured hereunder and
shall be paid on demand. Dealer shall not mortgage, pledge, grant or create any
other security interest in the Collateral and shall not transfer or otherwise
dispose of said Collateral out of the ordinary course of Dealer's business
without the consent of Bank until the payment of the Indebtedness hereunder.
Transactions in the ordinary course of business shall include trade-ins and
replacements of furniture, fixtures and equipment used in the ordinary course of
business. Any and all cash proceeds of any sale of Collateral shall be fully
accounted for, and promptly paid to Bank, to be applied to the payment of the
Indebtedness secured hereunder. Notwithstanding the foregoing, Dealer may create
any such lien incident to any and all forms of "purchase money financing"
regarding the acquisition of new assets other than Inventory; provided, that
this provision does not waive or alter any of the other covenants contained
herein; and provided, further, that Dealer must advise Bank in writing of such
lien within ten (10) business days after such lien is created.
15. DEMONSTRATORS. Dealer agrees that Bank may limit the number of
Demonstrators (and Bank hereby limits the number of Demonstrators to thirty
(30)) and that Bank may establish other requirements for Demonstrators. Dealer
shall maintain records at the premises
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where the Collateral is to be kept evidencing which Vehicles are being used as
Demonstrators. Dealer agrees to immediately notify Bank as to any Vehicles which
are to be classified or used as Demonstrators. Bank has the right, on demand, to
secure an immediate curtailment for the reduction of the debt due to Bank for
any Vehicle that is a Demonstrator, is damaged, is aged or has its value
impaired, which determination of any of the foregoing shall be made by Bank in
its sole discretion; and provided, further, in all events all Demonstrators
shall be curtailed at the rate of two percent (2%) of vehicle cost per month
beginning the first (1st) month after the Demonstrator is placed in service.
16. PREPAYMENT.
(a) Dealer may prepay, in whole or part, from time to time,
its outstanding Indebtedness under this Agreement.
(b) Subject to compliance with each of the following terms,
Dealer from time to time may reborrow in the aggregate an amount equal to or
less than the total sums prepaid, up to the unfunded portion of the Maximum
Aggregate Advance then available:
(1) There exists a sufficient number of
Vehicles in Dealer's inventory eligible for advances under this Agreement
(subject to no liens or encumbrances except to Bank), the manufacturer's invoice
value (or Dealer's actual cost, whichever is lesser) of which is equal to or
greater than the sum of Dealer's outstanding indebtedness to Bank under this
Agreement, plus the amount of reborrowing requested;
(2) No money is past due from Dealer to Bank
pertaining to any Vehicle, unless the reborrowing is used to pay this past due
money; and
(3) Dealer is not in default under this
Agreement or under any other document now or later in effect between Bank and
Dealer, regardless of whether Bank has given notice of default or taken any
action on the default.
Any reborrowing shall be deemed to be an advance under this Agreement and
subject to the terms of this Agreement and all related loan documents.
(c) Advances by Bank shall be made to Dealer's account at Bank
or at any other financial institution or shall be applied against Dealer's
indebtedness to Bank, as designated on the request for advance. Reborrowing
shall be requested by submission of a request for advance in the following form:
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REBORROWING CERTIFICATE
AND
REQUEST FOR ADVANCE
The undersigned ("Dealer") requests an advance in the amount of
______________________________________________________ Dollars
($_______________________) under the Motor Vehicle Floor Planning Agreement and
Security Agreement dated ______________________, 199___ between Dealer and
Comerica Bank ("Bank"), as amended, renewed, extended or substituted (the
"Agreement"). Dealer warrants and certifies as follows:
1. There is presently outstanding under the Agreement (including any
pending requests for advances under the Agreement) the principal sum of
$-----------------------------;
2. There exists a sufficient number of [new] Vehicles (as defined in the
Agreement) the invoice value of which is equal to or greater than the sum of
Dealer's outstanding indebtedness to Bank under the Agreement, plus the amount
of reborrowing requested under the Agreement;
3. No money is past due and owing from Dealer to Bank due to the sale of
any Vehicle;
4. Dealer is not in default under the Agreement or under any other
document now in effect between Bank and Dealer, regardless of whether Bank
has given notice of default or taken any action on the default; and
5. The advance shall be disbursed as follows in compliance with the
Agreement:
-------------------------------------------------------------
Dated this _______ day of __________________, 19___.
(Dealer signs)
(d) Dealer and Bank, at various times, may be parties to a
Corporate Cash Management Service Agreement ("Service Agreement") providing for
a Controlled Disbursement Account (the "Account"). Dealer authorizes Bank to
fund the Account, on a daily basis if necessary, by advancing under this
Agreement to the extent of Dealer's prepayments available for reborrowing under
this Section. Dealer understands that checks to be paid through the Account will
not be paid unless funds in an amount sufficient to pay those checks are then
available for reborrowing in compliance with this Section to enable Bank to
advance those funds to the Account. Advances by Bank under this Section to the
Account will be considered a reborrowing by Dealer. Dealer agrees that checks to
be submitted for payment through the Account will not be issued by Dealer unless
sufficient funds are available in compliance with this Section to pay all issued
checks. Dealer at all times is responsible for having sufficient available funds
at Bank to pay all checks to be paid through the Account, whether these funds
are advanced under this Agreement or otherwise. Dealer understands
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that the Service Agreement relating to the Account may be canceled by Bank at
any time upon written notice to Dealer, notwithstanding anything contrary in the
Service Agreement. A copy of the Service Agreement may be attached to this
Agreement by Bank at any time the Service Agreement is in effect between Dealer
and Bank, although the failure to attach it shall not affect its validity or the
effectiveness of this paragraph.
(e) If Dealer is in default under this Agreement or under any
other document now or later in effect between Bank and Dealer, Bank reserves the
right to apply the prepaid funds generally against Dealer's Indebtedness to
Bank, or against Indebtedness related to specific Vehicles, as Bank determines.
17. DEALER FINANCIAL INFORMATION.
(a) BANK'S RELIANCE. Dealer acknowledges that it has furnished
Bank with certain financial or business information in order to induce Bank to
enter into this Agreement and upon which Bank has relied in doing so, and Dealer
certifies that all such information is complete and accurate in all respects.
Dealer shall furnish Bank, promptly upon request by Bank, any additional
financial or business information concerning Dealer or Dealer's operations,
prospects or management, or concerning any guarantor or affiliate of, or other
entity related to, Dealer, in such form and with such certifications and
frequency as may be required by Bank including, but not limited to, financial
statements, tax returns or other governmental or regulatory reports. Dealer
understands that Bank will rely on such information.
(b) ANNUAL AUDITED FINANCIAL STATEMENTS. From the date hereof
until all of the Indebtedness is paid in full and Dealer has performed all of
its obligations under all documents evidencing or securing the Indebtedness,
Dealer covenants and agrees that it will furnish to Bank, in form and reporting
basis satisfactory to Bank, not later than one hundred twenty (120) days after
the close of each fiscal year of Dealer, beginning with Dealer's fiscal year for
the fiscal year preceding the fiscal year in which this Agreement is entered
into, financial statements of Dealer (which statements may be on a consolidated
basis with affiliated entities if Dealer's financial statements are reflected
separately as part of the consolidated financial statements) containing the
balance sheet of Dealer as of the close of each such fiscal year, statements of
income and retained earnings and a statement of cash flows for each such fiscal
year and such other comments and financial details as are usually included in
similar reports. Such reports shall be prepared in accordance with GAAP by
independent certified public accountants of recognized standing selected by
Dealer and acceptable to Bank, shall be audited, and shall contain unqualified
opinions as to such financial statements. Further, in addition to the foregoing
audited financial statements for Dealer, there shall also be provided the same
quality audited financial statements for First Team Management, Inc., a Florida
corporation, as well as all other First Team Management, Inc. affiliated
automobile dealership entities. In lieu of audited financial statements, Mealey
Holdings, Inc., a Florida corporation, shall provide a copy of its annual income
tax return, and Donald C. Mealey shall provide an unaudited personal financial
statement.
(c) BANK'S USE OF INFORMATION. The review, audit, approval,
inspection or examination by Bank of any item under the terms of this Agreement
is for either the accuracy or sufficiency of such item or the quality or
suitability of such item for its intended use. Any such review, audit, approval,
inspection or examination by Bank is for the sole purpose of protecting Bank's
interest in the Collateral or Bank's other interests under this Agreement and
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is not for the benefit or protection of Dealer or any third party. Dealer
further agrees that Bank shall have no obligation to provide Dealer in writing
or orally with the results of any review, audit, approval, inspection or
examination by Bank. Dealer further agrees that if Bank discloses the results of
any review, audit, approval, inspection or examination by Bank, this disclosure
is for the sole protection of Bank's interests under this Agreement, does not
constitute an agreement by Bank to any further disclosures and shall not be
deemed to create a warranty or representation by Bank as to the accuracy,
sufficiency or any other aspect of the disclosure.
(d) TAX RETURNS. From the date hereof until all of the
Indebtedness is paid in full and Dealer has performed all of its obligations
under all documents evidencing or securing the Indebtedness, Dealer covenants
and agrees that it will provide to Bank no later than ten (10) days following
the due date (including valid extensions) true and correct copies of all United
States income tax returns for Dealer. Dealer shall cause the person responsible
for submitting any such United States income tax return to the Internal Revenue
Service to submit a copy of such return directly to Bank simultaneously with the
submission to the Internal Revenue Service.
(e) MONTHLY REPORTING - REQUIRED. From the date hereof until
all of the Indebtedness is paid in full and Dealer has performed all of its
obligations under all documents evidencing or securing the Indebtedness, Dealer
covenants and agrees that it will furnish to Bank, in form and reporting basis
satisfactory to Bank, within fifteen (15) days after the close of each calendar
month, with the following items:
(1) FINANCIAL REPORTS. Internally prepared
financial statements of Dealer.
(2) STATEMENT SUBMISSION CERTIFICATE, INCLUDING
NO DEFAULT CERTIFICATE. A fully completed Statement Submission Certificate as of
the end of such month. This certificate shall be executed by the chief
executive or chief financial officer. This Statement Submission Certificate
shall be in the following form:
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<PAGE>
STATEMENT SUBMISSION CERTIFICATE
The undersigned hereby warrants and represents that, to the
best of the undersigned's belief and knowledge, as of the date of the
execution of this certificate, there does not exist any default, or
event or condition which with the giving of notice or passage of time,
or both, would cause a default or event of default in any agreement
between_____________, a Florida corporation ("Dealer") and Comerica
Bank ("Bank"), including without limitation any default in any
financial covenant contained in any agreement between Dealer and Bank.
The undersigned further warrants and represents that the
attached financial statement of Dealer dated___________ has been
prepared in accordance with generally accepted accounting principles
and, except as set forth below, was prepared on a basis consistent with
the financial statements previously submitted by Dealer to Bank. The
attached financial statement contains all adjustments necessary for a
fair presentation of the financial condition of Dealer as of the
statement date and the results of its operations for the period then
ended. To the best of the undersigned's belief and knowledge, there is
no set of facts existing or which will come into existence with the
passage of time which would cause a material misstatement of either the
financial condition or results of operation for Dealer. The financial
statements may be relied upon by Bank when considering the extension or
renewal of credit to Dealer and its affiliates.
(3) CALCULATION OF NEW VEHICLE EQUITY. A
calculation of New Vehicle Equity, certified by the chief executive or chief
financial officer.
18. (intentionally deleted)
19. FRANCHISES, LICENSES AND PERMITS. Dealer shall do or cause to be
done all things necessary to preserve and keep in full force and effect Dealer's
rights and franchises and comply with all applicable laws; continue to conduct
and operate its businesses substantially as conducted and operated during the
present and preceding calendar year; at all times maintain, preserve and protect
all franchises and trade names and preserve all the remainder of its property
and keep the same in good repair, working order and condition; and from time to
time make, or cause to be made, all needed and proper repairs, renewals,
replacements, betterments and improvements thereto so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times.
20. NOTICE OF MATERIAL ADVERSE CHANGE. Dealer agrees to promptly notify
Bank in writing of any existing or anticipated material adverse change in
Dealer's financial condition, properties, business operations or prospects, or
of any Event of Default or Default. Dealer further agrees to promptly notify
Bank in writing of any litigation or administrative proceeding initiated or
threatened against it, which in either case, if adversely determined, would
cause a material adverse change in its financial condition, properties, business
operations or prospects. Dealer covenants and agrees that it will promptly
furnish to Bank such other information regarding the operations, business
affairs and financial condition of Dealer as Bank may reasonably request from
time to time and permit Bank, its employees, attorneys and agents, to inspect
all of the books, records and properties of Dealer at any reasonable time.
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21. COMPLIANCE. Dealer agrees to comply with all federal, state and
local laws, regulations, ordinances or rules applicable to the existence,
ownership and operation of Dealer's business.
22. MAINTENANCE OF CURRENT OWNERSHIP. Dealer agrees to provide Bank
with one hundred (120) days prior written notice of any proposed change in
majority ownership of Dealer. It shall be a default hereunder if Dealer or a
controlling portion of its voting stock or a substantial portion of its assets
comes under the practical, beneficial or effective control of one or more
persons other than Donald C. Mealey by reason of merger, consolidation, sale or
purchase of stock or assets or otherwise (however, not including the death of
Donald C. Mealey).
23. CHANGE OF CURRENT OFFICERS. Dealer agrees to provide Bank with
written notice of any change in the officers or key management personnel of
Dealer within three (3) business days after the change occurs.
24. MAINTAIN NEW VEHICLE EQUITY. From the date hereof until the
Indebtedness is paid in full and Dealer has performed all of its other
obligations hereunder, Dealer covenants and agrees that it will not allow
Dealer's Vehicle Equity regarding new vehicles to be less than the following
amounts:
at closing through 12/31/96 $250,000.00
1/1/97 through 12/31/97 $400,000.00
1/1/98 and thereafter $600,000.00.
For purposes of the foregoing, the term "Vehicle Equity" shall mean, as of any
applicable date of determination the "first in, first out" book value of new
vehicle inventory, including Demonstrators (but specifically excluding any
vehicle used in the computation of Used Vehicle Equity, if applicable), adjusted
as follows:
(a) plus:
(1) C.I.T. from sales of new vehicle inventory,
and
(2) A.R.V. from sales of new vehicle inventory,
and
(3) any positive cash book balance of Dealer;
(b) less all of the following:
(1) the outstanding principal balance of the
indebtedness owed to Bank with regard to any
vehicle included in the computation of
Vehicle Equity, together with the
outstanding principal balance of the
indebtedness owed to Bank with regard to any
vehicle not included in the computation of
Vehicle Equity, but which remains owing to
Bank (and this is the net amount owing as
adjusted for any balance in the Excess
Payment Account, as the Excess Payment
Account is defined and used by Bank incident
to its accounting and recordkeeping with
regard to the Facility), and
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<PAGE>
(2) any negative cash book balance of Dealer,
and
(3) any third party liens or claims against or
affecting any of the assets included in the
computation of Vehicle Equity.
The following definitions shall be used for purposes of the above:
A.R.V. shall mean the book value of accounts receivable not over thirty
(30) days old from date of sale arising from sales of new or used vehicles
(unless older accounts receivable are otherwise agreed upon by Bank in writing),
and which otherwise is an Eligible Account.
C.I.T. shall mean contracts in transit not over fifteen (15) days old
from date of sale arising from sales of new or used vehicles, and which
otherwise is an Eligible Account.
ELIGIBLE ACCOUNT Shall mean an account that must meet the following as
of the date of the computation:
(a) Such account arose in the ordinary course of the business
of Debtor out of either (1) a bona fide sale of inventory by the Debtor, and in
such case such inventory has in fact been delivered to, and accepted and
retained by, the appropriate account debtor or the sale has otherwise been
consummated in accordance with such order, or (2) services performed by the
Debtor under an enforceable contract, and in such case such services have in
fact been performed for the appropriate account debtor in accordance with such
contract. Such accounts shall not include: (i) advances to or debts owed by
employees of any Debtor; (ii) installment debts and notes receivable incident to
the sale of inventory financed by any Debtor; (iii) receivables from
manufacturers or distributors of inventory to any Debtor; or (iv) finance
receivables.
(b) Such account represents a legally valid and enforceable
claim which is due and owing to the Debtor by such account debtor and for such
amount as is represented by the Debtor to Bank, such account is due and payable
not more than thirty (30) days from the delivery of the related inventory, or
the performance of the related services, giving rise to such account and not
more than thirty (30) days have passed since the invoice date corresponding to
such account.
(c) The unpaid balance of such account as represented by the
Debtor to Bank is not subject to any defense, counterclaim, set off, contra
account, credit, allowance or adjustment by the account debtor because of
returned, inferior or damaged inventory or services, or for any other reason,
except for customary discounts allowed by Debtor in the ordinary course of
business for prompt payment, and there is no agreement between Debtor, the
related account debtor and any other person for any rebate, discount, concession
or release of liability, in whole or in part.
(d) The transactions leading to the creation of such account
comply with all applicable local, state and federal laws and regulations.
(e) The Debtor has granted to Bank a perfected security
interest in such account (as an item of the Collateral) prior in right to all
other persons, and such account has not been sold, transferred or otherwise
assigned by the Debtor to any person, other than Bank.
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<PAGE>
(f) If such account is represented by any note, trade
acceptance, draft or other negotiable instrument or by any chattel paper, then
upon request of Bank, such instrument must be endorsed and delivered by the
Debtor to Bank on or prior to such account's inclusion.
(g) The Debtor has not received, with respect to such account,
any notice of any of the following events by or against such account debtor: the
death, dissolution, liquidation, termination of existence, insolvency, business
failure, appointment of a receiver for any part of the property of, assignment
for the benefit of creditors by, or the filing of a petition in bankruptcy or
the commencement of any proceeding under any bankruptcy or insolvency laws
against.
(h) The account debtor on such account is not:
(1) an Affiliate of any Debtor, except in the
ordinary course of business,
(2) the United States of America or any
department, agency, or instrumentality
thereof,
(3) a citizen or resident of any jurisdiction
other than one of the United States, except
in the ordinary course of business, or
(4) an account debtor whom Bank has, in the
exercise of such Bank's reasonable
discretion, determined to be (based on such
facts as Bank deems reasonably appropriate)
an ineligible account debtor and as to which
Bank has notified the Debtor.
25. SUBCHAPTER S DISALLOWANCE. If Dealer is an S Corporation for
purposes of Federal income taxation, Dealer shall cause any principals of Dealer
to repay to Dealer the financial impact of any S Corporation deductions or
benefits disallowed by the Internal Revenue Service.
26. CONDITIONS TO CLOSING. The obligations of Bank under this
Agreement, and the obligations of Bank to enter into the Facility, are subject
to the occurrence, prior to or simultaneously with either (i) the execution and
entering into of this Agreement or (ii) the entering into of the Facility, of
each of the following conditions, any or all of which may be waived in whole or
in part by Bank in writing.
(a) DOCUMENTS EXECUTED AND FILED. Dealer shall have executed
(or caused to be executed) and delivered to Bank and, as appropriate, there
shall have been filed or recorded with such filing or recording offices as Bank
shall deem appropriate, all documents determined by Bank to be necessary to
evidence the obligations of the Facility and of the Indebtedness, and the
security given incident to such matters, including without limitation the
Facility Documents.
(b) CERTIFIED RESOLUTIONS. If Dealer is a Legal Entity, Dealer
shall have furnished to Bank a copy of resolutions of the Board of Directors, or
Partners, or Members, or such other body as is applicable, of Dealer authorizing
the execution, delivery and
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<PAGE>
performance of this Agreement and of the transactions described in and
contemplated by this Agreement, which shall have been certified by the Secretary
or Assistant Secretary (or other appropriate individual) of Dealer as being
complete, accurate and in effect. The foregoing shall also apply to any Legal
Entity that is acting as a guarantor of any of the Indebtedness. The term "Legal
Entity" shall mean any corporation, limited liability company, limited
partnership, or other form of business that is required to register, or file
annual reports, or take other similar action, with the State Corporation
Commission (or equivalent governmental authority) in the state of its
organization.
(c) CERTIFICATE OF GOOD STANDING. Any Dealer that is a Legal
Entity shall have furnished to Bank a certificate of good standing with respect
to Dealer, which shall have been certified by the State Corporation Commission
(or equivalent governmental authority) of the state of its organization as of a
date within thirty (30) days of the date hereof. The foregoing shall also apply
to any Legal Entity that is acting as a guarantor of any of the Indebtedness.
(d) CERTIFICATE OF INCUMBENCY. If Dealer is a Legal Entity,
that Dealer shall have furnished to Bank a certificate of the Secretary or
Assistant Secretary (or other appropriate individual) of Dealer, certified
within thirty (30) days of the date hereof, as to the incumbency and signatures
of the officers (or other appropriate individuals) of Dealer signing this
Agreement, any notes or other evidences of indebtedness and any documents
contemplated or delivered under this Agreement. The foregoing shall also apply
to any Legal Entity that is acting as a guarantor of any of the Indebtedness.
(e) UCC LIEN SEARCH. Bank shall have received UCC record and
copy searches, evidencing the appropriate filing and recording of those UCC-1
Financing Statements that are part of the Security Documents, and disclosing no
notice of any liens or encumbrances filed against any of the Collateral other
than as may have been previously approved in writing by Bank.
(f) CASUALTY INSURANCE. Dealer shall have furnished to Bank,
in form, content and amounts and with companies satisfactory to Bank, casualty
insurance policies with loss payable clauses in favor of Bank relating to the
assets and properties (including, but not limited to, the Collateral) of Dealer.
(g) OPINION OF DEALER'S COUNSEL. Dealer shall have furnished
to Bank the favorable written opinion of legal counsel to Dealer, in form and
content satisfactory to legal counsel to Bank.
(h) APPROVAL OF BANK COUNSEL. All actions, proceedings,
instruments and documents required to carry out the transactions contemplated by
this Agreement or incidental thereto and all other related legal matters shall
have been satisfactory to and approved by legal counsel for Bank, and said
counsel shall have been furnished with such certified copies of actions and
proceedings and such other instruments and documents as they shall have
reasonably requested.
(i) FICTITIOUS NAME FILINGS. Dealer shall have properly filed
all fictitious name filings with the Florida Department of State for all
fictitious names and tradenames under which Dealer does business.
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<PAGE>
(j) BANK'S COSTS. Dealer shall be responsible for the payment
of all of Bank's costs incurred incident to this Agreement and the closing of
the transactions contemplated by this Agreement, including without limitation
the fees and costs of Bank's legal counsel.
27. DEALER'S REPRESENTATIONS AND WARRANTIES. Dealer represents and
warrants to Bank (on a continuing basis from the date hereof until the
Indebtedness has been paid in full and Dealer has performed all of its other
obligations hereunder) that:
(a) EXISTENCE AND POWER.
(1) Dealer is a limited partnership duly
organized, validly existing and in good standing under the laws of the state of
Florida;
(2) Dealer has the power and authority to own
its properties and assets and to carry out its business as now being
conducted and is qualified to do business and in good standing in every
jurisdiction wherein such qualification is necessary; and
(3) Dealer has the power and authority to
execute, deliver and perform this Agreement, to borrow money in accordance with
its terms, to execute, deliver and perform the Notes and other documents
contemplated hereby, to grant to Bank liens and security interests in the
Collateral as hereby contemplated and to do any and all other things required of
it hereunder.
(b) AUTHORIZATION AND APPROVALS. The execution, delivery and
performance of this Agreement, the borrowings hereunder, the execution, delivery
and performance of the Facility Documents (a) have been duly authorized by all
requisite corporate action of Dealer, (b) except for UCC filings, do not require
registration with or consent or approval of, or other action by, any federal,
state or other governmental authority or regulatory body, or, if such
registration, consent or approval is required, the same has been obtained and
disclosed in writing to Bank, (c) will not violate any provision of law, any
order of any court or other agency of government, the partnership agreement of
Dealer, any provision of any indenture, note, agreement or other instrument to
which Dealer is a party, or by which it or any of its properties or assets are
bound, (d) will not be in conflict with, result in a breach of or constitute
(with or without notice or passage of time) a default under any such indenture,
note, agreement or other instrument, and (e) will not result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of Dealer other than in favor of Bank and as
contemplated hereby.
(c) VALID AND BINDING AGREEMENT. This Agreement and each of
the other Facility Documents will be, when delivered, valid and binding
obligations of Dealer.
(d) ACTIONS, SUITS OR PROCEEDINGS. There are no actions, suits
or proceedings, at law or in equity, and no proceedings before any arbitrator or
by or before any governmental commission, board, bureau, or other administrative
agency, pending, or, to the best knowledge of Dealer, threatened against or
affecting Dealer or any properties or rights of Dealer, which, if adversely
determined, could materially impair the right of Dealer to carry on business
substantially as now conducted or could have a material adverse effect upon the
financial condition of Dealer.
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(e) NO LIENS, PLEDGES, MORTGAGES OR SECURITY INTERESTS. Except
for such liens that are clearly disclosed on the financial statements or
otherwise have been approved in writing by Bank, none of Dealer's assets and
properties, including without limit the Collateral, are subject to any mortgage,
pledge, lien, security interest or other encumbrance of any kind or character,
except for such liens that are disclosed on the financial statements or in
filings with the Florida Department of State.
(f) ACCOUNTING PRINCIPLES. All non-consolidated, consolidated
and consolidating balance sheets, earnings statements and other financial data
furnished to Bank for the purposes of, or in connection with, this Agreement and
the transactions contemplated by this Agreement, have been prepared in
accordance with GAAP, and do or will fairly present the financial condition of
Dealer as of the dates, and the results of their operations for the periods, for
which the same are furnished to Bank. Without limiting the generality of the
foregoing, all financial statements have been prepared in accordance with GAAP
(except as disclosed therein) and fairly present the financial condition of
Dealer as of the dates, and the results of its operations for the fiscal
periods, for which the same are furnished to Bank. Dealer has no material
contingent obligations, liabilities for taxes, long-term leases or unusual
forward or long-term commitments not disclosed by, or reserved against in, the
financial statements.
(g) FINANCIAL CONDITION. Dealer is solvent, able to pay its
debts as they mature, has capital sufficient to carry on its business and has
assets the fair market value of which exceed its liabilities, and Dealer will
not be rendered insolvent, undercapitalized or unable to pay maturing debts by
the execution or performance of this Agreement, the Guaranty or the other
documents contemplated hereby. There has been no material adverse change in the
business, properties or condition (financial or otherwise) of Dealer since the
date of the latest of any financial statements submitted to Bank.
(h) TAXES. Dealer has filed by the due date therefor (or has
had properly and timely extended the due date for any such filing) all federal,
state and local tax returns and other reports it is required by law to file, has
paid or caused to be paid all taxes, assessments and other governmental charges
that are shown to be due and payable under such returns, and has made adequate
provision for the payment of such taxes, assessments or other governmental
charges which have accrued but are not yet payable. Dealer has no knowledge of
any deficiency or assessment in connection with any taxes, assessments or other
governmental charges not adequately disclosed in the financial statements
provided to Bank.
(i) COMPLIANCE WITH LAWS. Dealer has complied with all
applicable laws, to the extent that failure to comply would materially interfere
with the conduct of the business of Dealer.
(j) INDEBTEDNESS. Except as clearly reflected in financial
statements provided to Bank prior to the entering into of this Agreement, Dealer
does not have any indebtedness for money borrowed or any direct or indirect
obligations under any leases (whether or not required to be capitalized under
GAAP) or any agreements of guarantee or surety except for the endorsement of
negotiable instruments by Dealer in the ordinary course of business for deposit
or collection, except as disclosed to Bank in writing prior to signing this
Agreement.
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(k) MISREPRESENTATION. No warranty or representation by Dealer
contained herein or in any certificate or other document furnished by Dealer
pursuant hereto contains any untrue statement of material fact or omits to state
a material fact necessary to make such warranty or representation not misleading
in light of the circumstances under which it was made. There is no fact which
Dealer has not disclosed to Bank in writing which materially and adversely
affects nor, so far as Dealer can now foresee, is likely to prove to affect
materially and adversely the business, operations, properties, prospects,
profits or condition (financial or otherwise) of Dealer or ability of Dealer to
perform this Agreement.
28. DEFAULT; REMEDIES.
(a) EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute an Event of Default and Default under this
Agreement and under the Facility:
(1) FAILURE TO PAY MONIES DUE. If Dealer
shall fail to pay, when due, any principal or interest on the Note or any other
amount payable by Dealer under this Agreement, the Note, incident to any of the
Indebtedness, or otherwise due under any of the Facility Documents.
(2) MISREPRESENTATION. If any warranty or
representation of Dealer in connection with or contained in this Agreement, or
if any financial data or other information now or hereafter furnished to Bank by
or on behalf of Dealer, shall prove to be false or misleading in any material
respect.
(3) NONCOMPLIANCE. If Dealer shall fail to
perform in the time and manner required any of its obligations and covenants
under, or shall fail to comply with any of the provisions of, this Agreement or
any other agreement with Bank to which it may be a party or of any of the
Facility Documents.
(4) OTHER DEFAULTS. If Dealer shall default
in the payment when due of any of its indebtedness (other than to Bank) or in
the observance or performance of any term, covenant or condition in any
agreement or instrument evidencing, securing or relating to such indebtedness,
and such default be continued for a period sufficient to permit acceleration of
the indebtedness, irrespective of whether any such default shall be forgiven or
waived or there has been acceleration by the holder thereof.
(5) BUSINESS SUSPENSION, BANKRUPTCY, ETC. If
Dealer shall voluntarily suspend transaction of its business; or if Dealer shall
not pay its debts as they mature or shall make a general assignment for the
benefit of creditors; or proceedings in bankruptcy, or for reorganization or
liquidation of Dealer under Bankruptcy Code or under any other state or federal
law for the relief of debtors shall be commenced by Dealer, or shall be
commenced against Dealer, if not voluntarily commenced, shall not be discharged
within thirty (30) days of commencement; or a receiver, trustee or custodian
shall be appointed for Dealer or for any substantial portion of their respective
properties or assets.
(6) CHANGE OF MANAGEMENT OR OWNERSHIP. If
Dealer or a controlling interest in Dealer or a substantial portion of its
assets comes under the practical, beneficial or effective control of one or more
persons other than Donald C. Mealey, whether by reason of
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merger, consolidation, sale or purchase of stock or assets or otherwise
(however, not including the death of Donald C. Mealey).
(7) INSOLVENCY. If Dealer becomes insolvent.
(8) DISSOLUTION. If Dealer is the subject of
a dissolution, merger or consolidation with another Legal Entity.
(9) TERMINATION OF INSTRUMENTS. If there is
any termination, notice of termination, or breach of any guaranty, pledge,
collateral assignment or subordination agreement relating to all or any part of
the Indebtedness.
(b) INTEREST RATE UPON DEFAULT. Upon the occurrence
of an Event of Default, and until such Event of Default is cured, Bank shall be
permitted to establish and charge a Default Rate of interest on the Facility.
(c) REMEDIES UPON DEFAULT.
(1) NON-MONETARY DEFAULT. Upon the
occurrence of an Event of Default or Default described herein which does not
involve the failure to pay a monetary amount when due (be it principal, interest
or otherwise) and which is not cured by Dealer nor waived by Bank within thirty
(30) days after the earlier of the date of notice to Dealer by Bank of such
Event of Default or Default or the date Bank is notified pursuant to Dealer's
obligations under this Agreement, of such Event of Default or Default, then all
Indebtedness shall be due and payable in full immediately at the option of Bank
without presentation, demand, protest, notice of dishonor or other notice of any
kind, all of which are hereby expressly waived, except as may be specifically
provided for in this Agreement. Further, if such non-monetary default can not be
cured within said thirty (30) day period, then Dealer shall continue to pursue
the cure of such default with due diligence and provide Bank every ten (10) days
with a written report setting forth the actions being taken by Dealer to cure
such non-monetary default and Dealer's progress in achieving such cure.
(2) MONETARY DEFAULT.
(A) FAILURE TO REMIT UPON DISPOSITION OF
VEHICLE. See the Section hereof entitled REQUIRED PAYMENTS BY DEALER. That
section sets forth certain time periods within which Dealer is required to remit
payments to Bank upon the disposition of a Vehicle. In the event of a default by
Dealer under these provisions, Bank shall not be required to provide any notice
or curative period, and in such event all Indebtedness shall be due and payable
in full immediately at the option of Bank without presentation, demand, protest,
notice of dishonor or other notice of any kind, all of which are hereby
expressly waived. However, Bank agrees that if a floorplan audit reveals that a
Vehicle was sold and not timely paid off solely due to a clerical or
administrative mistake, then such shall not be a default hereunder if Dealer
cures the mistake by the following business day.
(B) OTHER THAN FAILURE TO REMIT UPON
DISPOSITION OF VEHICLE. Upon the occurrence of an Event of Default which does
involve the failure of Dealer to pay a monetary amount when due to Bank (other
than as set forth in subparagraph (A) immediately above), all Indebtedness shall
be due and payable in full immediately at the option of Bank
- --------------------------------------------------------------------------------
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<PAGE>
without presentation, demand, protest, notice of dishonor or other notice of any
kind, all of which are hereby expressly waived, except as may be specifically
provided for in this Agreement. Notwithstanding the foregoing, Dealer shall be
given five (5) business days in which to cure any such monetary default upon
receipt of notice by Dealer. However, once Bank has given three (3) such notices
in any three hundred sixty-five (365) day period, then Bank shall no longer be
required to provide written notice and a five (5) business day curative period
for monetary defaults.
(3) REMEDIES UPON UNCURED DEFAULT AND
ACCELERATION. In the event of the acceleration of the Indebtedness as described
in Subsections (a) and (b) immediately above, then unless all of the
Indebtedness is then immediately fully paid, Bank shall have and may exercise
any one or more of the rights and remedies for which provision is made for a
secured party under the UCC, under the Security Agreements, or under any other
document contemplated hereby or for which provision is provided by law or in
equity, including, without limitation, the right to take possession and sell,
lease or otherwise dispose of any or all of the Collateral and to set off
against the Indebtedness any amount owing by Bank to Dealer and/or any property
of Dealer in possession of Bank. Dealer agrees, upon request of Bank, to
assemble the Collateral and make it available to Bank at any place designated by
Bank which is reasonably convenient to Bank and Dealer. Additionally, Dealer
shall be responsible for and shall repay on demand all of Bank's collection
expenses and legal expenses incurred as a result of the default. Further, in
such event, Bank may take immediate possession of said Collateral, including any
attachments, keys, starting and entry devices and the like, without demand or
notwithstanding anything contained in this Section to the contrary, without
further notice and without legal process.
(4) APPLICATION OF PROCEEDS AFTER DEFAULT.
All of the Indebtedness shall constitute one loan secured by Bank's security
interest in the Collateral and by all other security interests, mortgages,
liens, claims, and encumbrances now and from time to time hereafter granted from
Dealer to Bank. Upon the occurrence of an Event of Default which is not cured
within the cure period, if any, provided herein Bank may in its sole discretion
apply the Collateral to any portion of the Indebtedness. The proceeds of any
sale or other disposition of the Collateral authorized by this Agreement shall
be applied by Bank, first upon all expenses authorized by the UCC or otherwise
in connection with the sale and all reasonable attorneys' fees and legal
expenses incurred by Bank; the balance of the proceeds of such sale or other
disposition shall be applied in the payment of the Indebtedness, first to all
costs and expenses (including attorneys fees and costs as provided for herein)
regarding the administration of the Facility and the Collateral and the
enforcement of Banks' rights and remedies hereunder, then to interest, then to
principal, then to other Indebtedness and the surplus, if any, shall be paid
over to Dealer or to such other person or persons as may be entitled thereto
under applicable law. Dealer shall remain liable for any deficiency, which
Dealer shall pay to Bank immediately upon demand.
(5) CUMULATIVE REMEDIES. The remedies
provided for herein are cumulative to the remedies for collection of the
Indebtedness as provided by law, in equity or by any mortgage, trust deed,
security deed, security agreement or other document contemplated hereby. Nothing
herein contained is intended, nor shall it be construed, to preclude Bank from
pursuing any other remedy for the recovery of any other sum to which Bank may be
or become entitled for the breach of this Agreement by Dealer.
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<PAGE>
29. ABSOLUTE DISCRETION. Any consent given, determination or decision
made, or action taken by Bank under this Agreement shall be given, made or taken
in Bank's sole and absolute discretion, unless expressly provided otherwise in
this Agreement or otherwise required by law. The foregoing includes, without
limitation, the demand nature of the Note.
30. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties, their representatives, heirs, devisees, successors and
assigns. Notwithstanding the above, Dealer has no right of assignment absent
prior written consent of Bank.
31. CHOICE OF LAW. This Agreement shall be governed by the laws of the
State of Florida. Provided, further, with regard to the enforcement of security
interests encumbering any portion of the Collateral located outside of the State
of Florida, then the laws of the state where such portion of the Collateral is
located shall be applicable for the purpose of enforcement of the security
interests.
32. NO WAIVER. No failure to exercise, and no delay in exercising, on
the part of Bank, any right under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other
further exercise thereof or the exercise of any other right. The rights of Bank
under this Agreement, under the Note and under the Security Documents, shall be
in addition to all other rights provided by law. No modification or waiver of
any provision of this Agreement, the Note or any Security Documents, nor consent
to departure from them, shall be effective unless in writing signed by the
parties and no such consent or waiver shall extend beyond the particular case
and purpose involved. No notice or demand given in any case shall constitute a
waiver of the right to take other action in the same, similar or other instances
without such notice or demand.
33. SAVINGS CLAUSE. It is the intention of the parties that this
Agreement be construed and interpreted in such a manner so as to be valid under
applicable law. Any provision of this Agreement prohibited by law shall be
ineffective to the extent of such prohibition without invalidating the remaining
provisions of this Agreement.
34. ENTIRE AGREEMENT. Except as otherwise provided or referred to in
this Agreement, there are no other agreements or understandings, either oral or
in writing, between the parties affecting this Agreement or relating to any of
the subject matters covered by this Agreement. This Agreement cancels and
supersedes all previous agreements between the parties that relate to any
matters covered in this Agreement provided, however, that no debts or
obligations previously incurred by either party shall be affected. This
Agreement may be amended only in writing and signed by both parties. There are
no promises or agreements, oral or otherwise, inducing entry into this
Agreement, except as expressly set forth herein.
35. TRANSACTIONAL TAXES. In the event that any of the transactions
herein contemplated shall at any time be subject to any form of tax such as a
documentary stamp tax or intangible tax, incident to the transactions
contemplated herein, together with any penalties and interest thereon, Dealer
agrees to pay such tax, penalties and interest when due or to immediately
reimburse Bank in the event that Bank is required to pay such tax. This covenant
shall survive the repayment in full of any amounts owing hereunder to Bank.
36. NOTICES. All notices required under this Agreement shall be in
writing and deemed to have been given when delivered by hand or the date of
delivery by Federal Express
- --------------------------------------------------------------------------------
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<PAGE>
(or other nationally recognized delivery service). Notices shall be addressed to
the parties at their respective addresses set forth above or at such other
address as a party may notify the other of in accordance with this Section. If
any party is a legal entity (such as a corporation or limited partnership or
limited liability company) organized, or qualified to do business, in the
state(s) of their organization and in which they are conducting business
operations, then a permissible address for any such party shall be the address
of that party or its registered agent as reflected on the records of the
Department of State (or other similar governmental authority) for the state of
their organization or the state in which they are conducting business operations
and registered to do business.
37. ACCEPTANCE. This Agreement is not effective until accepted by Bank
at its main office in Detroit, Michigan.
38. FURTHER ACTS AND ASSURANCES. Dealer will do all acts and execute
all instruments of further assurance as shall be reasonably required by Bank to
do or effectuate for the purpose of fully carrying out and effecting this
Agreement and its intent, and shall furnish all documents that Bank shall
reasonably request. When requested, Dealer also agrees to do all things
necessary to perfect Bank's security for the direct assignment of fleet sale
proceeds and factory buyback agreements.
39. ACCOUNT MAINTENANCE CHARGE. Upon execution of this Agreement, and
annually thereafter, Dealer shall pay Bank annually in advance an account
maintenance charge in an amount equal to ZERO PERCENT (0.0%) of the amount of
the Maximum Aggregate Advance. Such fee shall be non-refundable and earned upon
receipt. It is expressly understood and agreed that the assessment and payment
of such annual fee shall not in any way alter or affect the right of Bank to
demand payment of all advances at any time, the right of Bank to discontinue or
modify advances at any time, or Dealer's right to repay its obligations
hereunder at any time, all as more particularly set forth herein.
40. ATTORNEYS' FEES. Dealer agrees that it will pay all costs and
expenses of Bank, including without limit reasonable attorneys fees and all
expenses even if not taxable court costs (whether in-house or outside counsel is
used and whether such costs and expenses are incurred in formal or informal
collection actions, arbitration, post-judgment proceedings, federal bankruptcy
proceedings, probate proceedings, on appeal or otherwise), in connection with
(i) seeking to collect any amounts owing under this Agreement, (ii) defending
Bank's security interests and liens, (iii) the enforcement of Bank's rights and
remedies under this Agreement, or (iv) the preparation or making of any
amendments, modifications, waivers or consents with respect to this Agreement or
the other documents contemplated hereby. Attorneys' fees include paralegal fees,
expert witness fees, investigative fee, administrative costs, and all other
reasonable charges billed by the attorney to the prevailing party.
41. INSURANCE. Dealer will insure the Collateral against loss, damage
or destruction due to fire or physical damage and shall procure and maintain
liability insurance against all liability for bodily injury or damage to
property in such form and amount as Bank may reasonably require, including, but
not limited to, naming Bank as loss payee. Copies of such policies will be
provided to Bank upon request. Dealer grants to Bank a security interest in any
proceeds of insurance affecting the Collateral. If Dealer fails to maintain
satisfactory insurance as herein provided, Bank shall have the option to do so,
and Dealer agrees to repay Bank upon demand, with interest at the Default Rate,
all amounts so expended by Bank.
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<PAGE>
42. TAXES. From the date hereof until all of the Indebtedness is paid
in full and Dealer has performed all of its obligations under all documents
evidencing or securing the Indebtedness, Dealer covenants and agrees that it
will pay promptly and within the time that they can be paid without late charge,
penalty or interest all taxes, assessments and similar imposts and charges of
every kind and nature lawfully levied, assessed or imposed upon Dealer or its
property, except to the extent being contested in good faith and, if requested
by Bank, bonded in an amount and manner satisfactory to Bank. If Dealer shall
fail to pay such taxes and assessments within the time they can be paid without
penalty, late charge or interest Bank shall have the option to do so, and Dealer
agrees to repay Bank upon demand, with interest at the Default Rate, all amounts
so expended by Bank.
43. SURVIVAL OF WARRANTIES. All of Dealer's covenants, agreements,
representations and warranties made in connection with this Agreement and any
document contemplated hereby shall survive the borrowing and the delivery of the
Notes hereunder and shall be deemed to have been relied upon by Bank,
notwithstanding any investigation heretofore or hereafter made by Bank. All
statements contained in any certificate or other document delivered to Bank at
any time by or on behalf of Dealer pursuant hereto or in connection with the
transactions contemplated hereby shall constitute representations and warranties
by Dealer in connection with this Agreement.
44. PAYMENTS ON SATURDAYS, ETC. Whenever any payment to be made
hereunder shall be stated to be due on a Saturday, Sunday or any other day which
is not a business day, such payment may be made on the next succeeding business
day, and such extension, if any, shall be included in computing interest in
connection with such payment.
45. BUSINESS DAYS. The term "business days" shall not include any
Saturday, Sunday, or any banking holiday whereby nationally chartered banks are
closed for business.
46. BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors and
assigns; provided, however, that Dealer may not assign or transfer its rights or
obligations hereunder without the prior written consent of Bank.
47. MAINTENANCE OF RECORDS. Dealer will keep all of its records
concerning its business operations and accounting at its principal place of
business. Dealer will give Bank prompt written notice of any change in its
principal place of business, or in the location of its records.
48. INTERPRETATION. When the context in which the words are used in
this Agreement indicates that such is the intent, words in the singular shall
include the plural and vice versa. The table of contents, article or section
titles, captions and abbreviations contained in this Agreement are for
convenience only and shall not be deemed a part of this Agreement.
49. ARMS LENGTH; AMBIGUITIES. The parties acknowledge that all terms of
this Agreement are negotiated at arms length, and that each party, being
represented by counsel, is acting to protect its own interest. The terms and
conditions of this Agreement are the product of mutual draftsmanship by both
parties, each being represented by counsel, and any ambiguities in this
Agreement or any documentation prepared pursuant to or in connection
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<PAGE>
with this Agreement shall not be construed against any of the parties because of
draftsmanship.
50. TANGIBLE NET WORTH COVENANT. In addition to the financial covenants
contained in this Agreement regarding a minimum amount of New Vehicle Equity as
set forth in the section hereof entitled MAINTAIN NEW VEHICLE EQUITY, it is
understood and agreed that Dealer shall maintain Tangible Net Worth in at least
the following minimum amounts:
TIME PERIOD AMOUNT
---------------------------------------------------
through 12/31/96 $1,500,000.00
1/1/97 - 12/31/97 $1,800,000.00
1/1/98 - 12/31/98 $2,200,000.00
1/1/99 and thereafter $2,500,000.00
For purposes of the foregoing, the term Tangible Net Worth shall mean, as of any
applicable date of determination, the excess of (i) the net book value of all
assets (other than patents, patent rights, trademarks, trade names, franchises,
copyrights, licenses, goodwill, receivables from affiliated entities which
include at a minimum the foregoing corporations, and similar intangible assets)
after all appropriate deductions in accordance with GAAP (including, without
limitation, reserves for doubtful receivables, obsolescence, depreciation and
amortization) plus sixty-six percent (66%) of LIFO reserves, over (ii) all debt
of such person. For purposes of the foregoing, the term "debt" shall mean, as of
any applicable date of determination, all items of indebtedness, obligation or
liability, whether matured or unmatured, liquidated or unliquidated, direct,
absolute, joint or several, that should be classified as liabilities in
accordance with GAAP, less any such debt that may be subordinated to the Bank
pursuant to a written subordination agreement.
51. JURY WAIVER. EACH PARTY ACKNOWLEDGES THAT THE RIGHT TO TRIAL BY
JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY
RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT.
[SIGNATURES ON FOLLOWING PAGE]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
FIRST TEAM FORD, LTD., a Florida
limited partnership, by its sole
general partner:
FIRST TEAM MANAGEMENT, INC., a Florida
corporation
By: __________________________________________
John Lumpkin, as its Vice President
(CORPORATE SEAL)
Date executed: ______________, 1996
WITNESSES TO ABOVE SIGNATURE:
- ---------------------------
- ---------------------------
(PRINT NAME OF WITNESS ABOVE)
- ---------------------------
- ---------------------------
(PRINT NAME OF WITNESS ABOVE)
COMERICA BANK, a Michigan banking corporation
By: _______________________________________
Joseph A. Moran
As its Senior Vice President
(CORPORATE SEAL)
Date Accepted in Detroit, Michigan and executed:
___________, 1996
WITNESSES TO ABOVE SIGNATURE:
- ---------------------------
- ---------------------------
(PRINT NAME OF WITNESS ABOVE)
- ---------------------------
- ---------------------------
(PRINT NAME OF WITNESS ABOVE)
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<PAGE>
MOTOR VEHICLE
FLOOR PLANNING AGREEMENT AND SECURITY AGREEMENT
Dealer: FIRST TEAM FORD, LTD. dba Don Mealey's Seminole Ford
Bank: Comerica Bank
Amount: $10,000,000.00
Date: April 1, 1996
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<TABLE>
<CAPTION>
<S> <C> <C>
1. Recitals..................................................................... 1
2. Definitions.................................................................. 1
(a) Collateral.......................................................... 1
(b) Demonstrators....................................................... 1
(c) Default Rate........................................................ 1
(d) Facility............................................................ 2
(e) Facility Documents.................................................. 2
(f) GAAP................................................................ 2
(g) (intentionally deleted)............................................. 2
(h) (intentionally deleted)............................................. 2
(i) Indebtedness........................................................ 2
(j) Legal Rate.......................................................... 2
3. Purpose...................................................................... 2
4. (intentionally deleted)...................................................... 2
5. Maximum Aggregate Advance.................................................... 2
6. Cancellation of Credit Facility; Demand...................................... 3
7. Promissory Note and Security Documents....................................... 3
8. (intentionally deleted)...................................................... 4
9. Assignment by Dealer of Sales Proceeds....................................... 4
10. Advances..................................................................... 4
11. Required Payments By Dealer.................................................. 5
12. Inspection of Dealer by Bank................................................. 6
13. Grant of Security Interest................................................... 6
14. Use and Protection of Collateral............................................. 7
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<PAGE>
15. Demonstrators................................................................ 7
16. Prepayment................................................................... 8
17. Dealer Financial Information................................................. 10
(a) Bank's Reliance..................................................... 10
(b) Annual Audited Financial Statements................................. 10
(c) Bank's Use of Information........................................... 10
(d) Tax Returns......................................................... 11
(e) Monthly Reporting - Required........................................ 11
(1) Financial Reports.......................................... 11
(2) Statement Submission Certificate, Including No Default
Certificate................................................ 11
(3) Calculation of New Vehicle Equity.......................... 12
18. (intentionally deleted)...................................................... 12
19. Franchises, Licenses and Permits............................................. 12
20. Notice of Material Adverse Change............................................ 12
21. Compliance................................................................... 13
22. Maintenance of Current Ownership............................................. 13
23. Change of Current Officers................................................... 13
24. Maintain New Vehicle Equity.................................................. 13
25. Subchapter S Disallowance.................................................... 15
26. Conditions to Closing........................................................ 15
(a) Documents Executed and Filed........................................ 15
(b) Certified Resolutions............................................... 15
(c) Certificate of Good Standing........................................ 16
(d) Certificate of Incumbency........................................... 16
(e) UCC Lien Search..................................................... 16
(f) Casualty Insurance.................................................. 16
(g) Opinion of Dealer's Counsel......................................... 16
(h) Approval of Bank Counsel............................................ 16
(i) Fictitious Name Filings............................................. 16
(j) Bank's Costs........................................................ 17
27. Dealer's Representations and Warranties...................................... 17
(a) Existence and Power................................................. 17
(b) Authorization and Approvals......................................... 17
(c) Valid and Binding Agreement......................................... 17
(d) Actions, Suits or Proceedings....................................... 17
(e) No Liens, Pledges, Mortgages or Security Interests.................. 18
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<PAGE>
(f) Accounting Principles............................................... 18
(g) Financial Condition................................................. 18
(h) Taxes............................................................... 18
(i) Compliance with Laws................................................ 18
(j) Indebtedness........................................................ 18
(k) Misrepresentation................................................... 19
28. Default; Remedies............................................................ 19
(a) Events of Default................................................... 19
(1) Failure to Pay Monies Due.................................. 19
(2) Misrepresentation.......................................... 19
(3) Noncompliance.............................................. 19
(4) Other Defaults............................................. 19
(5) Business Suspension, Bankruptcy, Etc....................... 19
(6) Change of Management or Ownership.......................... 19
(7) Insolvency................................................. 20
(8) Dissolution................................................ 20
(9) Termination of Instruments................................. 20
(b) Interest Rate Upon Default.......................................... 20
(c) Remedies Upon Default............................................... 20
(1) Non-Monetary Default....................................... 20
(2) Monetary Default........................................... 20
(3) Remedies Upon Uncured Default and Acceleration............. 21
(4) Application of Proceeds After Default...................... 21
(5) Cumulative Remedies........................................ 21
29. Absolute Discretion.......................................................... 22
30. Successors and Assigns....................................................... 22
31. Choice of Law................................................................ 22
32. No Waiver.................................................................... 22
33. Savings Clause............................................................... 22
34. Entire Agreement............................................................. 22
35. Transactional Taxes.......................................................... 22
36. Notices...................................................................... 22
37. Acceptance................................................................... 23
38. Further Acts and Assurances.................................................. 23
39. Account Maintenance Charge................................................... 23
40. Attorneys' Fees.............................................................. 23
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41. Insurance.................................................................... 23
42. Taxes........................................................................ 24
43. Survival of Warranties....................................................... 24
44. Payments on Saturdays, etc................................................... 24
45. Business Days................................................................ 24
46. Binding Effect............................................................... 24
47. Maintenance of Records....................................................... 24
48. Interpretation............................................................... 24
49. Arms Length; Ambiguities..................................................... 24
50. Tangible Net Worth Covenant.................................................. 25
51. JURY WAIVER.................................................................. 25
</TABLE>
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EXHIBIT 10.8.2
MASTER REVOLVING NOTE
Variable Rate-Demand (Business and Commercial Loans Only)
(hereafter the "Note")
<TABLE>
<CAPTION>
<S> <C> <C> <C>
==========================================================================================================
OBLIGOR # NOTE # NOTE DATE TAX IDENTIFICATION NO.
___________,
1996
- ----------------------------------------------------------------------------------------------------------
AMOUNT EXECUTED IN: MATURITY DATE
$10,000,000.00 ON DEMAND (See Floorplan Agreement)
==========================================================================================================
</TABLE>
Reference is made to that certain "Motor Vehicle Floor Planning
Agreement and Security Agreement" executed contemporaneously with this
Note by and between Comerica Bank and Maker (as defined in this Note)
(the "Floorplan Agreement"). The Floorplan Agreement are hereby
incorporated by this reference into and made a part of this Note. In
the event of a conflict between the Floorplan Agreement and this Note,
then the Floorplan Agreement, as the case may be, shall prevail.
Specifically, notwithstanding various provisions of this Note that
state the indebtedness evidenced by this Note is payable upon demand,
the provisions of the Floorplan Agreement prevail.
For Value Received, the undersigned, FIRST TEAM FORD, LTD., a Florida
limited partnership ("Dealer"), whose principal place of business is 3786
Highway 17-92 South, Sanford, Florida 32771 ("Maker"), promise(s) to pay ON
DEMAND to the order of Comerica Bank ("Bank"), at any office of the Bank in the
State of Michigan, TEN MILLION DOLLARS (U.S.) ($10,000,000.00) (or that portion
of it advanced by the Bank and not repaid as later provided) with interest until
demand or an Event of Default, as later defined, at a per annum rate equal to
the Quoted Rate (as that term is defined herein), and after that at a rate equal
to the Default Rate (as that term is defined in the Floorplan Agreement). All
references herein to interest shall mean interest calculated at the Quoted Rate,
unless specifically noted otherwise. Interest rate changes will be effective for
interest computation purposes as and when the Quoted Rate changes (which, if
applicable, will be as and when the Bank's prime rate changes). Interest shall
be calculated on the basis of a 360-day year for the actual number of days the
principal is outstanding. Unless sooner demanded, accrued interest on this Note
shall be payable on the 15th day of each month commencing the first calendar
month after the date of the first advance of funds by Bank that are evidenced by
this Note. If the frequency of interest payments is not otherwise specified,
accrued interest on this Note shall be payable monthly on the first day of each
month, unless sooner demanded. If any payment of principal or interest under
this Note shall be payable on a day other than a day on which the Bank is open
for business, this payment shall be extended to the next succeeding business day
and interest shall be payable at the rate specified in this Note during this
extension. A late payment charge equal to 5% of each late payment of interest
may be charged on any payment not received by the Bank within 10 calendar days
after the payment due date, but acceptance of payment of this charge shall not
waive any Default under this Note. A late payment charge, as described and set
forth in the Floorplan Agreement, may be charged by Bank incident to any late
payment of principal.
- --------------------------------------------------------------------------------
Page 1 Initialed: _______
<PAGE>
The term "Quoted Rate" shall mean a per annum rate of interest
established from time to time pursuant to the following procedures:
(1) first, Bank shall notify Maker from time to time of the
then available Quoted Rate (and any such available Quoted Rate shall be
available for a period of at least thirty (30) days) (together with any terms
then associated with the Quoted Rate - such as by way of example only, the
Quoted Rate may be available for a specific amount of principal and for a
specific period of time, e.g., $1,000,000.00 for thirty days);
(2) second, if Maker desires to avail itself of the then
quoted rate, Maker shall notify Bank solely by telephonic communication;
(3) third, Bank shall then confirm the Quoted Rate by written
notice to Maker; and
(4) fourth, the Maker's failure to object to such written
notice within two (2) business days after Bank sends the written notice shall
constitute Maker's acceptance of the Quoted Rate (and any associated terms and
conditions) set forth in said written notice; and
(5) the Quoted Rate shall be no higher a rate than the sum of:
(i) the then thirty (30) day LIBOR rate (as announced from time to time) plus
(ii) two hundred thirty (230) basis points.
In the event there is no such established Quoted Rate (and any such rate may be
referred to herein as an "Established Rate"), then the Quoted Rate shall be a
per annum rate that is the sum of: (i) the Bank's prime rate from time to time
in effect, plus (ii) zero percent (0.0%). The Bank's "prime rate" is that annual
rate of interest so designated by the Bank and which is changed by the Bank from
time to time. Further, in the event there is in effect an Established Rate,
Maker understands and agrees that such Established Rate shall be a fixed rate of
interest and shall be applicable notwithstanding there may be a subsequent
reduction in Bank's prime rate during the time period covered by the Established
Rate, which may result in the Established Rate being greater than the variable
rate of interest otherwise charged under this Note.
Maker agrees that if the available Quoted Rate (which would become the
Established Rate) is twenty-five (25) or more basis points below the variable
rate of interest otherwise charged under this Note as of the date on which Bank
announces the available Quoted Rate, then the Established Rate under this Note
shall become said available Quoted Rate without notice to Maker and without the
need for any instruction or authorization from Maker.
The principal amount payable under this Note shall be the sum of all
advances made by the Bank to or at the request of the Maker, less principal
payments actually received in cash by the Bank. The books and records of the
Bank shall be the best evidence of the principal amount and the unpaid interest
amount owing at any time under this Note and shall be presumed correct. No
interest shall accrue under this Note until the date of the first advance made
by the Bank; after that interest on all advances shall accrue and be computed
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<PAGE>
on the principal balance outstanding from time to time under this Note until the
same is paid in full.
This Note and any other indebtedness and liabilities of any kind of the
Maker (or any of them) to the Bank, and any and all modifications, renewals or
extensions of it, whether joint or several, contingent or absolute, now existing
or later arising, and however evidenced (collectively "Indebtedness") are
secured by and the Bank is granted a security interest in all items deposited in
any account of any of the Maker with the Bank and by all proceeds of these items
(cash or otherwise), all account balances of any of the Maker from time to time
with the Bank, by all property of any of the Maker from time to time in the
possession of the Bank and by any other collateral, rights and properties
described in each and every mortgage, security agreement, pledge, assignment and
other security or collateral agreement which has been, or will at any time(s)
later be, executed by any (or all) of the Maker to or for the benefit of the
Bank (collectively "Collateral"). The term "Collateral" is defined with more
particularity in the Floorplan Agreement.
If the Maker (or any of them) or any guarantor under a guaranty of all
or part of the Indebtedness ("guarantor") (a) fail(s) to pay any of the
Indebtedness when due, by maturity, acceleration or otherwise, or fail(s) to pay
any Indebtedness owing on a demand basis upon demand; or (b) there is a default
or event of default as defined in the Floorplan Agreement, then the Bank, upon
the occurrence of any of these events (each a "Default" or "Event of Default"),
may at its option, but in all events subject to the notice and right to cure
provisions provided for in the Floorplan Agreement (which notice and right to
cure provisions are incorporated into and made a part hereof), declare any or
all of the Indebtedness to be immediately due and payable (notwithstanding any
provisions contained in the evidence of it to the contrary), sell or liquidate
all or any portion of the Collateral, set off against the Indebtedness any
amounts owing by the Bank to the Maker (or any of them), charge interest at the
Default Rate (as that term is defined in the Floorplan Agreement) and exercise
any one or more of the rights and remedies granted to the Bank by the Floorplan
Agreement, under any agreement with the Maker (or any of them), or given to Bank
under applicable law.
The Maker acknowledge(s) that this Note matures upon issuance, and that
the Bank, at any time, without notice, and without reason, may demand that this
Note be immediately paid in full (subject, however, to the provisions of the
Floorplan Agreement). The demand nature of this Note shall not be deemed
modified by reference to a Default or Event of Default in this Note or in the
Floorplan Agreement or in any other agreement to a Default by the Maker or to
the occurrence of an Event of Default. For purposes of this Note, to the extent
there is reference to an Event of Default, this reference is for the purpose of
permitting the Bank to accelerate Indebtedness not on a demand basis and to
receive interest at the default rate provided in the document evidencing the
relevant Indebtedness. It is expressly agreed that the Bank may exercise its
demand rights under this Note whether or not an Event of Default has occurred
(subject, however, to the provisions of the Floorplan Agreement).
All payments under this Note shall be in immediately available United
States funds, without setoff or counterclaim.
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<PAGE>
If this Note is signed by two or more parties (whether by all as makers
or by one or more as an accommodation party or otherwise), the obligations and
undertakings under this Note shall be that of all and any two or more jointly
and also of each severally. This Note shall bind the Maker, and the Maker's
respective heirs, personal representatives, successors and assigns.
The Maker waive(s) presentment, demand, protest, notice of dishonor,
notice of demand or intent to demand, notice of acceleration or intent to
accelerate, and all other notices and agree(s) that no extension or indulgence
to the Maker (or any of them) or release, substitution or nonenforcement of any
security, or release or substitution of any of the Maker, any guarantor or any
other party, whether with or without notice, shall affect the obligations of any
of the Maker. The Maker waive(s) all defenses or right to discharge available
under Florida Statute ss. 673.6051 and waive(s) all other suretyship defenses or
right to discharge. The Maker agree(s) that the Bank has the right to sell,
assign, or grant participations, or any interest, in any or all of the
Indebtedness, and that, in connection with this right, but without limiting its
ability to make other disclosures to the full extent allowable, the Bank may
disclose all documents and information which the Bank now or later has relating
to the Maker or the Indebtedness.
The Maker agree(s) to reimburse the holder or owner of this Note for
any and all costs and expenses (including without limit, court costs, all
expenses even if not taxable court costs, legal expenses and reasonable attorney
fees, whether inside or outside counsel is used, whether or not suit is
instituted and, if suit is instituted, whether at the trial court level,
appellate level, in a bankruptcy, probate or administrative proceeding or
otherwise) incurred in collecting or attempting to collect this Note or incurred
in any other matter or proceeding relating to this Note. Attorneys' fees include
paralegal fees, expert witness fees, investigative fee, administrative costs,
and all other reasonable charges billed by the attorney.
The Maker acknowledge(s) and agree(s) that there are no contrary
agreements, oral or written, establishing a term of this Note and agree(s) that
the terms and conditions of this Note may not be amended, waived or modified
except in a writing signed by an officer of the Bank expressly stating that the
writing constitutes an amendment, waiver or modification of the terms of this
Note. As used in this Note, the word "Maker" means, individually and
collectively, each maker, accommodation party, indorser and other party signing
this Note in a similar capacity. If any provision of this Note is unenforceable
in whole or part for any reason, the remaining provisions shall continue to be
effective.
This Note shall be governed by and construed in accordance with the
laws of the State of Florida; provided, however, with regard to the enforcement
of security interests encumbering any portion of any collateral given as
security for this Note which is located outside of the State of Florida, then
the laws of the state where such portion of the collateral is located shall be
applicable for the purpose of enforcement of such security interests.
The Maker has executed this Note in the city, state or other location
first set forth above on the date first set forth above, and is effective upon
delivery to the Bank in Detroit, Michigan.
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<PAGE>
In no event shall the amount of interest due or payments in the nature
of interest payable to Bank under this Note exceed the maximum contract rate of
interest allowed by applicable law, as amended from time to time. In the event
any such payment is paid by Maker or received by Bank, then, upon discovery of
such overcharge, Bank shall immediately notify Maker of such overcharge and
shall refund the amount thereof to Maker; provided, however, Maker may elect to
have such overcharge applied to the reduction of principal under this Note.
THE MAKER AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY
AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY
IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS.
FIRST TEAM FORD, LTD., a Florida
limited partnership, by its sole
general partner:
FIRST TEAM MANAGEMENT, INC., a Florida
corporation
By: __________________________________________
John Lumpkin, as its Vice President
(CORPORATE SEAL)
Date executed: ______________, 1996
WITNESSES TO ABOVE SIGNATURE (HOWEVER, THE WITNESSES
BELOW ARE NOT INCLUDED AS THE "UNDERSIGNED" AS REFERRED
TO IN THE ABOVE PROMISSORY NOTE):
- ---------------------------
- ---------------------------
(PRINT NAME OF WITNESS ABOVE)
- ---------------------------
- ---------------------------
(PRINT NAME OF WITNESS ABOVE)
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<PAGE>
STATE OF GEORGIA
COUNTY OF _____________
The foregoing instrument was acknowledged before me this _____ day of
April, 1996, by John Lumpkin, as Vice President of FIRST TEAM MANAGEMENT, INC.,
a Florida corporation, on behalf of the corporation as the sole general partner
of FIRST TEAM FORD, LTD., a Florida limited partnership, on behalf of the
partnership, and who is personally known to me or who has produced
________________________ as identification.
________________________________(SEAL)
(Signature of person taking acknowledgment)
________________________________________________
(Name of acknowledger typed, printed or stamped)
NOTARY PUBLIC
My commission expires:___________
- ----------------------------------------------------
For Bank Use Only
- ----------------------------------------------------
LOAN OFFICER INITIALS LOAN GROUP NAME
- ----------------------------------------------------
LOAN OFFICER I.D. NO. LOAN GROUP NO.
- ----------------------------------------------------
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Page 6 Initialed: _______
EXHIBIT 10.8.3
SECURITY AGREEMENT
(Equipment)
(hereafter the "Agreement")
For value received, the undersigned, FIRST TEAM FORD, LTD., a Florida limited
partnership ("Debtor") grants to Comerica Bank, a Michigan banking corporation,
whose address is 411 W. Lafayette Street, P. O. Box 75000, National Dealer
Services - 3517, Detroit, Michigan 48275-3517 ("Bank"), a security interest in
all Equipment of Debtor wherever located, now owned or later acquired,
including, without limit, the property described in Exhibit "A" attached hereto
and made a part hereof (but only if any such Exhibit "A" is attached hereto),
and also in (a) all other similar property, wherever located, now owned or later
acquired by Debtor, (b) all additions, attachments, accessions, parts,
replacements, substitutions and renewals of or for all Equipment of Debtor,
wherever located, now owned or later acquired, (c) all of Debtor's Property in
Possession of Bank, and (d) the Proceeds and products of all of the above, to
secure payment of any and all sums, indebtedness and liabilities of any and
every kind now owing or later to become due to the Bank from Debtor during the
term of this Agreement, however created, incurred, evidenced, acquired or
arising, whether under any note(s), guaranty(ies), letter of credit
agreement(s), evidence(s) of indebtedness or under any other instrument,
obligation, guaranty, contract or agreement or dealing of any and every kind now
existing or later entered into between the Debtor or the Borrower and the Bank,
or otherwise, and whether direct, indirect, primary, secondary, fixed,
contingent, joint or several, due or to become due, together with interest and
charges, and including, without limit, all present and future indebtedness or
obligations of third parties to the Bank which is guaranteed by the Debtor or
the Borrower or any or all of them and the present or future indebtedness
originally owing by the Debtor or the Borrower or any or all of them to third
parties and assigned by third parties to the Bank, and any and all renewals,
extensions or modifications of any of them (the "Indebtedness").
1. DEFINITIONS. As used in this Agreement:
1.1 "Collateral" means any and all property of Debtor in which Bank now
has or by this Agreement now or later acquires a security interest.
1.2 "Debtor's Property in Possession of Bank" means goods, instruments,
documents, policies and certificates of insurance, deposits, money or other
property now owned or later acquired by Debtor or in which Debtor now has or
later acquires an interest and which are now or later in possession of Bank or
as to which Bank now or later controls possession by documents or otherwise.
1.3 "Environmental Law" means any laws, ordinances, directives, orders,
statutes, or regulations an object of which is to regulate or improve health,
safety, or the environment, including, without limit, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
USC 9601 et seq.), the Resource Conservation and Recovery Act, as amended (42
USC 6901 et seq.), and such similar environmental protection laws as enacted in
the State of Florida.
1.4 "Equipment" has the respective meaning assigned it in Article 9 of
the Uniform Commercial Code, as of the date of this Agreement.
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<PAGE>
1.5 "Hazardous Materials" means each and all of the following:
hazardous materials and/or substances as defined in any Environmental Law,
petroleum, petroleum by-products, natural gas, flammable explosives, radioactive
materials, and toxic materials.
1.6 "Proceeds" has the meaning assigned it in Article 9 of the Uniform
Commercial Code, as of the date of this Agreement, and also includes without
limit cash or other property which were proceeds and are recovered by a
bankruptcy trustee or otherwise as a preferential transfer by Debtor.
1.7 "Uniform Commercial Code" means the Uniform Commercial Code as
enacted in the State of Florida, as amended from time to time.
1.8 Except as otherwise provided in this Agreement, all terms used in
this Agreement have the meanings assigned to them in Article 9 (or, absent
definition in Article 9, in any other Article) of the Uniform Commercial Code,
as of the date of this Agreement.
2. WARRANTIES, COVENANTS AND AGREEMENTS. Debtor warrants, covenants and
agrees as follows:
2.1 The Collateral has been acquired (or will be acquired) for use
primarily in business. Bank at its option may disburse loan proceeds directly to
the seller of any Collateral to be acquired with proceeds of loans from Bank.
2.2 (intentionally deleted)
2.3 At the time any Collateral becomes, or is represented to be,
subject to a security interest in favor of Bank, Debtor shall be deemed to have
warranted that (a) Debtor is the lawful owner of the Collateral and has the
right and authority to subject the same to a security interest granted to Bank
and (b) none of the Collateral is subject to any security interest other than
that in favor of Bank and there are no financing statements on file other than
in favor of Bank.
2.4 Debtor will keep the Collateral free at all times from any and all
claims, liens, security interests and encumbrances other than those in favor of
Bank. Debtor will not, without providing prior written notice to Bank, sell,
transfer or lease, or permit or suffer to be sold, transferred or leased any or
all of the Collateral, except in the ordinary course of business. Bank or its
agents or attorneys may at all reasonable times inspect the Collateral and may
enter upon all premises where the Collateral is kept or might be located. Debtor
shall allow Bank to examine, inspect and make abstracts from, or copy any of
Debtor's books and records (relating to the Collateral or otherwise).
2.5 Debtor will do all acts and things, and will execute all writings
reasonably requested by Bank to establish, maintain and continue a perfected and
first security interest of Bank in the Collateral, and will pay on demand all
reasonable costs and expenses of searches, filing and recording deemed necessary
by Bank to establish, determine or continue the validity and the priority of
Bank's security interest.
2.6 If Bank, acting in its sole discretion, redelivers Collateral to
Debtor or Debtor's
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<PAGE>
designee for the purpose of
(a) the ultimate sale or exchange thereof, or
(b) presentation, collection, renewal, or registration of
transfer thereof, or
(c) loading, unloading, storing, shipping, transshipping,
manufacturing, processing or otherwise dealing therewith preliminary to sale or
exchange,
such redelivery shall be in trust for the benefit of Bank and shall not
constitute a release of Bank's security interest therein or in the proceeds or
products thereof unless Bank specifically so agrees in writing. If Debtor
requests any such redelivery, Debtor will deliver with such request a duly
executed financing statement in form and substance satisfactory to Bank. Any
proceeds of Collateral coming into Debtor's possession as a result of any such
redelivery shall be held in trust for Bank and forthwith delivered to Bank for
application on the Indebtedness. Bank may (if, in its sole discretion, it elects
to do so) deliver the Collateral or any part of the Collateral to Debtor, and
such delivery by Bank shall discharge Bank from any and all liability or
responsibility for such Collateral.
2.7 Debtor acknowledges and agrees that the Bank has no obligation to
acquire or perfect any lien on or security interest in any asset(s), whether
realty or personalty, to secure payment of the Indebtedness, and Debtor is not
relying upon assets in which the Bank has or may have a lien or security
interest for payment of the Indebtedness.
2.8 Debtor will pay promptly and within the time that they can be paid
without interest or penalty all taxes, assessments and similar imposts and
charges which at any time are or may become, a lien, charge, or encumbrance upon
any of the Collateral, except to the extent contested in good faith and bonded
in a manner satisfactory to Bank. If Debtor fails to pay any of these taxes,
assessments, or other charges in the time provided above, Bank has the option
(but not the obligation) to do so and Debtor agrees to repay all amounts so
expended by Bank immediately upon demand, together with interest at the highest
default rate which could be charged by Bank to Debtor on any Indebtedness.
2.9 Debtor will keep the Collateral in good condition and will
safeguard and protect it from loss, damage or deterioration from any cause.
Debtor has and will maintain at all times (a) with respect to the Collateral,
insurance against fire and other risks customarily insured against under an "all
risk" policy and such other risks customarily insured against by persons engaged
in similar business to that of Debtor, and (b) public liability insurance and
other insurance as may be required by law or reasonably required by Bank, all of
which insurance shall be in amount, form and content, and written by companies
as may be satisfactory to Bank, naming Bank as additional insured as to the
Collateral. Debtor will deliver to Bank evidence satisfactory to Bank that the
required insurance has been procured. If Debtor fails to maintain satisfactory
insurance, Bank has the option (but not the obligation) to do so and Debtor
agrees to repay all amounts so expended by Bank immediately upon demand,
together with interest at the highest default rate which could be charged by
Bank to Debtor on any Indebtedness.
2.10 If any of the Collateral (or any records concerning the
Collateral) is located or kept by Debtor on leased premises, Debtor will: (a)
provide a complete and correct copy of all
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<PAGE>
applicable leases to Bank, (b) furnish or cause to be furnished to Bank from
each landlord under such leases a lessor's acknowledgment in form satisfactory
to Bank authorizing, on Default, Bank's entry on such premises to enforce its
rights and remedies under this Agreement and (c) comply with all such leases.
Debtor's rights under all such leases shall further be part of the Collateral,
and included in the security interest granted to Bank hereunder.
2.11 Debtor agrees to reimburse Bank upon demand for all fees and
expenses incurred by Bank (a) in seeking to collect the Indebtedness or any part
of it (through formal or informal collection actions, workouts or otherwise), in
defending the validity or priority of its security interest, or in pursuing its
rights and remedies under this Agreement or under any other agreement between
Bank and Debtor; (b) in connection with any proceeding (including, without
limit, bankruptcy, insolvency, administrative, appellate, or probate proceedings
or any lawsuit) in which Bank at any time is involved as a result of any lending
relationship or other financial accommodation involving Bank and Debtor; or (c)
incurred by Bank during the continuance of an Event of Default, which fees and
expenses relate to or would not have been incurred but for any lending
relationship or other financial accommodation involving Bank and Debtor. The
fees and expenses include, without limit, court costs, legal expenses,
reasonable attorneys' fees, paralegal fees, internal transfer charges for
in-house attorneys and paralegals and other services, and audit expenses.
2.12 Debtor at all times shall be in material compliance with all
applicable laws.
2.13 (a) Debtor is and shall be in material compliance with all
Environmental Laws. There are not and will not be Hazardous Materials on, in or
under any real or personal property ("Property") now or at any time owned,
occupied, or operated by Debtor which in any manner violates any Environmental
Law or which could be subject to remediation pursuant to any Environmental Law.
Debtor has not disposed of, manufactured, treated, stored, handled, used,
transported, or generated Hazardous Materials, and shall not in the future do
any of the above acts in violation of any Environmental Law.
(b) Debtor shall promptly conduct all investigations, testing,
removal and other actions necessary to clean up and remove all Hazardous
Materials on or affecting the Property in accordance with all Environmental
Laws. These actions will not be deemed to cure any breach of this Section.
(c) Debtor shall defend, indemnify and hold harmless Bank, its
employees, agents, shareholders, officers, and directors from and against any
and all claims, damages, fines, expenses, liabilities or causes of action of
whatever kind, including without limit consultant fees, legal expenses, and
reasonable attorneys' fees, suffered by any of them as a direct or indirect
result of any actual or asserted violation of any Environmental Law or of any
remediation relating to the Property required by any Environmental Law.
(d) Upon twenty (20) ten days notice to Debtor (except in an
emergency or where not practical under applicable law), Bank may (but is not
obligated to) enter on the Property or take such other actions as it deems
appropriate to inspect, test for, clean up, remove, minimize the impact of, or
advise governmental agencies of the possible existence of any Hazardous
Materials upon Bank's receipt of any notice from any source asserting the
existence of any Hazardous Materials in violation of Environmental Laws. All
costs and
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<PAGE>
expenses so incurred by Bank, including without limit consultant fees, legal
expenses, and reasonable attorneys' fees, shall be payable by Debtor upon
demand, together with interest at the highest default rate which could be
charged by Bank to Debtor on any Indebtedness.
(e) The provisions of this section shall survive the repayment
of the Indebtedness, the satisfaction of all other obligations of Debtor to
Bank, the discharge or termination by Bank of any lien or security interest from
Debtor, and the foreclosure of or exercise of rights as to any Collateral.
(f) Debtor acknowledges that there may have been environmental
problems with regard to the Property prior to the date hereof, but that any and
all such environmental problems have been fully disclosed in writing to Bank.
2.14 Debtor acknowledges and agrees that if any Guaranty is executed by
the Debtor in connection with or related to this Agreement, all waivers
contained in that Guaranty shall be and are incorporated by reference into this
Agreement.
3. DEFAULTS, ENFORCEMENT AND APPLICATION OF PROCEEDS.
3.1 Reference is made to that certain Motor Vehicle Floor Planning
Agreement and Security Agreement being entered into contemporaneously with this
Agreement by and between Debtor and Bank (the "Floorplan Agreement"). The
Floorplan Agreement is hereby incorporated into and made a part hereof. Upon the
occurrence of any of the following events (each an "Event of Default"), Debtor
shall be in default under this Agreement:
(a) Any Default or Event of Default under the Floorplan
Agreement as if such Defaults or Events of Default were set out in full herein
(and if the Floorplan Agreement shall no longer be in effect, then such Defaults
or Events or Default shall continue to be applicable to this Agreement); or
(b) Any material failure or neglect to comply with, or breach
of, any of the terms, provisions, warranties or covenants of this Agreement; or
(c) Any failure to pay the Indebtedness when due, or such
portion of it as may be due, by acceleration or otherwise; or
(d) Bank has a reasonable basis to fear deterioration, removal
or waste of the Collateral; or
(e) If the Collateral or any part of it ceases to be personal
property unless shown to the contrary in this Agreement.
3.2 Upon the occurrence of any Event of Default, and which is not cured
within any applicable curative period provided for in the Floorplan Agreement
(and which curative period is applicable to any of the defaults or Events of
Default set forth herein, and also, which notice and curative period is hereby
incorporated into and made a part hereof), then Bank may at its discretion and
without prior notice to Debtor declare any or all of the Indebtedness to be
immediately due and payable, and shall have and may exercise any one or more of
the
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<PAGE>
following rights and remedies:
(a) exercise all the rights and remedies available to Bank
under the Floorplan Agreement;
(b) exercise all the rights and remedies upon default, in
foreclosure and otherwise, available to secured parties under the provisions of
the Uniform Commercial Code and other applicable law;
(c) institute legal proceedings to foreclose upon and against
the lien and security interest granted by this Agreement, to recover judgment
for all amounts then due and owing as Indebtedness, and to collect the same out
of any of the Collateral or proceeds of any sale of it;
(d) institute legal proceedings for the sale, under the
judgment or decree of any court of competent jurisdiction, of any or all of the
Collateral; and/or
(e) personally or by agents, attorneys or appointment of a
receiver, enter upon any premises where the Collateral or any part of it may
then be located, and take possession of all or any part of it and/or render it
unusable, and without being responsible for loss or damage to such Collateral,
(i) hold, store, and keep idle, or lease,
operate, remove or otherwise use or permit the use of, the Collateral or any
part of it, for that time and upon those terms as Bank, in its sole discretion,
deems to be in its own best interest, and demand, collect and retain all
resulting earnings and other sums due and to become due from any party,
accounting only for net earnings, if any (unless the Collateral is retained in
satisfaction of the Indebtedness, in which case no accounting will be necessary)
arising from that use (which net earnings may be applied against the
Indebtedness) and charging against all receipts from the use of the Collateral
or from its sale, by court proceedings or pursuant to subsection (ii) below, all
other costs, expenses, charges, damages and other losses resulting from that
use; and/or
(ii) sell, lease or dispose of, or cause to
be sold, leased or disposed of, all or any part of the Collateral at one or more
public or private sales, leasings or other dispositions, at places and times and
on terms and conditions as Bank may deem fit, without any previous demand or
advertisement and, except as provided in this Agreement, all notice of sale,
lease or other disposition, and advertisement, and other notice or demand, any
right or equity of redemption, and any obligation of a prospective purchaser or
lessee to inquire as to the power and authority of Bank to sell, lease or
otherwise dispose of the Collateral or as to the application by Bank of the
proceeds of sale or otherwise, which would otherwise be required by, or
available to Debtor under, applicable law are expressly waived by Debtor to the
fullest extent permitted.
At any sale pursuant to this Section 3.2, whether
under the power of sale, by virtue of judicial proceedings or otherwise, it
shall not be necessary for Bank or a public officer under order of a court to
have present physical or constructive possession of the Collateral to be sold.
The recitals contained in any conveyances and receipts made and given by Bank or
the public officer to any purchaser at any sale made pursuant to this Agreement
shall, to the extent permitted by applicable law, conclusively establish the
truth and accuracy
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of the matters stated (including, without limit, as to the amounts of the
principal of and interest on the Indebtedness, the accrual and nonpayment of it
and advertisement and conduct of the sale); and all prerequisites to the sale
shall be presumed to have been satisfied and performed. Upon any sale of any of
the Collateral, the receipt of the officer making the sale under judicial
proceedings or of Bank shall be sufficient discharge to the purchaser for the
purchase money, and the purchaser shall not be obligated to see to the
application of the money. Any sale of any of the Collateral under this Agreement
shall be a perpetual bar against Debtor with respect to that Collateral.
3.3 The proceeds of any sale or other disposition of Collateral
authorized by this Agreement shall be applied by Bank first upon all expenses
authorized by the Uniform Commercial Code and all reasonable attorney fees and
legal expenses incurred by Bank; the balance of the proceeds of the sale or
other disposition shall be applied in the payment of the Indebtedness, first to
interest, then to principal, then to remaining Indebtedness, if any, and the
surplus, if any, shall be paid over to Debtor or to such other person(s) as may
be entitled to it under applicable law. Debtor shall remain liable for any
deficiency, which it shall pay to Bank immediately upon demand.
3.4 Nothing in this Agreement is intended, nor shall it be construed,
to preclude Bank from pursuing any other remedy provided by law for the
collection of any or all of the Indebtedness or for the recovery of any other
sum to which Bank may be or become entitled for the breach of this Agreement by
Debtor. Nothing in this Agreement shall reduce or release in any way any rights
or security interests of Bank contained in any existing agreement between Debtor
and Bank, nor shall anything in this Agreement modify the terms of any
Indebtedness owing to Bank on a demand basis.
3.5 No waiver of default or consent to any act by Debtor shall be
effective unless in writing and signed by an authorized officer of Bank. No
waiver of any default or forbearance on the part of Bank in enforcing any of its
rights under this Agreement shall operate as a waiver of any other default or of
the same default on a future occasion or of any rights.
3.6 After Default, Debtor irrevocably appoints (which appointment is
coupled with an interest) Bank or any employee or agent of Bank the true and
lawful attorney of Debtor (with full power of substitution) in the name, place
and stead of, and at the expense of, Debtor:
(a) to give any necessary receipts or acquittances for amounts
collected or received under this Agreement;
(b) to make all necessary transfers of all or any part of the
Collateral in connection with any sale, lease or other disposition made pursuant
to this Agreement;
(c) to adjust and compromise any insurance loss on the
Collateral and to endorse checks or drafts payable to Debtor in connection with
the insurance;
(d) to execute and deliver for value all necessary or
appropriate bills of sale, assignments and other instruments in connection with
any sale, lease or other disposition of the Collateral. Debtor ratifies and
confirms all that its said attorney (or any substitute) shall lawfully do under
this Agreement. Nevertheless, if requested by Bank or a purchaser or lessee,
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Debtor shall ratify and confirm any sale, lease or other disposition by
executing and delivering to Bank or the purchaser or lessee all proper bills of
sale, assignments, releases, leases and other instruments as may be designated
in any such request; and
(e) to execute and file in the name of and on behalf of Debtor
all financing statements or other filings deemed necessary or desirable by Bank
to evidence, perfect or continue the security interests granted in this
Agreement.
3.7 Upon the occurrence of an Event of Default, which Event of Default
remains uncured after any applicable curative period provided for in the
Floorplan Agreement, Debtor also agrees, upon request of Bank, to assemble the
Collateral and make it available to Bank at any place designated by Bank which
is reasonably convenient to Bank and Debtor.
4. MISCELLANEOUS.
4.1 This Agreement shall in all respects be governed by and construed
in accordance with the laws of the State of Florida.
4.2 This Agreement shall be terminated only by the filing of a
termination statement in accordance with the applicable provisions of the
Uniform Commercial Code, but the obligations contained in Section 2.13 of this
Agreement shall survive termination. Until terminated, the security interest
created by this Agreement shall continue in full force and effect and shall
secure and be applicable to all advances now or later made by Bank to Debtor,
whether or not Debtor is indebted to Bank immediately prior to the time of any
advance, and to all other Indebtedness.
4.3 Notwithstanding any prior revocation, termination, surrender or
discharge of this Agreement, the effectiveness of this Agreement shall
automatically continue or be reinstated, as the case may be, in the event that
(a) any payment received or credit given by the Bank in respect of the
Indebtedness is returned, disgorged or rescinded as a preference, impermissible
setoff, fraudulent conveyance, diversion of trust funds, or otherwise under any
applicable state or federal law, including, without limitation, laws pertaining
to bankruptcy or insolvency, in which case this Agreement shall be enforceable
against Debtor as if the returned, disgorged or rescinded payment or credit had
not been received or given, whether or not the Bank relied upon this payment or
credit or changed its position as a consequence of it; or (b) any liability is
imposed, or sought to be imposed, against the Bank relating to the environmental
condition of, or the presence of Hazardous Materials on, in or about, any
Property given as Collateral to the Bank whether this condition is known or
unknown, now exists or subsequently arises (excluding only conditions which
arise after any acquisition by the Bank of any such Property, by foreclosure, in
lieu of foreclosure or otherwise, to the extent due to the wrongful act or
omission of the Bank), in which case this Agreement shall be enforceable to the
extent of all liability, costs and expenses (including without limit reasonable
attorney fees) incurred by the Bank as the direct or indirect result of any
environmental condition or Hazardous Materials. In the event of continuation or
reinstatement of this Agreement, Debtor agree(s) upon demand by the Bank to
execute and deliver to the Bank those documents which the Bank determines are
appropriate to further evidence (in the public records or otherwise) this
continuation or reinstatement, although the failure of Debtor to do so shall not
affect in any way the reinstatement or continuation. If Debtor does not execute
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and deliver to the Bank upon demand such documents, the Bank and each Bank
officer is irrevocably appointed (which appointment is coupled with an interest)
the true and lawful attorney of Debtor (with full power of substitution) to
execute and deliver such documents in the name and on behalf of Debtor.
4.4 This Agreement and all the rights and remedies of Bank under this
Agreement shall inure to the benefit of Bank's successors and assigns and to any
other holder who derives from Bank title to or an interest in the Indebtedness
or any portion of it, and shall bind Debtor and the heirs, legal
representatives, successors and assigns of Debtor.
4.5 If there is more than one Debtor, all undertakings, warranties and
covenants made by Debtor and all rights, powers and authorities given to or
conferred upon Bank are made or given jointly and severally.
4.6 In addition to Bank's other rights, any indebtedness owing from
Bank to Debtor can be set off and applied by Bank on any Indebtedness at any
time(s) either before or after maturity or demand without notice to anyone.
4.7 In the event that applicable law shall obligate Bank to give prior
notice to Debtor of any action to be taken under this Agreement, Debtor agrees
that a written notice given to it at least five days before the date of the act
shall be reasonable notice of the act and, specifically, reasonable notification
of the time and place of any public sale or of the time after which any private
sale, lease, or other disposition is to be made, unless a shorter notice period
is reasonable under the circumstances. All notices given under this Agreement
shall be given in the manner set forth in the Floorplan Agreement (whether or
not the Floorplan Agreement is still in effect as of the date of the giving of
any such notice).
4.8 A carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement under the Uniform Commercial Code
and may be filed by Bank in any filing office.
4.9 No single or partial exercise, or delay in the exercise, of any
right or power under this Agreement, shall preclude other or further exercise of
the rights and powers under this Agreement.
4.10 The unenforceability of any provision of this Agreement shall not
affect the enforceability of the remainder of this Agreement.
4.11 No amendment or modification of this Agreement shall be effective
unless the same shall be in writing and signed by Debtor and an authorized
officer of Bank.
4.12 This Agreement constitutes the entire agreement of Debtor and Bank
with respect to the subject matter of this Agreement.
4.13 To the extent that any of the Indebtedness is payable upon demand,
nothing contained in this Agreement shall modify the terms and conditions of
that Indebtedness nor shall anything contained in this Agreement prevent Bank
from making demand, without notice and with or without reason, for immediate
payment of any or all of that Indebtedness at any time(s), whether or not an
Event of Default has occurred.
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5. STATEMENT OF BUSINESS NAME, RESIDENCE AND LOCATION OF COLLATERAL.
Debtor warrants, covenants and agrees as follows:
5.1 Debtor's chief executive office is located in the County of
Seminole, State of Florida.
Mailing Address: 3786 Highway 17-92 South, Sanford, Fl 32771.
This location is leased by the Debtor.
5.2 (Intentionally Deleted)
5.3 Any other places of business of Debtor are indicated below:
NONE .
5.4 Debtor's correct legal name is set forth at the end of this
Agreement, and Debtor also does business under the tradename "Don Mealey's
Seminole Ford." During the past five years, Debtor has not conducted business
under any other name except as set forth in any appropriately labeled schedule
attached to this Agreement.
5.5 Until Bank is advised in writing by Debtor to the contrary, all
notices, requests and demands required under this Agreement or by law shall be
given to, or made upon, Debtor at the address indicated in Section 5.1 above.
5.6 The Collateral (or any records concerning the Collateral) will be
kept at Debtor's address(es) above and/or in the County of Seminole, State of
Florida.
Mailing Address: 3786 Highway 17-92 South, Sanford, Fl 32771.
This location is leased by the Debtor.
5.7 Debtor will give Bank not less than 90 days prior written notice of
all contemplated changes in Debtor's name, identity, corporate structure, and/or
any of the above addresses, but the giving of this notice shall not cure any
default caused by this change.
6. APPLICABILITY OF THIS AGREEMENT. This Agreement secures all of the
Indebtedness (as that term is defined herein), including without limitation the
following loan and credit transactions with Bank:
(1) $10,000,000.00 New Car Floorplan Line to Debtor.
(2) $1,000,000.00 Revolving Credit Facility to Debtor.
7. JURY WAIVER.
7.1 DEBTOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY
AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY
IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS AGREEMENT
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OR THE INDEBTEDNESS.
FIRST TEAM FORD, LTD., a Florida
limited partnership, by its sole general partner:
FIRST TEAM MANAGEMENT, INC., a Florida
corporation
By: ______________________________________________
W. Warner Peacock, as its Vice President
(CORPORATE SEAL)
Date executed: April 1st, 1996
EXHIBIT "A"
(SCHEDULE OF EQUIPMENT)
Exhibit "A" not attached - this agreement covers all Equipment.
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EXHIBIT 10.8.4
SECURITY AGREEMENT
(Accounts, Chattel Paper, and Inventory)
(hereafter the "Agreement")
For value received, the undersigned, FIRST TEAM FORD, LTD., a Florida limited
partnership ("Debtor") grants to Comerica Bank, a Michigan banking corporation,
whose address is 411 W. Lafayette Street, P. O. Box 75000, National Dealer
Services - 3517, Detroit, Michigan 48275-3517 ("Bank"), a continuing security
interest in (a) Debtor's Accounts Receivable, (b) Debtor's interest in the goods
which has given rise to any Account Receivable, (c) Debtor's Property in
Possession of Bank, (d) Debtor's Inventory, and (e) the Proceeds and products of
all the above, to secure payment of any and all sums, indebtedness and
liabilities of any and every kind now owing or later to become due to the Bank
from Debtor during the term of this Agreement, however created, incurred,
evidenced, acquired or arising, whether under any note(s), guaranty(ies), letter
of credit agreement(s), evidence(s) of indebtedness or under any other
instrument, obligation, guaranty, contract or agreement or dealing of any and
every kind now existing or later entered into between the Debtor and the Bank,
or otherwise, and whether direct, indirect, primary, secondary, fixed,
contingent, joint or several, due or to become due, together with interest and
charges, and including, without limit, all present and future indebtedness or
obligations of third parties to the Bank which is guaranteed by the Debtor and
the present or future indebtedness originally owing by the Debtor to third
parties and assigned by third parties to the Bank, and any and all renewals,
extensions or modifications of any of them (the "Indebtedness").
1. DEFINITIONS. As used in this Agreement:
1.1 "Account(s) Receivable" or "Debtor's Account(s) Receivable" means
all of the following now owned or later acquired by Debtor wherever located: all
accounts, general intangibles (including, without limit, Tax Refunds, trade
names, trade styles and goodwill, trademarks, copyrights and patents, and
applications for them, trade and proprietary secrets, formulae, designs,
blueprints and plans, customer lists, software programs, literary rights,
licenses and permits, insurance policies, insurance proceeds, beneficial
interests in trusts, and minute books and other books and records), chattel
paper, contract rights, deposit accounts, documents and instruments.
1.2 "Collateral" means any and all property of Debtor in which Bank now
has or by this Agreement now or later acquires a security interest.
1.3 "Debtor's Property in Possession of Bank" means goods, instruments,
documents, policies and certificates of insurance, deposits, money or other
property now owned or later acquired by Debtor or in which Debtor now has or
later acquires an interest and which are now or later in possession of Bank, or
as to which Bank now or later controls possession by documents or otherwise.
1.4 "Environmental Law" means any laws, ordinances, directives, orders,
statutes, or regulations an object of which is to regulate or improve health,
safety, or the environment, including, without limit, the Comprehensive
Environmental Response, Compensation and
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Liability Act of 1980, as amended (42 USC 9601 et seq.),the Resource
Conservation and Recovery Act, as amended (42 USC 6901 et seq.), and such
similar environmental protection laws as enacted in the State of Florida.
1.5 "Hazardous Materials" means each and all of the following:
hazardous materials and/or substances as defined in any Environmental Law,
petroleum, petroleum by-products, natural gas, flammable explosives, radioactive
materials, and toxic materials.
1.6 "Inventory" or "Debtor's Inventory" means all goods wherever
located, now owned or later acquired by Debtor, which are held for sale or lease
or furnished or to be furnished under any contract of service (including,
without limit, any such goods which are returned to or repossessed by Debtor),
or which are raw materials, work in process or materials used or consumed in
Debtor's business and any other property constituting "inventory" under the
Uniform Commercial Code.
1.7 "Proceeds" has the meaning assigned it in Article 9 of the Uniform
Commercial Code, as of the date of this Agreement, and also includes, without
limit, cash or other property which were proceeds and are recovered by a
bankruptcy trustee or otherwise as a preferential transfer by Debtor.
1.8 "Tax Refunds" means refunds or claims for refunds of any taxes at
any time paid by Debtor to the United States of America, any state, city, county
or any other governmental entity.
1.9 "Uniform Commercial Code" means the Uniform Commercial Code as
enacted in the State of Florida, as amended from time to time.
1.10 Except as otherwise provided in this Agreement, all terms in this
Agreement have the meanings assigned to them in Article 9 (or, absent definition
in Article 9, in any other Article) of the Uniform Commercial Code, as of the
date of this Agreement.
2. WARRANTIES, COVENANTS AND AGREEMENTS. Debtor warrants, covenants and
agrees as follows:
2.1 Bank at its option may disburse loan proceeds directly to the
seller of any Collateral to be acquired with proceeds of loans from Bank.
2.2 Debtor shall (a) furnish to Bank, in form and at intervals as Bank
may request, information adequate to identify the Inventory, its cost and
location, and reports with respect to the acquisition and sale of Inventory; (b)
evidence to Bank, in form and at intervals as Bank may request, the account
balances and the nature and extent of those Accounts Receivable in which Debtor
has rights, the names and addresses of all account debtors and reports with
respect to the payments on and aging of Accounts Receivable; (c) keep adequate
records of the Collateral and other records as Bank shall determine to be
appropriate; and (d) allow Bank to examine, inspect and make abstracts from, or
copy any of Debtor's books and records (relating to the Collateral or otherwise
and whether printed or in magnetic tape or discs or in
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other machine readable form), and only upon an uncured Default or Event of
Default (as defined herein) arrange for verification of Accounts Receivable
directly with account debtors or by other methods acceptable to Bank.
2.3 Debtor shall at the request of Bank (a) mark its records and the
Collateral to clearly indicate the security interest of Bank under this
Agreement, and (b) deliver to Bank all accounting and other records pertaining
to, and all writings evidencing, the Collateral or any portion of it, together
with all books, records and documents of Debtor related to it in whatever form
kept by Debtor, whether printed or in magnetic tape or discs or in other machine
readable form or otherwise, and all forms, programs, software and other
materials and instructions necessary or useful to Bank, to monitor the
Collateral or enforce its rights under this Agreement.
2.4 At the time any Collateral becomes, or is represented to be,
subject to a security interest in favor of Bank, Debtor shall be deemed to have
warranted that (a) Debtor is the lawful owner of the Collateral and has the
right and authority to subject it to a security interest granted to Bank; (b)
none of the Collateral is subject to any security interest other than that in
favor of Bank and there are no financing statements on file, other than in favor
of Bank; and (c) Debtor acquired its rights in the Collateral in the ordinary
course of its business.
2.5 On each occasion on which Debtor evidences to Bank the account
balances on and the nature and extent of Debtor's Accounts Receivable, Debtor
shall be deemed to have warranted that except as otherwise indicated (a) each of
those Accounts Receivable is valid and enforceable without performance by Debtor
of any act; (b) each of those account balances are in fact owing, (c) there are
no setoffs, recoupments, credits, contra accounts, counterclaims or defenses
against any of those Accounts Receivable, (d) as to any Accounts Receivable
represented by a note, trade acceptance, draft or other instrument or by any
chattel paper or document, (e) Debtor has not received with respect to any
Account Receivable, any notice of the death of the related account debtor, nor
of the dissolution, liquidation, termination of existence, insolvency, business
failure, appointment of a receiver for assignment for the benefit of creditors
by, or filing of a petition in bankruptcy by or against, the account debtor, and
(f) as to each Account Receivable, the account debtor is not an affiliate of
Debtor, the United States of America or any department, agency or
instrumentality of it, or a citizen or resident of any jurisdiction outside of
the United States.
2.6 Debtor will keep the Collateral free at all times from any and all
claims, liens, security interests and encumbrances other than those in favor of
Bank. Debtor will not, without the prior written consent of Bank, sell, transfer
or lease, or permit or suffer to be sold, transferred or leased, any or all of
the Collateral, except for Inventory in the ordinary course of its business and
will not return any Inventory to its supplier. Bank or its agents or attorneys
may at all reasonable times inspect the Collateral and may enter upon all
premises where the Collateral is kept or might be located.
2.7 If Bank, acting in its sole discretion, redelivers Collateral to
Debtor or Debtor's designee for the purpose of
(a) the ultimate sale or exchange thereof, or
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<PAGE>
(b) presentation, collection, renewal, or registration of
transfer thereof, or
(c) loading, unloading, storing, shipping, transshipping,
manufacturing, processing or otherwise dealing therewith preliminary to sale or
exchange,
such redelivery shall be in trust for the benefit of Bank and shall not
constitute a release of Bank's security interest therein or in the proceeds or
products thereof unless Bank specifically so agrees in writing. If Debtor
requests any such redelivery, Debtor will deliver with such request a duly
executed financing statement in form and substance satisfactory to Bank. Any
proceeds of Collateral coming into Debtor's possession as a result of any such
redelivery shall be held in trust for Bank and forthwith delivered to Bank for
application on the Indebtedness. Bank may (if, in its sole discretion, it elects
to do so) deliver the Collateral or any part of the Collateral to Debtor, and
such delivery by Bank shall discharge Bank from any and all liability or
responsibility for such Collateral.
2.8 Debtor acknowledges and agrees that the Bank has no obligation to
acquire or perfect any lien on or security interest in any asset(s), whether
realty or personalty, to secure payment of the Indebtedness, and Debtor is not
relying upon assets in which the Bank has or may have a lien or security
interest for payment of the Indebtedness.
2.9 Debtor will do all acts and things, and will execute all writings
reasonably requested by Bank to establish, maintain and continue a perfected and
first security interest of Bank in the Collateral, and will pay on demand
reasonable all costs and expenses of searches, filing and recording deemed
necessary by Bank to establish, determine or continue the validity and the
priority of Bank's security interest.
2.10 Debtor will pay promptly and within the time that they can be paid
without interest or penalty all taxes, assessments and similar imposts and
charges which at any time are or may become a lien, charge, or encumbrance upon
any of the Collateral, except to the extent contested in good faith and bonded
in a manner satisfactory to Bank. If Debtor fails to pay any of these taxes,
assessments, or other charges in the time provided above, Bank has the option
(but not the obligation) to do so and Debtor agrees to repay all amounts so
expended by Bank immediately upon demand, together with interest at the highest
default rate which could be charged by Bank to Debtor on any Indebtedness.
2.11 Debtor will keep the Inventory in good condition and will
safeguard and protect it from loss, damage or deterioration from any cause.
Debtor has and will maintain at all times (a) with respect to the Inventory,
insurance against fire and other risks customarily insured against under an
"all-risk" policy and other risks customarily insured against by persons engaged
in similar business to that of Debtor, and (b) public liability insurance and
other insurance as may be required by law or reasonably required by Bank, all of
which insurance shall be in amount, form and content, and written by companies
as may be satisfactory to Bank, naming Bank as sole payee as to the Inventory,
and Debtor will deliver to Bank evidence satisfactory to Bank that the required
insurance has been procured. If Debtor fails to maintain satisfactory insurance,
Bank has the option (but not the obligation) to do so and Debtor agrees to repay
all amounts so expended by Bank immediately upon demand, together with interest
at the highest default rate which could be charged by Bank to Debtor on any
Indebtedness.
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2.12 If any of the Collateral (or any records concerning the
Collateral) is located or kept by Debtor on leased premises, Debtor will: (a)
provide a complete and correct copy of all applicable leases to Bank, (b)
furnish or cause to be furnished to Bank from each landlord under such leases a
lessor's acknowledgment in form satisfactory to Bank authorizing, on Default,
Bank's entry on such premises to enforce its rights and remedies under this
Agreement and (c) comply with all such leases. Debtor's rights under all such
leases shall further be part of the Collateral, and included in the security
interest granted to Bank hereunder.
2.13 After uncured Default (as defined herein), Debtor shall neither
make nor permit any modification, compromise or substitution for any Account
Receivable without the prior written consent of Bank.
2.14 Debtor agrees to reimburse Bank upon demand for all fees and
expenses incurred by Bank (a) in seeking to collect the Indebtedness or any part
of it (through formal or informal collection actions, workouts or otherwise), in
defending the validity or priority of its security interest, or in pursuing its
rights and remedies under this Agreement or under any other agreement between
Bank and Debtor; (b) in connection with any proceeding (including, without
limit, bankruptcy, insolvency, administrative, appellate, or probate proceedings
or any lawsuit) in which Bank at any time is involved as a result of any lending
relationship or other financial accommodation involving Bank and Debtor; or (c)
incurred by Bank during the continuance of an Event of Default, which fees and
expenses relate to or would not have been incurred but for any lending
relationship or other financial accommodation involving Bank and Debtor. The
fees and expenses include, without limit, court costs, legal expenses,
reasonable attorneys' fees, paralegal fees, internal transfer charges for
in-house attorneys and paralegals and other services, and audit expenses.
2.15 Debtor at all times shall be in material compliance with all
applicable laws.
2.16 (a) Debtor is and shall be in material compliance with all
Environmental Laws. There are not and will not be Hazardous Materials on, in or
under any real or personal property ("Property") now or at any time owned,
occupied, or operated by Debtor which in any manner violates any Environmental
Law or which could be subject to remediation pursuant to any Environmental Law.
Debtor has not disposed of, manufactured, treated, stored, handled, used,
transported, or generated Hazardous Materials, and shall not in the future do
any of the above acts in violation of any Environmental Law.
(b) Debtor shall promptly conduct all investigations, testing,
removal and other actions necessary to clean up and remove all Hazardous
Materials on or affecting the Property in accordance with all Environmental
Laws. These actions will not be deemed to cure any breach of this Section.
(c) Debtor shall defend, indemnify and hold harmless Bank, its
employees, agents, shareholders, officers, and directors from and against any
and all claims, damages, fines, expenses, liabilities or causes of action of
whatever kind, including without limit consultant fees, legal expenses, and
reasonable attorneys' fees, suffered by any of them as a direct or indirect
result of any actual or asserted violation of any Environmental Law or of
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any remediation relating to the Property required by any Environmental Law.
(d) Upon twenty (20) days notice to Debtor (except in an
emergency or where not practical under applicable law), Bank may (but is not
obligated to) enter on the Property or take such other actions as it deems
appropriate to inspect, test for, clean up, remove, minimize the impact of, or
advise governmental agencies of the possible existence of any Hazardous
Materials upon Bank's receipt of any notice from any source asserting the
existence of any Hazardous Materials in violation of Environmental Laws. All
costs and expenses so incurred by Bank, including without limit consultant fees,
legal expenses, and reasonable attorneys' fees, shall be payable by Debtor upon
demand, together with interest at the highest default rate which could be
charged by Bank to Debtor on any Indebtedness.
(e) The provisions of this Section shall survive the repayment
of the Indebtedness, the satisfaction of all other obligations of Debtor to
Bank, the discharge or termination by Bank of any lien or security interest from
Debtor, and the foreclosure of or exercise of rights as to any Collateral.
(f) Debtor acknowledges that there may have been environmental
problems with regard to the Property prior to the date hereof, but that any and
all such environmental problems have been fully disclosed in writing to Bank.
2.17 Debtor acknowledges and agrees that if any Guaranty is executed by
the Debtor in connection with or related to this Agreement, all waivers
contained in that Guaranty shall be and are incorporated by reference into this
Agreement.
3. COLLECTION OF PROCEEDS.
3.1 Debtor agrees to collect and enforce payment of all Accounts
Receivable until Bank shall direct Debtor to the contrary and, from and after
this direction, Debtor agrees to fully and promptly cooperate and assist Bank
(or any other person as Bank shall designate) in the collection and enforcement
of all Accounts Receivable.
3.2 Debtor irrevocably authorizes Bank or any Bank employee or agent to
endorse the name of Debtor upon any checks or other items which are received in
payment of any Account Receivable or for any Inventory, and to do any and all
things necessary in order to reduce these items to money.
3.3 Bank shall have no duty as to the collection or protection of
Collateral or the proceeds of it, nor as to the preservation of any related
rights, beyond the use of reasonable care in the custody and preservation of
Collateral in the possession of Bank. Debtor agrees to take all steps necessary
to preserve rights against prior parties with respect to Debtor's Property in
Possession of Bank.
3.4 For the purpose of calculating interest on the Indebtedness, Debtor
understands that Bank imposes a minimum one business day delay in crediting
payments received by Bank on Accounts Receivable against the Indebtedness to
allow time for collection and Debtor
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agrees that Bank may, at Bank's option, make such credits only when payments are
actually collected by Bank in immediately available funds. Any credit of payment
by Bank prior to receipt by Bank of immediately available funds is conditional
upon Bank's receipt of those funds. For the purpose of calculating the principal
amount which Debtor may request to borrow from Bank under any borrowing
arrangements with Bank, Debtor understands that Bank may, at Bank's option, use
a method different from that used for the purpose of calculating interest.
3.5 If there is an uncured Default or Event of Default (as those terms
are defined in this Agreement), then Bank shall have the right to notify Debtor
at any time that the Indebtedness shall henceforth be on a Remittance Basis:
(a) Unless Bank otherwise agrees in writing, Debtor shall at
its sole expense establish and maintain, during the entire term of this
Agreement (or until Bank acting in its sole discretion shall notify Debtor that
the Indebtedness is no longer required to be on a Remittance Basis) a United
States post office lock box (the "Lock Box"), to which Bank shall have exclusive
access, and to which Debtor shall have no access. Debtor expressly authorizes
Bank, from time to time, to remove all contents from the Lock Box, for
disposition in accordance with this Agreement. Debtor agrees to notify all
account debtors and other parties obligated to it that all payments made on any
account, invoice or other collateral (other than payments by electronic funds)
shall be remitted, for the credit of Debtor, to the Lock Box, and Debtor shall
include a like statement on all invoices. Payments made by electronic funds
transfer shall be made directly to the Cash Collateral Account (defined below),
and Debtor shall so instruct its account debtors and other parties obligated to
it. Debtor shall execute all documents, authorizations and other agreements
necessary to establish the Lock Box, and Bank's exclusive access thereto.
(b) Whether or not Debtor is required by Bank to maintain a
Lock Box under this paragraph, any and all cash, checks, drafts and other
instruments for the payment of money received by Debtor at any time, in full or
partial payment of any of the Collateral shall forthwith, upon receipt, be
transmitted and delivered to Bank (properly endorsed, where required, so that
such items may be collected by Bank). Any such items received by Debtor shall
not be commingled with any other of Debtor's funds or property, but will be held
separate and apart from Debtor's own funds or property, and upon express trust
for the benefit of Bank until delivery is made to Bank.
(c) All items or amounts which are remitted to the Lock Box or
otherwise delivered by or for the benefit of Debtor to Bank on account of
partial or full payment of, or any other amount payable with respect to, any of
the Collateral shall, at Bank's option, (i) be applied to the payment of the
Indebtedness, whether then due or not, in such order of application as Bank may
determine in its sole discretion, or, (ii) shall be deposited to the credit of a
non-interest bearing deposit account in the name of Comerica Bank for the
benefit of Debtor (the "Cash Collateral Account") to be established by Debtor
with Bank pursuant to this paragraph, as security for payment of the
Indebtedness. Debtor shall have no right whatsoever to withdraw any funds so
deposited. Debtor further grants to Bank a first security interest in and lien
on all funds on deposit in such account. To the extent collected funds remain at
any time on deposit in the Cash Collateral Account after payment and discharge
in full of the
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Indebtedness (provided there is then no Default hereunder), Bank shall release
such surplus collected funds to Debtor. Debtor hereby irrevocably authorizes and
directs Bank to endorse all items received for deposit to the Cash Collateral
Account, notwithstanding the inclusion on any such item of a restrictive
notation, e.g., "paid in full", "balance of account", or other restriction.
(d) Debtor agrees that Bank shall not be liable for any loss
or damage which Debtor suffers or may suffer as a result of Bank's processing of
items or its exercise of any other rights or remedies under this Agreement,
including without limitation indirect, special or consequential damages, loss of
revenues or profits, or any claim, demand or action by any third party arising
out of or in connection with the processing of items or the exercise of any
other rights or remedies hereunder. Debtor further agrees to indemnify and hold
Bank harmless from and against all such third party claims, demands or actions,
including without limitation litigation costs and reasonable attorney fees.
4. DEFAULTS, ENFORCEMENT AND APPLICATION OF PROCEEDS.
4.1 Reference is made to that certain Motor Vehicle Floor Planning
Agreement and Security Agreement being entered into contemporaneously with this
Agreement by and between Debtor and Bank (the "Floorplan Agreement"). The
Floorplan Agreement is hereby incorporated into and made a part hereof. Upon the
occurrence of any of the following events (each an "Event of Default"), Debtor
shall be in default under this Agreement:
(a) Any Default or Event of Default under the Floorplan
Agreement as if such Defaults or Events of Default were set out in full herein
(and if the Floorplan Agreement shall no longer be in effect, then such Defaults
or Events or Default shall continue to be applicable to this Agreement); or
(b) Any failure or neglect to comply with, or breach of, any
of the terms, provisions, warranties or covenants of this Agreement; or
(c) Any failure to pay the Indebtedness when due, or such
portion of it as may be due, by acceleration or otherwise; or
(d) Bank has a reasonable basis to fear deterioration, removal
or waste of the Collateral.
4.2 Upon the occurrence of any Event of Default, and which is not cured
within any applicable curative period provided for in the Floorplan Agreement
(and which curative period is applicable to any of the defaults or Events of
Default set forth herein, and also, which notice and curative period is hereby
incorporated into and made a part hereof), Bank may at its discretion and
without prior notice to Debtor declare any or all of the Indebtedness to be
immediately due and payable, and shall have and may exercise any one or more of
the following rights and remedies:
(a) exercise all the rights and remedies available to Bank
under the Floorplan
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<PAGE>
Agreement;
(b) exercise all the rights and remedies upon default, in
foreclosure and otherwise, available to secured parties under the provisions of
the Uniform Commercial Code and other applicable law;
(c) institute legal proceedings to foreclose upon and against
the lien and security interest granted by this Agreement, to recover judgment
for all amounts then due and owing as Indebtedness, and to collect the same out
of any of the Collateral or the proceeds of any sale of it;
(d) institute legal proceedings for the sale, under the
judgment or decree of any court of competent jurisdiction, of any or all of the
Collateral; and/or
(e) personally or by agents, attorneys, or appointment of a
receiver, enter upon any premises where the Collateral or any part of it may
then be located, and take possession of all or any part of it and/or render it
unusable; and without being responsible for loss or damage to such Collateral,
(1) hold, store, and keep idle, or lease,
operate, remove or otherwise use or permit the use of the Collateral or any part
of it, for that time and upon those terms as Bank, in its sole discretion, deems
to be in its own best interest, and demand, collect and retain all resulting
earnings and other sums due and to become due from any party, accounting only
for net earnings, if any (unless the Collateral is retained in satisfaction of
the Indebtedness, in which case no accounting will be necessary), arising from
that use (which net earnings may be applied against the Indebtedness) and
charging against all receipts from the use of the Collateral or from its sale,
by court proceedings or pursuant to subsection (ii) below, all other costs,
expenses, charges, damages and other losses resulting from that use; and/or
(2) sell, lease, dispose of, or cause to be
sold, leased or disposed of, all or any part of the Collateral at one or more
public or private sales, leasings or other dispositions, at places and times and
on terms and conditions as Bank may deem fit, without any previous demand or
advertisement; and except as provided in this Agreement, all notice of sale,
lease or other disposition, and advertisement, and other notice or demand, any
right or equity of redemption, and any obligation of a prospective purchaser or
lessee to inquire as to the power and authority of Bank to sell, lease or
otherwise dispose of the Collateral or as to the application by Bank of the
proceeds of sale or otherwise, which would otherwise be required by, or
available to Debtor under, applicable law are expressly waived by Debtor to the
fullest extent permitted.
At any sale pursuant to this Section 4.2,
whether under the power of sale, by virtue of judicial proceedings or otherwise,
it shall not be necessary for Bank or a public officer under order of a court to
have present physical or constructive possession of the Collateral to be sold.
The recitals contained in any conveyances and receipts made and given by Bank or
the public officer to any purchaser at any sale made pursuant to this Agreement
shall, to the extent permitted by applicable law, conclusively establish the
truth and accuracy
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<PAGE>
of the matters stated (including, without limit, as to the amounts of the
principal of and interest on the Indebtedness, the accrual and nonpayment of it
and advertisement and conduct of the sale); and all prerequisites to the sale
shall be presumed to have been satisfied and performed. Upon any sale of any of
the Collateral, the receipt of the officer making the sale under judicial
proceedings or of Bank shall be sufficient discharge to the purchaser for the
purchase money, and the purchaser shall not be obligated to see to the
application of the money. Any sale of any of the Collateral under this Agreement
shall be a perpetual bar against Debtor with respect to that Collateral.
4.3 Debtor shall (at any time) at the request of Bank, notify the
account debtors or obligors of the security interest of Bank in any Accounts
Receivable and direct payment of it to Bank. Bank may, itself, upon the
occurrence of any Event of Default so notify and direct any account debtor or
obligor and may take control of any proceeds to which it may be entitled under
this Agreement.
4.4 The proceeds of any sale or other disposition of Collateral
authorized by this Agreement shall be applied by Bank first upon all expenses
authorized by the Uniform Commercial Code and all reasonable attorney fees and
legal expenses incurred by Bank; the balance of the proceeds of the sale or
other disposition shall be applied in the payment of the Indebtedness, first to
interest, then to principal, then to remaining Indebtedness and the surplus, if
any, shall be paid over to Debtor or to such other person(s) as may be entitled
to it under applicable law. Debtor shall remain liable for any deficiency, which
it shall pay to Bank immediately upon demand.
4.5 Nothing in this Agreement is intended, nor shall it be construed,
to preclude Bank from pursuing any other remedy provided by law for the
collection of any or all of the Indebtedness or for the recovery of any other
sum to which Bank may be or become entitled for the breach of this Agreement by
Debtor. Nothing in this Agreement shall reduce or release in any way any rights
or security interests of Bank contained in any existing agreement between Debtor
and Bank, nor shall anything in this Agreement modify the terms of any
Indebtedness owing to Bank on a demand basis.
4.6 No waiver of default or consent to any act by Debtor shall be
effective unless in writing and signed by an authorized officer of Bank. No
waiver of any default or forbearance on the part of Bank in enforcing any of its
rights under this Agreement shall operate as a waiver of any other default or of
the same default on a future occasion or of any rights.
4.7 After Default, Debtor irrevocably appoints Bank or any employee or
agent of Bank (which appointment is coupled with an interest) the true and
lawful attorney of Debtor (with full power of substitution) in the name, place
and stead of, and at the expense of, Debtor:
(a) to demand, receive, sue for and give receipts or
acquittances for any moneys due or to become due on any Account Receivable and
to endorse any item representing any payment on or proceeds of the Collateral;
(b) with respect to any Collateral, to assent to any or
all extensions or
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<PAGE>
postponements of the time of its payment or any other indulgence in connection
with it, to the substitution, exchange, or release of Collateral, to the
addition or release of any party primarily or secondarily liable, to the
acceptance of partial payments on it and the settlement, compromise or
adjustment of it, all in a manner and at times as Bank shall deem advisable;
(c) to make all necessary transfers of all or any part of the
Collateral in connection with any sale, lease or other disposition made pursuant
to this Agreement;
(d) to adjust and compromise any insurance loss on the
Inventory and to endorse checks or drafts payable to Debtor in connection with
the insurance;
(e) to execute and deliver for value all necessary or
appropriate bills of sale, assignments and other instruments in connection with
any sale, lease or other disposition of the Collateral. Debtor ratifies and
confirms all that its said attorney (or any substitute) shall lawfully do under
this Agreement. Nevertheless, if requested by Bank or a purchaser or lessee,
Debtor shall ratify and confirm any sale, lease or other disposition by
executing and delivering to Bank or the purchaser or lessee all proper bills of
sale, assignments, releases, leases and other instruments as may be designated
in any request; and
(f) to execute and file in the name of and on behalf of Debtor
all financing statements or other filings deemed necessary or desirable by Bank
to evidence, perfect or continue the security interests granted in this
Agreement.
4.8 Upon the occurrence of an Event of Default, which Event of Default
remains uncured after any applicable curative period provided for in the
Floorplan Agreement, Debtor also agrees, upon request of Bank, to assemble the
Collateral and make it available to Bank at any place designated by Bank which
is reasonably convenient to Bank and Debtor.
5. MISCELLANEOUS.
5.1 This Agreement shall in all respects be governed by and
construed in accordance with the laws of the State of Florida.
5.2 This Agreement shall be terminated only by the filing of a
termination statement in accordance with the applicable provisions of the
Uniform Commercial Code, but the obligations contained in Section 2.16 of this
Agreement shall survive termination. Until terminated, the security interest
created by this Agreement shall continue in full force and effect and shall
secure and be applicable to all advances now or later made by Bank to Debtor,
whether or not Debtor is indebted to Bank immediately prior to the time of any
advance, and to all other Indebtedness.
5.3 Notwithstanding any prior revocation, termination, surrender or
discharge of this Agreement, the effectiveness of this Agreement shall
automatically continue or be reinstated, as the case may be, in the event that
(a) any payment received or credit given by the Bank in respect of the
Indebtedness is returned, disgorged or rescinded as a preference, impermissible
setoff, fraudulent conveyance, diversion of trust funds, or otherwise under any
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<PAGE>
applicable state or federal law, including, without limitation, laws pertaining
to bankruptcy or insolvency, in which case this Agreement shall be enforceable
against Debtor as if the returned, disgorged or rescinded payment or credit had
not been received or given, whether or not the Bank relied upon this payment or
credit or changed its position as a consequence of it; or (b) any liability is
imposed, or sought to be imposed, against the Bank relating to the environmental
condition of, or the presence of Hazardous Materials on, in or about, any
Property given as Collateral to the Bank whether this condition is known or
unknown, now exists or subsequently arises (excluding only conditions which
arise after any acquisition by the Bank of any such Property, by foreclosure, in
lieu of foreclosure or otherwise, to the extent due to the wrongful act or
omission of the Bank), in which case this Agreement shall be enforceable to the
extent of all liability, costs and expenses (including without limit reasonable
attorney fees) incurred by the Bank as the direct or indirect result of any
environmental condition or Hazardous Materials. In the event of continuation or
reinstatement of this Agreement, Debtor agree(s) upon demand by the Bank to
execute and deliver to the Bank those documents which the Bank determines are
appropriate to further evidence (in the public records or otherwise) this
continuation or reinstatement, although the failure of Debtor to do so shall not
affect in any way the reinstatement or continuation. If Debtor does not execute
and deliver to the Bank upon demand such documents, the Bank and each Bank
officer is irrevocably appointed (which appointment is coupled with an interest)
the true and lawful attorney of Debtor (with full power of substitution) to
execute and deliver such documents in the name and on behalf of Debtor.
5.4 This Agreement and all the rights and remedies of Bank under this
Agreement shall inure to the benefit of Bank's successors and assigns and to any
other holder who derives from Bank title to or an interest in the Indebtedness
or any portion of it, and shall bind Debtor and the heirs, legal
representatives, successors and assigns of Debtor.
5.5 If there is more than one Debtor, all undertakings, warranties and
covenants made by Debtor and all rights, powers and authorities given to or
conferred upon Bank are made or given jointly and severally.
5.6 In addition to Bank's other rights, any indebtedness owing from
Bank to Debtor can be set off and applied by Bank on any Indebtedness at any
time(s) either before or after maturity or demand without notice to anyone.
5.7 Bank assumes no duty of performance or other responsibility under
any contracts contained within the Collateral.
5.8 All notices given under this Agreement shall be given in the manner
set forth in the Floorplan Agreement (whether or not the Floorplan Agreement is
still in effect as of the date of the giving of any such notice).
5.9 A carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement under the Uniform Commercial Code
and may be filed by Bank in any filing office.
5.10 No single or partial exercise, or delay in the exercise, of any
right or power
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<PAGE>
under this Agreement, shall preclude other or further exercise of the rights and
powers under this Agreement.
5.11 The unenforceability of any provision of this Agreement shall not
affect the enforceability of the remainder of this Agreement.
5.12 No amendment or modification of this Agreement shall be effective
unless the same shall be in writing and signed by Debtor and an authorized
officer of Bank.
5.13 This Agreement constitutes the entire agreement of Debtor and Bank
with respect to the subject matter of this Agreement.
5.14 To the extent that any of the Indebtedness is payable upon demand,
nothing contained in this Agreement shall modify the terms and conditions of
that Indebtedness nor shall anything contained in this Agreement prevent Bank
from making demand, without notice and with or without reason, for immediate
payment of any or all of that Indebtedness at any time(s), whether or not an
Event of Default has occurred.
6. STATEMENT OF BUSINESS NAME, RESIDENCE AND LOCATION OF COLLATERAL.
Debtor warrants, covenants and agrees as follows:
6.1 Debtor's chief executive office is located in the County of
Seminole, State of Florida.
Mailing Address: 3786 Highway 17-92 South, Sanford, Fl 32771.
This location is leased by the Debtor.
6.2 (Intentionally Deleted)
6.3 Any other places of business of Debtor are indicated below:
none
6.4 Debtor's correct legal name is set forth at the end of this
Agreement, and Debtor also does business under the tradename "Don Mealey
Seminole Ford." During the past five years, Debtor has not conducted business
under any other name except as set forth in any appropriately labeled schedule
attached to this Agreement.
6.5 Until Bank is advised in writing by Debtor to the contrary, all
notices, requests and demands required under this Agreement or by law shall be
given to, or made upon, Debtor at the address indicated in Section 6.1 above.
6.6 The Collateral (or any records concerning the Collateral) will be
kept at Debtor's address(es) above and/or in the County of Seminole, State of
Florida.
Mailing Address: 3786 Highway 17-92 South, Sanford, Fl 32771.
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<PAGE>
This location is leased by the Debtor.
6.7 Debtor will give Bank not less than 90 days prior written notice of
all contemplated changes in Debtor's name, identity, corporate structure, and/or
any of the above addresses, but the giving of this notice shall not cure any
default caused by this change.
7. APPLICABILITY OF THIS AGREEMENT. This Agreement secures all of the
Indebtedness (as that term is defined herein), including without limitation the
following loan and credit transactions with Bank:
(1) $10,000,000.00 New Car Floorplan Line to Debtor.
(2) $1,000,000.00 Revolving Credit Facility to Debtor.
8. JURY WAIVER.
8.1 DEBTOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY
AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY
IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.
FIRST TEAM FORD, LTD., a Florida
limited partnership, by its sole general partner:
FIRST TEAM MANAGEMENT, INC., a Florida
corporation
By: _______________________________________________
W. Warner Peacock, as its Vice President
(CORPORATE SEAL)
Date executed: ______________, 1996
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Page 14
EXHIBIT 10.9.1
USED VEHICLE WHOLESALE BORROWING
BASE CREDIT LINE LOAN AGREEMENT
I. THE PARTIES
This Used Vehicle Wholesale Borrowing Base Credit Line Loan Agreement (the "Loan
Agreement') is made effective the 17th day of February, 1996, by and between
GENERAL MOTORS ACCEPTANCE CORPORATION, a New York corporation with a branch
operations office located at 3444 McCrory Place, Suite 200, Orlando, Florida
32803 ("GMAC") and FIRST TEAM INFINITI, LTD., a Florida limited partnership with
its principal business office located at 350 South Lake Destiny Road, Orlando,
Florida 32810 ("Borrower").
II. THE RECITALS
A. WHEREAS, GMAC is in the business of providing, among other things,
various credit accommodations to motor vehicle dealers, including
Borrower, for use in the purchase, sale, lease, and rental of motor
vehicles ("Dealership Financing"); and
B. WHEREAS, Borrower has requested and GMAC is willing to provide certain
credit and finance accommodations in the form of a discretionary
revolving borrowing base line of credit to finance the Borrower's
acquisition of certain used motor vehicles (the "Line of Credit") but
only in accordance with the terms and conditions of this Loan
Agreement.
III. THE AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual promises herein
contained, the sufficiency of which is hereby acknowledged, GMAC and Borrower
hereby agree as follows:
1. THE LINE OF CREDIT. Subject to all of the terms and conditions of
this Loan Agreement, GMAC hereby establishes an initial discretionary
revolving line of credit, not to exceed Five Hundred Thousand and
no/100 Dollars ($500,000.00) (the "Line of Credit").
(a) THE PURPOSE. The Line of Credit shall be used by the
Borrower to finance the direct acquisition and holding of Used
Motor Vehicles [as that term is defined in subparagraph
1(g)(ii)] in inventory for subsequent sale or
<PAGE>
lease. Borrower acknowledges that the fundamental nature and
character of the Line of Credit is a purchase money loan in
that the existence and use of the credit accommodations will
enable and facilitate the acquisition of Used Motor Vehicles
as inventory for Borrower.
(b) ADVANCES. Upon request made to GMAC by Borrower from time
to time, GMAC will loan and advance money directly to Borrower
or its designee under the Line of Credit ("Advance"). Such
request shall be in writing and presented to GMAC
substantially in the form of Exhibit 1(b) hereto with the
appropriate insertions (the "Request for Credit Line
Advance"). The first Advance made on or after the date of this
Loan Agreement shall be in an amount and shall be so used to
fully pay the total principal amount presently outstanding
under the used vehicle floorplan financing accommodations now
extant between Borrower and GMAC. The aggregate principal
amount of all Advances remaining unpaid from time to time are
deemed "Credit Line Advances."
(c) LIMITATION. Credit Line Advances shall at no time and in
no event exceed the lesser of Five Hundred Thousand and no/100
Dollars ($500,000.00) or the Collateral Formula Amount, as
that term is defined in subparagraph 1(g)(i); provided,
however, that if it does for any reason, the excess amount
shall be deemed to be part of the Line of Credit for all
intents and purposes under this Loan Agreement.
(d) ACCOUNT STATED. Each Advance shall be charged to the
Borrower's account on GMAC's books and records. GMAC will
render to Borrower a statement at least once each month of the
Borrower's account which, in the absence of manifest error,
shall constitute an account stated and shall be deemed to be
correct and accepted by and binding upon Borrower and
constitute conclusive evidence as to the existence and amounts
of the Credit Line Advances, unless GMAC receives a written
statement of the Borrower's exceptions thereto within ten (10)
days after such statement is rendered to the Borrower.
(e) PRINCIPAL REPAYMENT. In addition to the other amounts
Borrower is obligated to pay GMAC as herein set forth,
Borrower shall promptly and forthwith repay to GMAC the Credit
Line Advances, as follows:
(i) PERMISSIVE PREPAYMENT. The Credit Line Advances
may be prepaid in whole or in part at the option of
Borrower and without premium or penalty, provided,
however, that any partial prepayment shall be in
multiple amounts of ten thousand dollars.
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<PAGE>
(ii) MANDATORY REPAYMENT OF CREDIT LINE ADVANCES.
[A] So much of the Credit Line Advances must
be paid from time to time to ensure the Line of
Credit limitation of paragraph 1(c) is not exceeded.
[B] The full amount of the Credit Line
Advances must be paid immediately upon demand by
GMAC.
(f) INTEREST. The Credit Line Advances shall bear interest on
the principal amount of and from the date of each Advance to
the date of repayment in full of the Credit Line Advances.
Only one interest rate will apply to the Credit Line Advances
at any given time. The interest rate on each Credit Advance
will be determined from time to time at the Prime Rate plus
one percent per annum. The "Prime Rate" shall mean the rate of
interest publicly announced as being in effect from time to
time by a majority of the twelve (12) largest commercial banks
operating in the United States (the "Banks") as the "prime" or
"base" rate for computing interest on loans for borrowers of
the highest credit standing. In determining the Prime Rate
hereunder, GMAC's determination of the Banks and their
publicly announced prime or base rates shall be conclusive. No
change will be made in the Prime Rate unless there is a single
rate of interest which is publicly announced by at least seven
of the Banks as their prime or base rate. The Prime Rate as of
the date of this Agreement is Nine percent (9%).
Notwithstanding the foregoing, for the purposes of determining
the Prime Rate of Interest under this Loan Agreement, the
Prime Rate shall be considered to be five percent (5%) if the
Prime Rate established by said Banks at any time is a figure
which is less than 5% per annum. Interest shall be calculated
on the basis of a 360-day year for the number of actual days
outstanding. Interest shall be billed by GMAC monthly and
shall be due and payable immediately upon receipt. The parties
hereto intend to comply with applicable usury laws and the
aforesaid interest rate is to be construed in accordance with
this intent. The parties acknowledge that these laws may
change from time to time. If acceleration or other events
cause the interest contracted for, charged or received to be
in excess of the lawful maximum, Borrower will receive credits
so that the interest will comply with the law and in no event
will the interest contracted for, charged or received exceed
the legal maximum.
(g) SPECIAL DEFINITIONS.
(i) COLLATERAL FORMULA AMOUNT. The Collateral Formula
Amount shall be the aggregate of the following amounts, as
hereinafter described, as of the date of this Loan
Agreement, as
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<PAGE>
adjusted from time to time, and as certified in the
Certification Report required to be submitted to GMAC by
Borrower pursuant to paragraph 4 hereof, provided that the
actual Collateral Formula Amount shall at no time be less
than (i) the amount represented in the Monthly
Certification Report or (ii) the Credit Line Advances,
whichever is less:
[A] With respect to all Used Motor Vehicles
owned by Borrower, Fifty percent (50%) of the lesser
of (I) the actual and reasonable acquisition cost
(plus actual and reasonable reconditioning
expenditures) or (II) the current listed wholesale
value as provided in the current, local edition of
the National Automobile Dealers Association used car
guide using average condition and making no allowance
for special or additional equipment or features.
(ii) "Used Motor Vehicles" shall mean any
and all motor vehicles, cars, vans, passenger vehicles, and
light trucks which
[A] are then owned and held in inventory for
sale, lease, or rental by Borrower; and
[B] have been owned and held in inventory
for not more than ninety (90) days from original
acquisition by Borrower; and
[C] have been previously used and titled
under any state title certificate law (except if such
use and titling was for the exclusive purpose of
utilizing it as a demonstrator in promoting the sale,
lease, or rental of Borrower merchandise); and
[D] were originally acquired by Borrower,
exclusive of reconditioning expenditures, for not
less than Three Thousand Dollars ($3,000.00) per
motor vehicle; and
[E] are of any make, type, model, or age;
and
[F] are not otherwise customarily regarded
by GMAC in the ordinary course of its business as a
new motor vehicle; and
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<PAGE>
[G] are free from any other lien, security
interest, or encumbrance, except in favor of GMAC in
connection with this Loan Agreement; and
[H] include all parts, accessories,
instruments, or equipment originally installed
thereon.
2. SECURITY INTEREST AND COLLATERAL ASSIGNMENT. To secure (i) the
prompt and complete payment of the Credit Line Advances, (ii) the
payment and performance of any and all obligations and duties of
Borrower of any and all other debts, obligations or duties of Borrower
to GMAC now existing or hereafter arising by this Loan Agreement,
whether direct or indirect, absolute or contingent, or otherwise,
Borrower hereby pledges, assigns and grants to GMAC a security interest
in all inventory of motor vehicles meeting each of the conditions
described in subparagraphs 1(g)(ii)[A], [C], [E], and [H], including
but not limited to all Used Motor Vehicles, now existing or hereafter
acquired and wherever located, and any and all proceeds thereof, in
whatever form (the "Collateral"). Borrower shall execute and deliver to
GMAC one or more agreements, documents, and financing statements, in
form and substance satisfactory to GMAC, as may be required by GMAC to
grant and maintain a valid, perfected first lien or security interest
in the Collateral.
3. HANDLING OF COLLATERAL. With respect to the Collateral, Borrower shall:
(a) maintain, secure and protect it from diminution in value;
and
(b) keep it free and clear of the claims, liens, mortgage,
pledge, encumbrances, security interests and rights of all
others; and
(c) hold, control and dispose of the Used Motor Vehicles only
for the purpose of storing and exhibiting it for retail sale
or lease in the ordinary course of business; and
(d) permit GMAC full and complete access to it in order to
inventory, inspect and audit it, including review of
Borrower's books and records pertaining thereto; and
(e) insure it against all risks in such amounts and with a
carrier and deductibles acceptable to GMAC. Such insurance
policy shall name GMAC as loss payee, to the extent of its
interests therein and shall contain a cancellation provision
only upon thirty (30) days' prior written notice to GMAC; and
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<PAGE>
(f) will have good and marketable title to all of it.
4. MONTHLY CERTIFICATION REPORTS. Borrower shall furnish GMAC within
fifteen (15) days of the fifteenth and last day of each month a report
certified by the chief executive officer or the chief financial officer
of Borrower, in the form attached as Exhibit 4, detailing the
Collateral Formula Amount as of the reporting date ("Monthly
Certification Report"). The Monthly Certification Report submitted as
of a month-end date shall have attached to it a complete and detailed
listing of all Used Motor Vehicles, in the form attached to Exhibit 4.
GMAC may, in its sole discretion, increase the frequency of such
reports and demand such a report at any time. The terms set forth in
the Monthly Certification Report shall be part and parcel of this Loan
Agreement.
5. RIGHTS AND REMEDIES OF GMAC. Upon the occurrence of any of the
following: (a) a default by Borrower in the payment, performance or
observance of any obligation or covenant under this Loan Agreement or
under any other agreement now or hereafter entered into with GMAC; (b)
the institution of a proceeding in bankruptcy, receivership or
insolvency by or against Borrower or its property; (c) if GMAC shall
deem itself insecure based on its knowledge of any event, occurrence,
circumstance or fact not directly caused by GMAC, which in the
reasonable judgment of GMAC will have a material adverse effect on the
Collateral, or on the collection by GMAC under any guaranty of the
obligations of Borrower hereunder or if any substantial portion of
Collateral is in danger of misuse, loss, seizure or confiscation; GMAC
may take immediate possession of Collateral without demand or further
notice and without legal process. In furtherance thereof, Borrower
shall, if GMAC so requests, assemble Collateral and make it available
to GMAC at a reasonable, convenient place designated by GMAC. GMAC
shall have the right, and Borrower hereby authorizes and empowers GMAC,
to enter upon the premises wherever Collateral may be and remove same.
In addition, GMAC shall have the right to exercise one or more of the
following remedies:
(a) institute proceedings to collect all or a portion of the
Credit Line Advances and to recover a judgment for the same
and to collect upon such judgment out of any property of the
Borrower wherever situated;
(b) to offset and apply any monies, credits or other proceeds
of property of Borrower that has or may come into possession
or under the control of GMAC against any amount owing by
Borrower to GMAC;
(c) sell or lease the Collateral, or any portion thereof,
after five days' written notice at public or private sale for
the account of the Borrower.
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<PAGE>
Borrower agrees that the sale by GMAC of any property repossessed by
GMAC to the seller thereof, or to any person designated by such seller
at the invoice cost thereof to Borrower less any credits granted to
Borrower with respect thereto and reasonable costs of transportation
and reconditioning, shall be deemed to be a commercially reasonable
means of disposing of the same. Borrower further agrees that if GMAC
shall solicit bids from three or more other dealers in the type of
property repossessed by GMAC hereunder, any sale by GMAC of such
property in bulk or in parcels to the bidder submitting the highest
cash bid therefor also shall be deemed to be a commercially reasonable
means of disposing of the same. Notwithstanding the foregoing, it is
expressly understood that such means of disposal shall not be
exclusive, and that GMAC shall have the right to dispose of any
property repossessed hereunder by any commercially reasonable means.
GMAC's remedies hereunder are cumulative and may be enforced
successively or concurrently. Borrower shall pay all expenses and
reimburse GMAC for any expenditures, including reasonable attorney fees
and legal expenses, in connection with GMAC's exercise of any of its
rights and remedies under this Loan Agreement. In addition to the
rights specified herein, all the rights and remedies afforded GMAC by
applicable law shall apply.
6. TERMINATION. This Loan Agreement is effective until terminated upon
the earlier of any event described in subparagraph 5(a), (b), or (c) or
sixty (60) days after receipt of written notice of termination sent by
either party to the other. All rights and remedies of GMAC or duties
and obligations of Borrower extant upon termination of this Loan
Agreement shall continue in full force and effect until all obligations
are paid in full.
7. SUSPENSION. GMAC may, in its sole and absolute discretion and
judgment, increase, decrease, change, or suspend its obligation to make
Advances under the Line of Credit.
8. NOTICES. All notices, requests, and demands shall be in writing and
be given to or made upon the respective parties at the addresses set
forth in Section I of this Agreement, or to such other address as
either party shall designate for itself in writing to the other party.
Notice shall be deemed given when sent to the addressee and may include
hand delivery, overnight courier, certified mail, or electronic written
transmission by public or private means.
9. RIGHTS AND REMEDIES NOT WAIVED. No course of dealing between the
Borrower and GMAC or any failure or delay on the part of GMAC in
exercising any rights or remedies hereunder shall operate as a waiver
of any rights or remedies of GMAC and no single or partial exercise of
any rights or remedies hereunder shall operate as a waiver or preclude
the exercise of any other rights or remedies hereunder.
-7-
<PAGE>
10. COMPLETE AGREEMENT. Except as otherwise provided or referred to herein,
there are no other agreements or understandings, either oral or in
writing, between the parties affecting this Loan Agreement or relating
to any of the subject matters covered by this Loan Agreement. No
agreement between GMAC and Borrower which relates to matters covered
herein, and no change in, addition to (except the filling in of blank
lines), or erasure of any printed portion of this Loan Agreement will
be binding unless it is approved in a written agreement executed by a
duly authorized representative of each party.
11. BINDING EFFECT. This Loan Agreement shall be binding upon the
parties' successors and assigns provided, however, that Borrower shall
have absolutely no right of assignment absent prior written consent of
GMAC.
12. SEVERABILITY. Any provision hereof prohibited by law shall be
ineffective to the extent of such prohibitions without invalidating the
remaining provisions hereof.
13. GOVERNING LAW. This Loan Agreement shall be construed in accordance
with and governed by the laws of the State of Florida.
14. CAPTIONS. The captions of the various sections and paragraphs of this
Loan Agreement have been inserted only for the purposes of convenience;
such captions are not a part of this Loan agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Loan Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Loan Agreement to be
executed by its duly authorized representative effective the date first above
written.
FIRST TEAM INFINITI, LTD., GENERAL MOTORS ACCEPTANCE
a Florida limited partnership CORPORATION, a New York
("Borrower") corporation ("GMAC")
By: First Team Management, Inc., By:_________________________________
a Florida corporation
Its:________________________________
By:_____________________
Print Name:_____________
As:_____________________
-8-
<PAGE>
STATE OF ___________ )
COUNTY OF _________ )
The foregoing instrument was acknowledged before me this ____ day of
______________, 1996*, by _____________________________, as ______________ of
FIRST TEAM MANAGEMENT, INC., a Florida corporation, the General Partner of FIRST
TEAM INFINITI, LTD., a Florida limited partnership, on behalf of the corporation
and partnership. He [is personally known to me] [has produced
___________________________ as identification].
_________________________________
Notary Public
Print name:______________________
My commission
expires:
STATE OF ___________ )
COUNTY OF _________ )
The foregoing instrument was acknowledged before me this ____ day of
______________, 1996*, by ________________________, as ___________________ of
GENERAL MOTORS ACCEPTANCE CORPORATION, a New York corporation, on behalf of the
corporation. [He] [She] [is personally known to me] [has produced
___________________________ as identification].
_________________________________
Notary Public
Print name:______________________
My commission
expires:
*(Reexecution Date)
-9-
<PAGE>
EXHIBIT 1(b) to Used
Vehicle Wholesale Borrowing
Base Credit Line Loan
Agreement Between GMAC and
_________ ("Borrower")
dated ________, 1995 (the
"Loan Agreement")
To: Attention: ___________________, Field Support Office Manager
General Motors Acceptance Corporation
REQUEST FOR CREDIT LINE ADVANCE
Pursuant to Paragraph 1(b) of the Loan Agreement, Borrower hereby requests an
Advance form GMAC to Borrower in the principal amount of $________________.
In connection with such Advance, the undersigned hereby certifies that:
1. Borrower's available Collateral Formula Amount, calculated pursuant to
subparagraph 1(g) of the Loan Agreement (i.e., Collateral Formula
Amount less outstanding Credit Line Advances), as of the date hereof is
$__________.
2. The amount of the Advance requested hereunder does not exceed the
amount of credit available pursuant to paragraph 1(c) of the Loan
Agreement.
3. No default under the Loan Agreement has occurred.
4. The proceeds of the Advance to Borrower requested hereby shall be
(INITIAL one):
______ delivered to Borrower in the form of a check drawn on
GMAC.
______ wire-transferred to Borrower's depository bank
account number _________________, located at the
following financial institution:
____________________ (Name)
____________________ (Address)
____________________
ABA Routing No. ________________
Certified as of __________________________.
________________________________________
Borrower
Preparer's Name_____________________
Preparer's Title______________________
Preparer's Signature__________________
-10-
<PAGE>
As of _______________, 1995 EXHIBIT 4 to Used Vehicle Wholesale
Borrowing Base Credit Line Loan
Agreement Between GMAC and
_____________________ ("Borrower")
dated ___________, 1995 (the "Loan
Agreement")
To: Attention:________________________, Field Support Office Manager
General Motors Acceptance Corporation
MONTHLY CERTIFICATION REPORT
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Used Motor Vehicles [see Paargraph. 1(g)] .................. $___________ x __% = $_________________
Outstanding Credit Line Advances (subtract) [see Paragraph. 1(b)]......................[$___________]
Available Collateral Formula Amount [see Paragraph. 1(c)]....................................$______
</TABLE>
The undersigned hereby certifies that as of the date hereof, the above
information and the attached list of Vehicles consisting of ___ pages is true
and correct and that there exists no default under the Loan Agreement.
The Monthly Certification Report of Borrower shall be subject to GMAC's
approval. No failure by GMAC to provide notice of approval or notice of
disapproval shall limit or constitute a waiver of any of the rights or remedies
of GMAC hereunder or under any other loan document. Notwithstanding anything
herein to the contrary and notwithstanding that GMAC may have previously
approved any Used Motor Vehicle for inclusion in the Collateral Formula Amount
at a specified value, GMAC may, at any time and from time to time, reevaluate
the value of any Used Motor Vehicle included in the Collateral Formula Amount.
Incident to any such reevaluation, the Borrower shall promptly provide to GMAC
any materials GMAC may reasonably require. GMAC, in its sole and absolute
discretion, may determine as a result of any such revaluation to reduce the
amount which any Used Motor Vehicle contributes to the Collateral Formula Amount
or to exclude such amount of any Used Motor Vehicle entirely, which
determination shall be conclusive and binding in the absence of manifest error.
If GMAC so determines that the Collateral Formula Amount of Borrower is to be
reduced, GMAC shall give written notice thereof to the Borrower stating the
amount of the reduction, the Used Motor Vehicle affected and the nature of the
action taken by GMAC, and the reduction shall be effective upon GMAC's issuance
of that notice.
_________________________________
Borrower
Preparer's Name_____________________
Preparer's Title____________________
Preparer's Signature________________
-11-
EXHIBIT 10.9.2
FIRST AMENDMENT TO USED VEHICLE
WHOLESALE BORROWING BASE CREDIT LINE LOAN AGREEMENT
THIS FIRST AMENDMENT TO USED VEHICLE WHOLESALE BORROWING BASE CREDIT
LINE LOAN AGREEMENT (the "Amendment") made and entered into this _______ day of
___________, 1996, by and between FIRST TEAM INFINITI, LTD., A FLORIDA LIMITED
PARTNERSHIP, FORMERLY KNOWN AS I-4 DESTINY, LTD., A FLORIDA LIMITED PARTNERSHIP
(the "Debtor"), and GENERAL MOTORS ACCEPTANCE CORPORATION, A NEW YORK
CORPORATION, of Detroit, Michigan, with a branch office in Orange County,
Florida ("GMAC").
R E C I T A L S:
A. I-4 DESTINY, LTD., a Florida limited partnership and GMAC entered
into that certain Used Vehicle Wholesale Borrowing Base Credit Line Loan
Agreement dated March 29, 1995 ("Used Vehicle Wholesale Agreement"),
establishing a Line of Credit (as defined in the Used Vehicle Wholesale
Agreement). The aggregate principal amount of all Credit Line Advances (as
defined in the Used Vehicle Wholesale Agreement) outstanding from time to time,
were not to exceed the lesser of Five Hundred Thousand and 00/100 Dollars
($500,000.00) or the Collateral Formula Amount (as defined in the Used Vehicle
Wholesale Agreement).
B. I-4 DESTINY, LTD., a Florida limited partnership, has changed its
name to FIRST TEAM INFINITI, LTD., A FLORIDA LIMITED PARTNERSHIP.
C. The Debtor has made application to GMAC for an increase in the Line
of Credit and GMAC has agreed to increase the amount of the Line of Credit.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged by all parties, the parties hereto agree as
follows:
1. RECITALS. The above recitals are true and correct and incorporated
herein by reference.
2. AMENDMENTS TO USED VEHICLE WHOLESALE AGREEMENT. The Used Vehicle
Wholesale Agreement is amended as follows:
(a) The address for GMAC in the first paragraph of the Used
Vehicle Wholesale Agreement is amended to read: 3504 Lake Lynda Drive, Suite
200, Laurel Building, Orlando, Florida 32817-1488.
(b) The first paragraph of Paragraph 1 is deleted in its
entirety and the following shall be substituted in lieu thereof:
1. THE LINE OF CREDIT. Subject to all of the terms and
conditions of this Loan Agreement, GMAC hereby establishes an
initial discretionary revolving line of credit, not to exceed
Seven Hundred Fifty Thousand and no/100 Dollars ($750,000.00)
(the "Line of Credit").
(c) Paragraph 1 C. is deleted in its entirety and the
following shall be substituted in lieu thereof:
C. LIMITATIONS. Credit Line Advances shall at no time and in
no event exceed the lesser of Seven Hundred Fifty Thousand and
no/100 Dollars ($750,000.00) or the Collateral Formula Amount,
as that term is defined in subparagraph 1(g)(i); provided,
however, that if it does for any reason, the excess amount
shall be deemed to be
<PAGE>
part of the Line of Credit for all intents and purposes under
this Loan Agreement.
3. SURVIVAL. All covenants, agreements, representations and warranties
made in connection with this Amendment and any documents executed by the Debtor
shall survive the borrowing hereunder and shall be deemed to have been relied
upon by GMAC. All statements contained in any certificate or other document
delivered to GMAC at any time by or on behalf of the Debtor pursuant hereto
shall constitute representations and warranties by the Debtor.
4. LAWS. This Amendment shall be interpreted according to the laws of
the State of Florida and shall be binding upon and inure to the benefit of each
of the parties hereto and their respective legal representatives, successors and
assigns; provided, however, the Debtor shall not assign or transfer its rights
or obligations hereunder without the prior written consent of GMAC.
5. ATTORNEYS' FEES, COSTS. In any litigation arising out of this
Amendment between the parties, the prevailing party shall be entitled to recover
reasonable attorneys' fees and costs including, but not limited to, fees and
costs incurred in all matters of collection and enforcement, construction and
interpretation, before, during and after suit, trial, arbitration proceedings
and appeals, and shall include hourly charges for work performed by paralegals
or other staff members working under the supervision of an attorney
(collectively, "Attorneys' Fees").
6. TIME. Time is of the essence of this Amendment. Time periods herein
of less than six (6) days shall exclude Saturdays, Sundays and state or national
legal holidays. Any time period provided for in this Amendment that ends on
Saturday, Sunday or a legal holiday shall extend to 5:00 p.m. on the next
business day.
7. DOCUMENTARY STAMPS. In the event that any of the transactions herein
contemplated shall at any time be subject to any form of transactional tax such
as a documentary stamp tax or intangible tax, the Debtor agrees to pay such tax
when due or to immediately reimburse GMAC in the event that GMAC is required to
pay such tax, and Debtor shall pay to GMAC any penalties which might be assessed
on same.
8. MISCELLANEOUS.
(a) At the request of GMAC, in its sole and absolute discretion,
the Debtor shall sign a Business Purpose Secured Promissory Note in favor of
GMAC.
(b) Except as specifically modified by this Amendment, the
terms, covenants, conditions, and obligations of the Used Vehicle Wholesale
Agreement shall remain unchanged and in full force and effect.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment on the day
and date above written.
DEBTOR:
FIRST TEAM INFINITI, LTD., a
Florida limited partnership
BY: FIRST TEAM
MANAGEMENT, INC.,
a Florida corporation,
its General Partner
_____________________________ BY:
Signature John Lumpkin
Assistant Secretary
_____________________________
Print name
_____________________________
Signature
_____________________________
Print name
GMAC:
GENERAL MOTORS
ACCEPTANCE CORPORATION,
a New York corporation
_____________________________ BY:
Signature Print Name:
As:
_____________________________
Print name
_____________________________
Signature
_____________________________
Print name
-3-
<PAGE>
STATE OF FLORIDA )
COUNTY OF ORANGE )
The foregoing instrument was acknowledged before me this ______ day of
__________, 1996, by JOHN LUMPKIN., as Assistant Secretary of FIRST TEAM
MANAGEMENT, INC., A FLORIDA CORPORATION, on behalf of the corporation, as
General Partner of FIRST TEAM INFINITI, LTD., A FLORIDA LIMITED PARTNERSHIP,
FORMERLY KNOWN AS I-4 DESTINY, LTD., A FLORIDA LIMITED PARTNERSHIP, on behalf of
the partnership. He [is personally known to me] OR [has produced a Florida
driver's license as identification].
Notary Public
Print Name:
My commission expires:
STATE OF FLORIDA )
COUNTY OF ORANGE )
The foregoing instrument was acknowledged before me this ____ day of
______________, 1996, by _________________, as ____________ of GENERAL MOTORS
CORPORATION, A NEW YORK CORPORATION, on behalf of the corporation. He [is
personally known to me] OR [has produced a Florida driver's license as
identification].
Notary Public
Print name:
My commission expires:
-4-
EXHIBIT 10.10.1
RENEWAL FLOORPLAN LINE-OF-CREDIT NOTE
$1,750,000.00 ___________, 1997
FOR VALUE RECEIVED, the undersigned, TALLAHASSEE IMPORTS,
INC., a Florida corporation, and INFINITI OF TALLAHASSEE, INC., a Florida
corporation (collectively, the "Borrower"), jointly and severally, promise to
pay to the order of SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, a
national banking association organized and existing under the laws of the United
States of America (the "Lender"), having a mailing address of Post Office Box
4999, Orlando, Florida 32802-4999 (Attention: Wholesale Finance Department),
the principal sum of ONE MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS
($1,750,000.00), together with interest on the principal balance from time to
time remaining unpaid from the date hereof at the applicable interest rate
hereinafter set forth, in lawful money of the United States of America which
shall be legal tender in payment of all debts at the time of payment, said
principal and interest to be paid over a term, at the times, and in the manner
following, to-wit:
INTEREST RATE.
Subject to the provisions below relating to the interest rate
applicable if Borrower does not timely make an interest rate
selection, interest shall accrue on the unpaid principal
amount hereof from time to time outstanding at the variable
rate of two hundred basis points (2%) above the reserve
adjusted LIBOR Rate (as defined below) from the date hereof
until such principal amount is paid in full. The Interest
Periods (as hereinafter defined) between the date hereof and
the date of payment in full of the principal amount hereof
shall, unless no interest rate selection is made by Borrower,
be divided into successive periods of one (1), two (2), three
(3), six (6), or twelve (12) months as selected by Borrower in
accordance with the terms hereinbelow, or such longer period
as may be agreed upon (in writing) by Borrower and Lender,
with each such period being an "Interest Period". The initial
Interest Period shall begin on the date hereof and each
subsequent Interest Period shall begin on the last day of the
immediately preceding Interest Period. The duration of each
Interest Period shall be selected by the Borrower by written
notice to Lender received by 10:00 a.m. (New York City time)
at least two (2) Business Days prior to the first day of such
Interest Period selected, PROVIDED, HOWEVER, that if the
Borrower fails to select the duration of any Interest Period
by providing written notice to Lender of such selection at
least two (2) business days prior to the expiration of the
then applicable Interest Period, the duration of such Interest
Period shall run until the date of the beginning of the next
Interest Period (as a result of Borrower providing notice of
its election to return to a selected LIBOR Rate) and interest
shall accrue during said
- -------------------------------------------------------------------------------
THIS INSTRUMENT IS BEING EXECUTED AND DELIVERED SOLELY FOR THE PURPOSE OF
RENEWING THAT CERTAIN PROMISSORY NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF
$1,750,000.00 EXECUTED BY TALLAHASSEE IMPORTS, INC., A FLORIDA CORPORATION,
D/B/A INFINITI OF TALLAHASSEE, DELIVERED TO SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION, FORMERLY KNOWN AS SUN BANK, NATIONAL ASSOCIATION, ON
AUGUST 10, 1994.
<PAGE>
period at the Prime Rate (as hereinbelow defined) less 50
basis points (0.5%). As used herein "LIBOR Rate" means the
interest rate per annum equal to the rate of interest at which
deposits in United States dollars are offered to the principal
office of the Lender by prime banks in the London interbank
market at 11:00 a.m. (London time) as of the day (the "Rate
Date") two Business Days prior to the first day of the
selected Interest Period for a period equal to such Interest
Period. The "reserve adjusted LIBOR Rate" means the LIBOR Rate
divided by a percentage equal to 100% minus the reserve
percentage, if any, applicable to Lender during such Interest
Period under applicable regulations of the Board of Governors
of the Federal Reserve System with respect to Eurocurrency
Liabilities (as defined in Regulation D, or any successor
regulation thereof, of such Board) having a duration equal to
such Interest Period. The term "Prime Rate" as used herein
shall mean and be defined as the interest rate per annum
announced by SunTrust Banks of Florida, Inc., to be its Prime
Rate (which interest rate is only a benchmark, is purely
discretionary and is not necessarily the best or lowest
interest rate charged borrowing customers of any subsidiary
bank of SunTrust Banks of Florida, Inc.).
Interest shall be calculated on the basis of a three hundred
sixty (360) day year and charged for the actual number of days
elapsed in an interest period. In no event shall the amount of
interest due or payments in the nature of interest payable
hereunder exceed the maximum rate of interest allowed by
applicable law, as amended from time to time, and in the event
any such payment is paid by the Borrower or received by the
Lender, then such excess sum shall be credited as a payment of
principal, unless the Borrower shall notify the Lender, in
writing, that the Borrower elects to have such excess returned
to it for its worth.
PRINCIPAL AND INTEREST PAYMENTS.
Monthly interest payments (each a "Monthly Interest Payment")
shall be due on the first day of each calendar month for the
immediately preceding calendar month; provided, however, that
the installment of interest due on February 1, 1997 (as
hereinbelow required) shall include interest accruing from the
date of this Note. The first Monthly Interest Payment shall be
due and payable on February 1, 1997, with subsequent monthly
interest payments being due on the first day of each
consecutive month thereafter. Payment of principal shall be
due on the date which is ten (10) days after demand. Said date
is herein referred to as the "Maturity Date".
It is expressly understood and agreed that this Note
constitutes a line of credit equal to the face amount hereof, which is available
to the Borrower. It is anticipated that the sums borrowed under this Note may
from time to time be repaid, in part or in full, and thereafter reborrowed. In
such case, this Note shall remain an enforceable obligation to the extent that
additional funds are available hereunder, notwithstanding the earlier repayment
hereof.
The Borrower has the right to prepay all or any part of
the outstanding principal sum, together with the accrued and
2
<PAGE>
unpaid interest thereon, at any time during the term of this Note, without
penalty or fee, upon two (2) days prior written notice by Borrower to Lender.
Any prepayment of this Note, shall not postpone the due date for any subsequent
payment.
THIS NOTE IS PAYABLE IN FULL ON THE MATURITY DATE. AT MATURITY THE BORROWER MUST
REPAY THE ENTIRE PRINCIPAL BALANCE OF THIS NOTE AND UNPAID INTEREST THEN DUE.
THE LENDER IS UNDER NO OBLIGATION TO REFINANCE OR RENEW THE NOTE AT THAT TIME.
THE BORROWER WILL THEREFORE BE REQUIRED TO MAKE PAYMENTS OUT OF OTHER ASSETS THE
BORROWER MAY OWN, OR THE BORROWER WILL HAVE TO FIND A LENDER WILLING TO LEND THE
BORROWER THE MONEY. IF THE BORROWER REFINANCES OR RENEWS THIS NOTE AT MATURITY,
THE BORROWER MAY HAVE TO PAY SOME OR ALL OF THE CLOSING COSTS NORMALLY
ASSOCIATED WITH A NEW LOAN EVEN IF THE BORROWER OBTAINS REFINANCING FROM THE
SAME LENDER.
The Lender may, at its option, collect a late charge not to
exceed five percent (5.0%) of any payment not made within ten (10) days after
coming due, to reimburse Lender for expenses of servicing the delinquent
payment.
This Note is secured by all property of the Borrower described
as "Collateral" in that certain Loan and Security Agreement dated August 10,
1994, as amended, (the "Loan Agreement"). The Loan Agreement, and all other
documents evidencing or securing repayment of this Note (all such documents
being herein collectively referred to as the "Loan Documents") also set forth
terms and provisions which may constitute grounds for acceleration of the
indebtedness evidenced by this Note, and additional remedies in the event of
default hereunder.
The Borrower does not intend or expect to pay, nor does the
Lender intend or expect to charge, accept or collect any interest greater than
the highest legal rate of interest which may be charged under the laws of the
State of Florida. If, from any circumstances whatsoever, fulfillment of any
provision of this Note or the Loan Agreement, at the time performance of said
provision shall be due, shall involve transcending the limit of validity
prescribed by the statutes of the State of Florida governing usury or any other
law of the State of Florida, then, IPSO FACTO, the obligation to be fulfilled
shall be reduced to the limit of such validity so that in no event shall
exaction be possible under this Note or the Loan Agreement in excess of the
limit of such validity, but such obligation shall be fulfilled to the limit of
such validity. If, under any circumstances whatsoever, interest in excess of the
limit of such validity will have been paid by the Borrower in connection with
the indebtedness evidenced by this Note, such excess shall be applied to the
unpaid and outstanding principal due under this Note, and not to the payment of
interest. The provisions of this paragraph shall control every other provision
of all other agreements executed by Borrower or Lender in connection with this
transaction.
It is agreed that any sums which shall not be paid when due,
whether maturing by lapse of time or by reason of acceleration, whether
principal, interest or money owing for advancements by the Lender pursuant to
the terms of the Loan Agreement securing this Note, shall bear interest at the
rate of eighteen percent (18%) per annum.
If default be made in the payment of any of the sums or
interest mentioned herein or in said Loan Agreement, or other Loan Documents, or
if default be made in the performance of or compliance with any of the covenants
and conditions contained herein or in the Loan Agreement or other Loan
Documents, and such default continues for a period of ten (10) days after
written notice thereof by Lender, then in any or all of such events, at the
option of the Lender, following the expiration of applicable
3
<PAGE>
grace periods provided in the Loan Agreement, if any, and without notice, the
entire amount of principal of this Note, together with all interest then
accrued, shall become and be immediately due and payable. Failure on the part of
the Lender to exercise any right granted herein or in the aforesaid Loan
Agreement or other Loan Documents shall not constitute a waiver of such right or
preclude the subsequent exercise thereof.
In the event this Note is placed in the hands of any attorney
for collection, or in case Lender shall become a party either as plaintiff or as
defendant in any suit or legal proceeding in relation to the property described
or the lien created in said Loan Agreement or for the recovery or protection of
the indebtedness represented by this Note or the property given as security
therefor, the Borrower will repay, on demand, all costs and expenses arising
therefrom, including, without limitation, reasonable attorneys' fees, together
with all attorneys' fees, costs and expenses incurred by the Lender in
connection with any bankruptcy proceeding involving any person liable hereunder
or any person who might now have or hereafter acquire a record interest or other
interest in the mortgaged property and other property securing repayment of sums
evidenced by this Note, whether or not there exists any default hereunder,
including by way of example, but without limitation, all attorneys' fees, costs,
and expenses incurred in connection with motions for relief from the automatic
stay and adequate protection, proofs of claim and objections thereto, motions to
dismiss or convert bankruptcy cases, approval of disclosure statements and
objections thereto, confirmation of plans of reorganization and objections
thereto, litigation involving preference and other avoidance powers, motions to
value collateral, objections to the sale or use of collateral, and any and all
other matters pertaining to any bankruptcy case affecting this Note, the Loan
Agreement, other Loan Documents, or the enforcement thereof, together with
interest on such costs and expenses at the highest rate allowed by law until
paid, and together with sales taxes thereon, if any.
The maker, endorsers and guarantors hereof, if any, and all
others who may be or become liable for all or any part of the obligation
represented by this Note, severally waive presentment for payment, protest, and
notice of protest and non-payment, and consent to any number of renewals or
extensions of time of payment hereof. Any such renewals or extensions of time
may be made without notice to any of said parties and without affecting their
liability. In addition, each maker, endorser, or guarantor and all others who
may be or become liable for all or any part of the obligation represented by
this Note agree that the Lender may without notice, and without regard to the
consideration, if any, paid therefor, release or substitute any part of the
property given as security for the repayment of the indebtedness represented
hereby without releasing any other property given as security for such
indebtedness or may release any person liable for the repayment of the
indebtedness represented hereby without releasing any other person obligated on
or for the repayment of the indebtedness evidenced by this Note.
If and whenever this Note shall be assigned and transferred,
or negotiated, the holder hereof shall be deemed the "Lender" for all purposes
under this Note.
This Note may not be changed orally, but only by an agreement
in writing, signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought. It is the intention of the parties hereto
that the terms and provisions of this Note are to be construed in accordance
with and governed by the laws of the State of Florida, except as such laws may
be preempted by any federal law controlling the rate of interest which may be
charged on account of this Note.
4
<PAGE>
Time is of the essence in interpreting the terms and provisions of this Note.
The rights, remedies and powers of Lender, as provided in this
Note, and the other Loan Documents, and in all other security documents given at
any time to secure the payment hereof, are cumulative and concurrent, and may be
pursued singly, successively or together against Borrower, the property
described in the Loan Agreement, any guarantor hereof and any other security
given at any time to secure the payment hereof, all at the sole discretion of
Lender.
Borrower hereby consents and agrees that, in any actions
predicated upon this Note, venue is properly laid in Orange County, Florida and
that the Circuit Court in and for Orange County, Florida, shall have full
jurisdiction to determine all issues arising out of or in connection with the
execution and enforcement of this Note. Borrower waives to the fullest extent
for itself, its successors and assigns and all persons now or at any time liable
for payment of this Note, to the fullest extent permitted under the laws of the
State of Florida, any right, power, privilege or prerogative to demand a jury
trial with respect to any and all issues arising out of or in connection with
the execution, delivery and/or enforcement of this Note or the transactions
contemplated in the other Loan Documents, (including but not limited to any
claims, cross-claims or third party claims).
The term "Borrower" as used herein in every instance shall
include the Borrower's successors, legal representatives and assigns, including
all subsequent grantees, either voluntarily by act of the Borrower or
involuntarily by operation of law and shall denote the singular and/or plural
and the masculine and/or feminine and natural and/or artificial persons,
whenever and wherever the contexts so requires or properly applies. The term
"Lender" as used herein in every instance shall include the Lender's successors,
legal representatives and assigns, as well as all subsequent assignees,
endorsees and holders of this Note, either voluntarily by act of the parties or
involuntarily by operation of law.
The interest rate, late fee and other charges referenced in
this Note are authorized by Section 687.12, Chapter 655, and other provisions of
the Florida Statutes and applicable federal laws.
Borrowers' Address: TALLAHASSEE IMPORTS, INC., a
Florida corporation
2421 West Tennessee Street By:___________________________
Tallahassee, Florida 32302 John Lumpkin
Treasurer
INFINITI OF TALLAHASSEE, INC.,
a Florida corporation
2421 West Tennessee Street By:___________________________
Tallahassee, Florida 32302 John Lumpkin
Treasurer
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<PAGE>
STATE OF _______________
COUNTY OF ______________
On the ___ day of ______________, 1997 personally appeared
JOHN LUMPKIN, as the Treasurer of Tallahassee Imports, Inc., a Florida
corporation, and before me executed the attached Renewal Floorplan
Line-of-Credit Note dated as of ____________, 1997, in the principal amount of
One Million Seven Hundred Fifty Thousand Dollars ($1,750,000.00) payable by
Tallahassee Imports, Inc., a Florida corporation, and Infiniti of Tallahassee,
Inc. a Florida corporation, as Borrower, to SunTrust Bank, Central Florida
National Association, in the state and county aforesaid. Said person (check
one) [ ] is personally known to me, [ ] produced a driver's license (issued by a
state of the United States within the last five (5) years) as identification, or
[ ] produced other identification, to wit:_____________________________________.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal, in the state and county aforesaid.
-----------------------------------
Print Name:________________________
Notary Public, State of ___________
Commission No.:____________________
My Commission Expires:_____________
STATE OF _______________
COUNTY OF ______________
On the ___ day of ______________, 1997 personally appeared
JOHN LUMPKIN, as the Treasurer of Infiniti of Tallahassee, Inc., a Florida
corporation, and before me executed the attached Renewal Floorplan
Line-of-Credit Note dated as of ____________, 1997, in the principal amount of
One Million Seven Hundred Fifty Thousand Dollars ($1,750,000.00) payable by
Tallahassee Imports, Inc., a Florida corporation, and Infiniti of Tallahassee,
Inc. a Florida corporation, as Borrower, to SunTrust Bank, Central Florida
National Association, in the state and county aforesaid. Said person (check
one) [ ] is personally known to me, [ ] produced a driver's license (issued by a
state of the United States within the last five (5) years) as identification, or
[ ] produced other identification, to wit:___________________.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal, in the state and county aforesaid.
-----------------------------------
Print Name:________________________
Notary Public, State of ___________
Commission No.:____________________
My Commission Expires:_____________
6
EXHIBIT 10.10.2
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is made
and entered into as of the ___ day of ____________, 19__, by and between
SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION (the "Bank"), with its
principal place of business located at 200 South Orange Avenue, Orlando, Florida
32801, and _________________________ (the "Borrower"), a _______ corporation,
with its principal office and place of business located at
___________________________________.
In consideration of the mutual promises contained herein and
to induce Bank to make loans or grant other financial accommodation to Borrower,
the parties agree as follows:
1. DEFINITIONS. As used herein:
a. The definitions of terms set forth in the
Florida Uniform Commercial Code, Chapters 671 - 680, Florida
Statutes, shall be controlling in this Agreement unless the
context clearly requires otherwise.
b. "ACCOUNT" shall mean an immediate right to
payment for inventory sold, rented or leased, and includes a
right to payment under a contract whether or not it has been
earned by performance.
c. "COLLATERAL" shall mean with regard to the Line of
Credit described in paragraph 2 hereof: (a) all of Borrower's Accounts
and Financed Inventory, whether now owned or hereafter acquired and all
products and proceeds of all of the foregoing; and (b) all property of
Borrower now or hereafter in possession of or under control of Bank in
any capacity whatsoever, including, but not limited to, any balance of
any trust, deposit, checking reserve or agency account and proceeds
thereof.
d. "FINANCED INVENTORY" shall mean all __________
Vehicle Inventory and/or Used Motor Vehicle Inventory held for sale,
lease or rent or being possessed for sale, lease or rent in Borrower's
business located at the above address or at any other address at which
the Borrower shall do business selling ___________ Vehicle Inventory,
as now or hereafter conducted, together with all increases, parts,
fittings, radios, accessories and special tools now or hereafter
affixed to any or any part thereof and all replacements of all or any
part thereof.
e. "GUARANTOR" shall mean ____________________.
f. "GUARANTY" shall mean that certain guaranty
agreement executed by the Guarantor in favor of the Bank
dated of even date herewith.
g. "LIABILITY" or "LIABILITIES" shall include the
Note and all liabilities or obligations (primary, secondary, direct,
contingent, sole, joint or several) due or to become due pursuant to
the Note and this Agreement, including costs, expenses, and attorneys'
fees (including attorneys' fees in any bankruptcy or appellate case or
proceeding), whether or not a lawsuit is instituted.
h. "___________ VEHICLE INVENTORY" shall mean new,
previously untitled ___________ automobiles, manufactured or sold by
_________________________ and held for sale, lease or rent or being
processed for sale, lease or rent in Borrower's business, as now or
hereafter conducted, together with all increases, parts, fittings,
radios, accessories and special tools now or hereafter affixed to any
or any part thereof and all replacements of all or any part thereof.
<PAGE>
i. "NOTE" shall mean the revolving-floorplan line of
credit promissory note in the maximum aggregate principal amount of
$__________, payable on demand, representing the Borrower's
indebtedness described in paragraph 2 hereof and otherwise payable
pursuant to the provisions of this Agreement, in form and substance
satisfactory to the Bank and any and all renewal or modifications
thereof and allonges thereto.
j. "PRIME RATE" shall mean the annual interest rate
announced by SunTrust Banks of Florida, Inc. from time to time as the
"Prime Rate" (which interest rate is only a bench mark, is purely
discretionary and is not necessarily the best or lowest rate charged
borrowing customers of any subsidiary bank of SunTrust Banks of
Florida, Inc.), with such change in the prime rate to be effective at
12:01 a.m. on the day any such change in the prime rate is announced by
SunTrust Banks of Florida, Inc.
k. "USED MOTOR VEHICLE INVENTORY" shall mean all
program/demonstrator and/or used motor vehicles, approved by the Bank,
and held for sale, lease or rent or being processed for sale, lease or
rent in Borrower's business, as now or hereafter conducted, together
with increases, parts, fittings, radios, accessories and special tools
now or hereafter affixed to any or any part thereof and all
replacements of all or any part thereof.
2. LINE OF CREDIT. Subject to the terms of this Agreement Bank
shall make available to Borrower a line of credit for the purchase by Borrower
of Financed Inventory. The actual principal balance due Bank at any given time
will be determined not by the face amount of the Note but by the aggregate
principal amount actually advanced by Bank to Borrower, plus interest thereon,
less any sums collected by Bank in payment of interest and in reduction of
principal of the loan or loans represented by the Note. The aggregate balance of
principal remaining outstanding at any one time for advances hereunder shall
never exceed the total of $___________, up to $___________ of which may be used
for the purchase of Used Motor Vehicle Inventory.
3. INTEREST RATE. Notwithstanding the rate of interest
specified on the Note, the interest payable under the Note shall accrue as
follows: with regard to the Note, for each advance hereunder, remaining unpaid,
shall initially bear interest from the date of the advance at a rate equal to
the Prime Rate for advances for all Financed Inventory; provided, however, that
the interest rate accruing under the Note shall never exceed the maximum lawful
rate, established from time to time, under the laws applicable to loans in
Florida. Any interest due on the loan made hereunder or any other Liability
shall be calculated on the basis of a year containing 360 days. The interest
rate may be adjusted from time to time by Bank.
4. ADVANCES. From the date hereof until the termination of
this Agreement as provided in paragraph 21 hereof, the Borrower shall be
entitled to advances of principal made in accordance with the terms hereof.
Advances pursuant hereto shall be used solely for the purchase of Financed
Inventory and shall be disbursed as follows:
a. For _____ Vehicle Inventory, Borrower shall cause
the manufacturer or seller from whom such Financed Inventory is
purchased to deliver directly to Bank: (i) the invoice or invoices
covering said item of Financed Inventory; (ii) the manufacturer's
statement of origin; (iii) a draft for the invoice price of the item of
Financed Inventory; and (iv) such other documents as Bank may request.
Upon receipt of the foregoing documents in form satisfactory to Bank,
Bank may upon receipt of same, pay the
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draft. Bank's payment of any draft covering the invoice
price will constitute an advance to Borrower hereunder.
b. Borrower may from time to time request loans for
the purchase of Used Motor Vehicle Inventory in an amount equal to the
less or (a) the Borrower's cost of acquiring the used motor vehicle or
(b) the Black Book "clean" value of any such motor vehicle. Each
request shall be in writing and shall be accompanied by: (i) the Motor
Vehicle Certificate of Title for the used motor vehicle; (ii) the
executed contract fore sale of the vehicle; and (iii) such other
documents as may be requested by Bank. Upon receipt of the foregoing
documents in form and substance satisfactory to Bank, Bank may upon
approval of same, pay the amount requested to the seller of the vehicle
and such payment shall constitute an advance to Borrower hereunder.
5. TRUST RECEIPTS. Borrower shall execute trust receipts with
respect to each unit of the Financed Inventory. Borrower hereby appoints Bank as
Borrower's attorney in Borrower's name and stead to: (a) execute, sign and seal
trust receipts describing the Financed Inventory so purchased on forms supplied
by Bank, a specimen copy being attached hereto and marked Exhibit "A" and by
reference made a part hereof; and (b) do and perform all and every act and thing
whatsoever requisite or necessary or proper to be done to carry out the terms of
this Agreement, for all intents and purposes as Borrower might or could do if
personally present. Borrower hereby ratifies and confirms all that Borrower's
attorney or its substitute shall lawfully do or cause to be done by virtue
hereof. Bank shall forthwith supply Borrower with a conformed copy of all trust
receipts so executed. Upon execution of such trust receipts the same are to be
deposited with and retained by Bank.
6. LINE OF CREDIT PAYMENTS. Notwithstanding any of the terms
hereof, upon the sale of any specific item of Financed Inventory, Borrower will
immediately pay to Bank the amount advanced by Bank for such item of Financed
Inventory less only any sums paid by Borrower to Bank and applied by Bank
against the amount advanced for the Financed Inventory. From the date Bank
advances sums in conjunction with the purchases of any specific item of Financed
Inventory until the sale thereof, Borrower shall pay Bank a principal reduction
of the amount so advanced on the specific item of Financed Inventory as provided
in Exhibit "B" attached hereto. Payment of interest accruing under the Note
shall be paid monthly, commencing ___________, 19__, and continuing on the first
day of each month thereafter throughout the term of this Agreement, with
principal payable on demand.
7. SECURITY INTEREST. As security for the payment of
all loans and advances now or in the future made hereunder,
including the Note, and for all other Liabilities, including any
extensions, renewals or changes in form of any thereof, Borrower
hereby assigns to Bank and grants to Bank a security interest in
the Collateral.
8. FEE. At the time any request for advance is made
with regard to any item of Financed Inventory, the Borrower shall
pay to the Bank a fee of One Dollar ($1.00) per item of Financed
Inventory.
9. OTHER OBLIGATIONS. So long as any Liability to Bank is
outstanding, Borrower will not without the prior written consent of Bank borrow
from anyone except Bank on security of, or pledge or grant any security interest
in, the Collateral to anyone except Bank, or permit any lien or encumbrance to
attach to the foregoing, or any levy to be made thereon, or any financing
statement (except Bank's financing statement) to be on file with respect
thereto.
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<PAGE>
10. FINANCIAL COVENANT. At all times during the term
of this Agreement, the Borrower shall maintain a financial
condition satisfactory to the Bank in its sole and absolute
discretion.
11. ADDITIONAL COVENANTS. Borrower shall: (a) immediately
notify Bank in writing of any change in the location of the place of business
where the bulk of Borrower's Financed Inventory is located or any change in the
location of the place of business where the records concerning Borrower's
Accounts are kept; (b) collect its Accounts and sell its Financed Inventory only
in the ordinary course of business; (c) keep accurate and complete records of
its Financed Inventory and Accounts; (d) pay and discharge when due all taxes,
levies and other charges on its Financed Inventory and on account of or in
connection with its Liabilities and notes evidencing the same, including
documentary tax stamps; (e) join with Bank in executing one or more financing
statements, notices, affidavits, or similar instruments in form satisfactory to
Bank, and such other instruments as Bank may from time to time request, and pay
the cost of filing the same in any public office deemed advisable by Bank; (f)
deposit with Bank any certificates of title issued with respect to any of the
Financed Inventory with notation thereon of the security interest hereunder,
which notation by proper public officer the Borrower will promptly obtain; (g)
give Bank (A) annually, within one hundred twenty (120) days of the expiration
of the respective fiscal years of each automobile dealership in which
_________________ has an ownership interest (collectively, the "___________
Dealerships"), a review quality financial statement with respect to each
___________ Dealership, prepared by a Certified Public Accountant acceptable to
the Bank, (B) monthly, within fifteen (15) days of the end of each month, the
internally prepared financial statements of each of the ___________ Dealerships,
certified by the Chief Financial Officer of each such dealership, and (C) such
other financial statements, reports, certificates, lists of purchasers of the
Collateral (showing names, addresses, and amount owing) and other data
concerning its collections, the Collateral and other matters as Bank may from
time to time specify or require; permit Bank or its nominee to examine all of
Borrower's records relating thereto at any time and to make extracts therefrom,
and to inspect and check the Collateral; (h) give Bank immediate written notice
(A) any adverse change in Borrower's financial condition, and (B) all threatened
or actual actions, investigations or proceedings affecting Borrower; (i)
maintain Borrower's principal demand and deposit accounts with Bank, maintaining
therein at all times sufficient balances for said accounts to be profitable to
Bank; (j) cause to be delivered to Bank personal financial statements, in form
and substance reasonably acceptable to the Bank and attested to by the
Guarantor, annually, within thirty (30) days of the one year anniversary date of
the most current personal financial statement on file with Bank; (k) cause to be
delivered to Bank the personal federal tax return of the Guarantor, annually,
within a reasonable time after same is filed with the Internal Revenue Service;
and (1) within ten (10) business days of the date hereof, deliver to the Bank
such UCC-3 termination statements and/or other documents or instruments
necessary to enable the Borrower to grant to the Bank a first priority security
interest in all Collateral.
12. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower
hereby represents and warrants to Bank that: (a) Borrower is a corporation duly
organized and validly existing under the laws of the State of Florida; (b)
Borrower has all the power necessary to own assets; (c) the execution of this
Agreement and the documents referred to herein have been duly authorized by the
requisite corporate action; (d) the person signing for the Borrower has been
duly authorized to do so; (e) in connection with each of Borrower's Accounts:
(i) it represents a bona fide complete transaction; (ii) the title of
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<PAGE>
Borrower to the Account and, except as against the purchaser, to any goods, is
absolute; (iii) the Account has not been transferred to any other person, and no
person, except Borrower has any claim thereto, or, with the sole exception of
Purchaser, to the goods; (iv) no setoff or counterclaim to such Account exists
and no agreement has been made with any person under which any deduction or
discount may be claimed, except regular discounts allowed by Borrower for prompt
payment; (f) in connection with Borrower's inventory Borrower is and will be the
absolute owner thereof; (g) Borrower is not a party to any agreement which, by
its terms or by operation of law, would conflict with this Agreement; (h) the
location where Borrower keeps the bulk of its Financed Inventory is at the
address stated in the preamble of this Agreement and the office where it keeps
its records concerning all of its Accounts is at the office of the Borrower at
________________________________________; (i) Bank's security interest in the
Collateral shall at all times be a first priority security interest; (j) no
material employee benefit plan maintained by Borrower (or any of its
subsidiaries or affiliates) which is subject to Part 3 of Subtitle B of Title I
of The Employee Retirement Income Security Act of 1974, as amended (hereafter
referred to as "ERISA") had a material accumulated funding deficiency (as
defined in /section/302 of ERISA) as of the last day of the most recent fiscal
year of such plan, or would have had such a deficiency if such year was the
first year of such plan; (k) no material liability to the Pension Benefit
Guaranty Corporation has been or is expected by Borrower (or its subsidiaries or
affiliates) to be incurred with respect to any such plan; (1) Borrower is not
required to contribute to a multi-employer pension plan (as defined in the
Multi-employer Pension Plan Amendments Act of 1980) and has no withdrawal
liability (as defined in such Act) to any multi-employer pension plan; and (m)
as of the date hereof, no material adverse change in the Borrower's financial
condition has occurred from the date of the Borrower's most recent fiscal year
end financial statements.
13. INSURANCE. Borrower shall, at Borrower's expense, acquire
and at all times maintain one or more policies of insurance covering Borrower's
Financed Inventory in such amounts, covering such risks and with such insurance
companies as may be satisfactory to Bank from time to time. Bank shall be named
as loss payee under such policy by New York standard or Union standard
endorsement. Certificates evidencing such insurance shall be delivered to Bank.
The policy and certificate shall provide that the policy is not cancellable on
less than ten (10) days notice to Bank. If Borrower fails to obtain and pay for
insurance as provided herein, then Bank may pay the premiums or acquire
insurance from another source and insure the interests of Bank and Borrower or
insure only the interests of Bank, without waiving or affecting any rights under
this Agreement. Every payment for insurance made by Bank shall bear interest
from the date thereof at the maximum rate allowed by law and each such payment
and interest thereon shall be secured by this Agreement. Bank shall be entitled
to retain and receive all experience rating credits which may accrue under or in
connection with any insurance which is procured by Bank pursuant to the
authorization contained herein.
14. COLLECTIONS. Bank shall have the right at any time and
from time to time, without notice to: (a) endorse all items of payment which may
come into Bank's possession or control and are payable to Borrower; (b) make
exchanges, substitutions or surrenders of Collateral; (c) insure Financed
Inventory to Bank's satisfaction if Borrower fails to do so and pay for the
same, and pay for the account of Borrower, any taxes, levies or other charges
affecting Borrower's Financed Inventory or upon or on account of this Agreement
or any Liability or any writing evidencing any Liability, which Borrower fails
to pay, and any such payment shall constitute a Liability of Borrower; (d)
notify purchasers that Accounts have been assigned to Bank, collect all
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<PAGE>
Accounts in Bank's or Borrower's name, and take control of any cash or noncash
proceeds of Accounts and of any Financed Inventory; (e) compromise, extend or
renew any account or deal with the same as it may deem advisable; and (f)
inspect any of the places of business of Borrower from time to time upon demand.
15. USE OF COLLATERAL. Until default, Borrower may: (a) use
its Financed Inventory in any lawful manner not inconsistent with this
Agreement and the terms of any insurance thereon; (b) sell its Financed
Inventory in the ordinary course of business; and (c) use and consume any raw
materials and supplies, the use and consumption of which is necessary to carry
on Borrower's business.
16. LOCATION OF FINANCED INVENTORY. Borrower agrees not to
remove or permit the removal of any Financed Inventory outside the
continental United States or Canada or transfer, dispose of or illegally or
improperly use said Financed Inventory.
17. CONDITIONS PRECEDENT. Prior to any advance being
made under this Agreement:
a. Borrower shall cause its landlord to execute
and deliver to Bank, a landlord's subordination agreement in
form and substance fully satisfactory to Bank;
b. the Borrower shall execute and deliver to
Bank the Note;
c. the Borrower shall deliver to Bank evidence
of insurance in accordance with paragraph 13;
d. the Borrower shall cause the Guarantor to
execute and deliver to Bank (i) a personal financial
statement on the Bank's form and (ii) an unconditional
guaranty fully satisfactory in form and substance to Bank;
e. the Borrower shall deliver to Bank evidence
of dealer approval from ____________________________________
along with an executed sales and service agreement and a
repurchase agreement satisfactory to Bank;
f. the Borrower shall deliver to Bank a copy of
the facility lease confirming the lease terms;
g. the Borrower shall deliver to Bank a properly
filed fictitious name affidavit, if necessary;
h. the Borrower shall deliver to the Bank such
UCC-3 termination statements and/or other documents or
instruments necessary to enable the Borrower to grant to the
Bank a first priority security interest in all Collateral;
i. the Borrower shall deliver to the Bank a
Secretary's Certificate and a Certificate of Resolution of
Board of Directors and Incumbency Certificate, each in form
and substance acceptable to the Bank; and
j. the Bank and ______________________________
shall enter into an Intercreditor Agreement in form and
substance satisfactory to the Bank in its sole and absolute
discretion.
18. DEFAULT AND REMEDIES. Borrower shall be in default under
this Agreement if: (a) at any time any warranty, representation, certificate
or statement of Borrower is not true, (b) any Liability or any part or
installment thereof or interest thereon is not paid when due, (c) any event of
default as defined in any note or other evidence of Liability held by Bank
should
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occur, (d) if Borrower should fail to observe or perform any agreement or term
hereof, or (e) the Guarantor defaults under the Guaranty. If Borrower is in
default under this Agreement or if Bank at any time feels insecure for any
reason whatsoever, then: (i) Borrower's rights, if any, to any further advances
or loans hereunder shall immediately terminate; (ii) Bank may, at its option,
thereupon or thereafter declare all Liabilities of Borrower to Bank, or any of
them selected by Bank (notwithstanding any provisions thereof) immediately due
and payable without demand or notice of any kind and the same thereupon shall
immediately become and be due and payable without demand or notice (but with
such adjustments, if any, with respect to interest or other charges as may be
provided for in the promissory note or other writing evidencing any Liability)
and such liabilities shall thereafter accrue interest at the highest rate
permitted by law; (iii) in addition to any other rights and remedies which Bank
may have, Bank shall have and may exercise immediately and without demand, any
and all the rights and remedies granted to a secured party upon default under
the Uniform Commercial Code; (iv) upon the request or demand of Bank, Borrower
shall, at Borrower's expense, assemble the Collateral and make it available to
Bank at a convenient place acceptable to Bank; (v) Borrower shall immediately
execute and deliver to Bank any and all instruments, documents, certificates of
title, or any similar items which Bank, in its sole discretion, deems necessary
to dispose of said Financed Inventory and Borrower hereby appoints Bank its
attorney in fact to execute, sign and seal any and all instruments, documents,
certificates of title or any similar items which the Bank, in its sole
discretion, deems necessary to dispose of the Collateral after default; and (vi)
Borrower shall pay to Bank on demand any and all costs and expenses, including
legal expenses and reasonable attorneys' fees, including costs, expenses and
reasonable attorneys' fees on appeal, incurred or paid by Bank in protecting and
enforcing Liabilities and the right of Bank hereunder, including Bank's right to
take possession of the Collateral and to hold, prepare for sale, sell and
dispose of the Collateral, whether or not a lawsuit is instituted. Any notice of
sale, disposition or other intended action by Bank, sent to Borrower at the
address of Borrower as may from time to time be shown on Bank's records, at
least five (5) days prior to such action, shall constitute reasonable notice to
Borrower although a shorter period of notice may also be reasonable. It shall be
commercially reasonable for Bank to sell the Collateral on a wholesale basis to
a dealer or dealers in new or used property of like kind to the Collateral, or
to sell to a purchaser directly or through a dealer in such new or used
property; but the enumeration of the foregoing methods of disposition are
without limitation on Bank's right to dispose of the Collateral by any other
manner or method (whether by sale, lease or otherwise) in a commercially
reasonable manner. Bank shall have the right to apply all or any part of any
surplus if any, from disposition of the Collateral to (or to hold same as a
reserve against) all or any Liabilities of Borrower to Bank, whether or not
they, or any of them, be then due, and in such order of application as Bank may
from time to time elect.
19. WAIVER. Borrower waives: (a) protest of all commercial
paper at any time held by Bank on which Borrower is in any way liable; (b)
notice of nonpayment at maturity of any and all accounts; and (c) except where
required hereby, notice of action taken by Bank. No waiver by Bank of any
default shall operate as a waiver of any other default or of the same default on
a future occasion. No delay or omission on the part of Bank in exercising any
right or remedy shall operate as waiver thereof, and no single or partial
exercise by Bank of any right or remedy shall preclude or affect any other or
further exercise thereof or the exercise of any other right or remedy.
20. SUCCESSORS AND ASSIGNS. All rights of Bank
hereunder shall inure to the benefit of Bank's successors and
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assigns. All obligations of Borrower shall bind the successors and assigns of
Borrower.
21. TERMINATION. This Agreement may be terminated by Borrower
by the payment of all Liabilities, if not earlier terminated as provided herein.
Bank may terminate this Agreement upon thirty (30) days written notice to
Borrower, mailed or delivered to the address shown in the preamble of this
Agreement or to the last known address of the Borrower or other party to whom
such notice is addressed, shown on the records of the Bank or otherwise known.
Upon the expiration of said thirty day period, Bank shall be under no obligation
to make further advances hereunder. Termination of this Agreement shall not in
any way affect the rights and liabilities of the parties hereunder relating to
loans made and Accounts, Financed Inventory or other Collateral pledged prior to
the date specified in such notice.
22. COSTS AND EXPENSES. Borrower shall pay upon demand: (a)
all costs and expenses arising out of or in connection with this Agreement,
including documentary stamp taxes, filing and recording fees and attorneys' fees
in connection with the preparation of this Agreement and related documents; and
(b) all service and administrative fees as may be charged by Bank from time to
time in connection with this Agreement, including Bank's customary fee for
processing trust receipts.
23. MISCELLANEOUS. Time is of the essence of this Agreement.
The provisions of this Agreement are cumulative and in addition to the
provisions of any liability and any note or other writing evidencing any
Liability secured by this Agreement, and Bank shall have all the benefits,
rights, and remedies of any liability and any note or other writing evidencing
any Liability secured hereby. The singular pronoun when used herein, shall
include the plural, and the neuter shall include the masculine and feminine.
Wherever possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provisions
of this Agreement shall be prohibited by or invalid under applicable law, such
provisions shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Agreement. The paragraph headings used herein are for convenience of
reference only and shall not be considered to expand, limit or otherwise
construe the terms of this Agreement.
24. PRIOR UNDERSTANDINGS. This Loan and Security Agreement
supersedes all prior understandings and agreements, whether written or oral,
among the parties hereto relating to the transactions provided for herein.
Agreed to as of the date first set forth above.
"BANK"
SUNTRUST BANK, CENTRAL
FLORIDA, NATIONAL ASSOCIATION
By:___________________________
Name:____________________
Title:___________________
"BORROWER"
__________________________, a
_______ corporation
By:___________________________
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Name:____________________
Title:___________________
(CORPORATE SEAL)
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ACKNOWLEDGEMENT OF GUARANTOR OF
LOAN AND SECURITY AGREEMENT
The undersigned Guarantor hereby acknowledges and consents to the terms
of the Loan and Security Agreement executed by and between SUNTRUST BANK,
CENTRAL FLORIDA, NATIONAL ASSOCIATION, and ____________________, a _________
corporation, dated of even date herewith.
Dated as of the ___ day of ____________, 19__.
Signed, sealed and delivered in the presence of:
- --------------------------- ------------------------------
- ---------------------------
STATE OF FLORIDA
COUNTY OF ___________
The foregoing instrument was acknowledged before me this ___
day of ____________, 19___, by ____________________. Said person (check one) |_|
is personally known to me, |_| produced a driver's license (issued by a state of
the United States within the last five (5) years) as identification, or |_|
produced other identification, to wit: ______________________________________.
-----------------------------------
Print Name:________________________
Notary Public, State of Florida
Commission No.:____________________
My Commission Expires:_____________
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Exhibit "A"
PAYMENT SCHEDULE
TYPE OF INVENTORY PAYMENT DUE DATE
A. New _________ Motor Vehicle Payment in full _____ (__)
Inventory years from finance date
B. Used Motor Vehicle Inventory __________ percent (__%) of
financed amount due at
________ (__) calendar days
from the finance date; and
Balance due at __________ (__)
calendar days from the finance
date
C. Demonstrator Motor Vehicles __________ percent (__%) per
calendar month for each
financed demonstrator vehicle
with over 1,000 miles
EXHIBIT 10.11
DRIVER'S MART/registered trademark/ RETAILER AGREEMENT
This Agreement, effective the _____ day of _______, 19___, is entered into by
Driver's Mart/registered trademark/ WORLDWIDE, INC. (DMV), AND
________________________________________.
(_____) a proprietorship;
(_____) a partnership;
(_____) a corporation, incorporated in the State of ________
on ___________ located in __________________;
(_____) a limited liability company (Retailer).
PURPOSE OF THE AGREEMENT
The principal purposes of this Agreement are to:
A. affirm the commitment of DMW and Retailer to adhere to the Driver's
Mart/registered trademark/" Philosophy and achieve the Driver's
Mart/registered trademark/ Mission,
B. identify the framework within which DMW and Retailer will jointly
act to fulfill their commitments to each other;
C. authorize Retailer to represent itself as a Driver's Mart/registered
trademark/' Retailer; and
D. identify other commitments, rights and responsibilities of DMW and
Retailer growing out of this mutual relationship.
1. DRIVER'S MART/registered trademark/ MISSION
The Mission of DMW is to develop a network of the world's best
retailers of used motor vehicles. DMW and its Retailers together aspire
to be leaders in on road transportation measured by quality, cost and
customer satisfaction through the integration of people, technology and
business systems.
2. DRIVER'S MART/registered trademark/ PHILOSOPHY
DMW believes that Retailers should develop and maintain a strong
relationship with Customers. To further the spirit of trust and respect
which is critical to the relationship with the Customer, DMW and its
Retailers will conduct business in an open and fair manner and pledge
their service, both as volunteers and as contributors, to the
communities where Customers reside.
3. RETAILER COMMITMENT TO MISSION AND PHILOSOPHY
In consideration of the mutual rights, benefits and obligations
contained herein, Retailer hereby agrees to adhere strictly to DMW's
standards and policies, upon which the Driver's Mart/registered
trademark/ System is founded, including, but not limited to, the
Driver's Mart/registered trademark/ Mission and Philosophy; DMW's
prescribed methods of making sales and delivering service; its Retail
Environmental Design (RED) package for the design, layout and
construction of facilities; its Market Area Approach to expansion; and
its emphasis on creating employee and customer enthusiasm, maintaining
an atmosphere of truth and openness for the conduct of business, and
providing exceptional value through extraordinary service, high quality
products and competitive prices. These standards and policies will
evolve over time through the mutual sharing of ideas and experience
between DMW and its Retailers.
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Retailer acknowledges that its strict adherence to DMW's standards and
policies strengthens brand equity and Customer acceptance of Driver's
Mart/registered trademark/ in the marketplace, and constitutes the
foundation of the Driver's Mart/registered trademark/ TI System under
which it conducts business.
4. SHARED RESPONSIBILITY
Consistent with the Driver's Mart/registered trademark/" Philosophy,
DMW and Retailer pledge to maintain the highest ethical standards in
all activities.
5. DISPUTE RESOLUTION PROCESS
A. EXCLUSIVE REMEDY
DMW and Retailer believe that their mutual commitment to the
Mission and Philosophy, and highest ethical standards, should
minimize the potential for disputes. The parties agree to
resolve disputes that do arise in good faith by negotiation.
If a matter has not been resolved within sixty (60) days of a
party's request for negotiation, any party to the dispute may
initiate mediation.
B. MEDIATION
If any dispute has not been resolved by negotiation, the
parties shall next attempt in good faith to settle the dispute
by mediation under the then current Center for Public
Resources ('CPR") Model Procedure for Mediation of Business
Disputes. The neutral third party shall be selected from the
CPR panels of Neutrals, with the assistance of CPR, unless the
parties otherwise agree.
C. LITIGATION
If and only if negotiation and mediation fail to resolve the
dispute, then any party to the dispute may resort to
litigation. In that event, DMW and Retailer agree that any
such action shall be filed in the Richmond Division of the
United States District Court for the Eastern District of
Virginia, and no other United States District Court, provided
the requirements of federal subject matter jurisdiction are
satisfied. If federal subject matter jurisdiction is lacking,
then DMW and Retailer agree that any action shall be brought
in the Circuit Court of the City of Richmond, Virginia, and in
no other state court. DMW and Retailer hereby consent to
submit to the personal jurisdiction of the two courts
specified in this section, and they agree not to object to
venue therein. DMW and Retailer each hereby waive their right
to trial by jury.
D. COSTS AND ATTORNEYS' FEES
DMW and Retailer agree that each party to any dispute shall
bear its own costs and attorneys' fees through negotiation and
mediation. Any fees and costs of CPR and a neutral third party
mediator incurred in connection with mediation shall be shared
equally by the parties to the dispute. If, however, litigation
is initiated, DMW and Retailer further agree that the
prevailing party shall be entitled to recover from the
non-prevailing party all reasonable costs and attorneys' fees
expended by the prevailing party in connection with
prosecuting or defending the lawsuit, including any such costs
or attorneys' fees expended on appeal.
E. EXCLUSIVITY OF DISPUTE RESOLUTION PROCESS
DMW and Retailer agree that the dispute resolution process in
this Article 5 shall be the exclusive mechanism for resolving
any dispute between them, including without limitation any
dispute arising out of or relating to this Agreement, its
creation, modification, or termination.
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6. AUTHORIZED RETAILER
Retailer has presented to DMW information regarding its qualifications
to he appointed a Driver's Mart/registered trademark/ Retailer.
Retailer and Retailer's Operator and Owner(s) have been evaluated and
found to satisfy DMW's standards. Retailer has also presented to DMW a
Market Area Plan for its assigned Area of Primary Responsibility (APR),
stating Retailer's proposal to develop and operate facilities in its
APR to represent Driver's Mart/registered trademark/ and DMW has
accepted the Plan.
In reliance upon these representations and submissions made by Retailer
and Retailer's commitment to the Driver's Mart/registered trademark/
Mission and Philosophy, DMW grants Retailer a non-exclusive right to
identify itself as an authorized Driver's Mart/registered trademark/
Retailer at the locations) approved by DMW. and a non-exclusive license
to use DMW's proprietary designations, including the mark Driver's
Mart/registered trademark/tm"', in connection with the products and
services Retailer will offer to customers at such approved locations).
7. RETAILER OPERATOR
A. PERSONAL OUALIFICATIONS;
DMW selects quality Retailer Owners who are committed to the
Driver's Mart/registered trademark/ TI Mission and Philosophy
and meet DMW's selection criteria. Retailer candidates with
experience in the automobile business must participate in a
selection process to demonstrate qualifications under DMW's
Retailer selection criteria.
B. MANAGEMENT RESPONSIBILITY
DMW and Retailer agree that the Retailer Operator has the
authority to exercise management control of the Retailer.
The ownership and management of Retailer and any other
arrangements necessary to comply with this Article are
described in Retailer's Market Area Plan.
8. TERM
If Retailer continues to meet all conditions and fulfill its obligations
and responsibilities under this Agreement, the Agreement will not expire
until 90 days following the death or incapacity of Retailer Operator. If
this Agreement is to expire because of the death or incapacity of R '
etailer Operator, Retailer may request a deferral of the effective date
of expiration to assist Retailer in winding up its Retailer business or
to provide for a transfer of assets or ownership previously approved
under Article 19. The request must be made at least 30 days prior to the
effective date of expiration, and DMW will not unreasonably refuse to
grant any necessary extension.
9. AUTHORIZED LOCATIONS AAD TERRITORIAL RIGHTS
A. RETAILER'S MARKET AREA
Retailer has been furnished a Notice of Retailer's Area of
Primary Responsibility (APR). Retailer is responsible for
effectively selling, servicing, and otherwise representing the
Driver's Mart/registered trademark/ System in the territory
designated. Retailer agrees to conduct retail facility
operations only from approved locations within its Marketing
Area, specified in Retailer's Market Area Plan as described in
Article 14. Where applicable, Retailer will establish
additional facilities in the time and manner agreed to by
Retailer and DMW in the Plan.
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(1) Facility Design and Appearance
Retailer's facilities shall share common elements of
architectural design and a retail environment that is
readily identifiable as a Driver's Mart/registered
trademark/ T" retail facilit)-. Accordingly, Retailer
agrees to provide Retailer facilities consistent with
DMW's Retail Environmental Design Package. Retailer
agrees to review all proposed facility plans with DMW
and obtain DMW's approval before committing to
construction. renovation and/or purchase. In the
event Retailer's facilities, or the real estate on
which the facilities will be located, will be leased
by Retailer from another party (whether such other
party is affiliated with Retailer or not), then
before this Agreement shall be deemed effective DMW
shall have the right to review and approve the terms
of such lease as permitting the functions and rights
contemplated by this Agreement.
Retailer pledges that its facility will be properly
maintained and satisfactory in appearance to promote
and preserve the image of a Driver's Mart/registered
trademark/" retail facility. Retailer further agrees
to make any future modifications to facilities which
may be approved by the Board of Directors of DMW.
Retailer agrees that it will not make modifications
to its facilities without DMW's prior written
authorization.
(2) Exclusive Use
To ensure that DMW and Retailer benefit from the
common retail facility design and retail environment
and to ensure that Retailer can effect properly any
required future modifications, Retailer agrees that
its facilities, including the individual sites
approved by DMW, will be used exclusively for the
conduct of Driver's Mart/registered trademark/"
retail facility operations. Driver's Mart/registered
trademark/ retail facility operations include the
sale, leasing and service of motor vehicles and
related products and other products as may be offered
through DMW from time to time.
Site approval includes, but is not limited to,
property location. legal description, dimensions, and
positioning of the facility on the property.
B. TERRITORIAL RIGHTS
It is the intention of DMW and Retailer that Retailer devote
its full efforts to developing its Area of Primary
Responsibility (APR). Consequently, Retailer agrees that it
will not engage, either directly or indirectly, in any of the
activities contemplated by this Agreement from locations
outside of its APR.
DMW will not authorize any other Retailer to establish a
Driver's Mart/registered trademark/ retail facility in
Retailer's APR if Retailer meets its obligations under the
Market Area Plan and this Agreement. If Retailer fails to
develop its territory according to its Market Area Plan, then
DMW may terminate this Agreement for failure of performance
under Article 19 or restructure Retailer's APR and reassign
any areas necessary to achieve the maximum potential
development of the territory.
10. RETAILER'S RESPONSIBILITY TO MARKET, SELL AND SERVICE
A. RESPONSIBILITY TO MARKET AND SELL
Retailer agrees to undertake an effective program to market
and sell (including rental and leasing) used motor vehicles
through its Driver's Mart/registered trademark/ business to
Customers located in its APR.
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Retailer agrees that its minimum performance standard shall be
the number of Driver's Mart/registered trademark/"
transactions prescribed by Retailer's Market Area Plan, as
described in Article 14. For purposes of this requirement,
'Driver's Mart/registered trademark/" transaction' shall mean
a vehicle sale or lease for which a fee is due DMW from
Retailer pursuant to Article 12, or the financing of a
customer's purchase through DMW's financing affiliate or
through a DMW-approved fmancing source. Retailer's performance
of this obligation will be reviewed annually in conjunction
with its performance of its obligations under the Market Area
Plan.
Effective June 1, 1997, Retailer agrees that its minimum
performance standard shall be the greater of (1) 300 Driver's
Mart/registered trademark/" transactions per month, or (2) the
number of Driver's Mart/registered trademark/tm"' transactions
prescribed by Retailer's Market Area Plan, provided DMW has
identified sources of motor vehicles for Driver's
Mart/registered trademark/ Retailers that are satisfactory in
the sole judgment of the DMW Board of Directors.
B. RESPONSIBILITY TO PROVIDE SERVICE
Retailer agrees to provide courteous, convenient, prompt,
efficient and quality service to owners of motor vehicles
purchased from Retailer which remain under warranty. All
service will be performed in a professional manner in
accordance with the systems in the Retailer Operating Systems
Manual and in accordance with Driver's Mart/registered
trademark/'s" World Class Retailing Standards and the Retailer
Service Reference Guide as they exist from time to time.
11. SUPPLY OF PRODUCTS
A. MOTOR VEHICLES
(1) DMW will use its best efforts to identify sources of late
model, low mileage, good condition used motor vehicles for
its Driver's Mart/registered trademark/' Retailers. It is
contemplated that each Retailer will appoint a Sourcing
Agent who will negotiate the purchase of vehicles on
behalf of the Retailer. Each Retailer will purchase the
vehicles directly from the source, and such vehicles will
be shipped directly to Retailer by the source using such
carriers as are arranged and paid for by the Retailer. DMW
will attempt to identify for the Retailer those sources
with the number and mix of brands identified by the
Retailer to DMW on a monthly basis, and at the best prices
for Retailer available in the market.
(2) In addition to the sources for motor vehicles identified
by DMW, Retailer may purchase vehicles for resale from any
source, provided the vehicles meet the minimum standards
of quality and condition specified in the Retailer
Operating Systems Manual.
(3) DMW assumes no responsibility to Retailer for the quality
or condition of vehicles purchased by Retailer from any
source, whether or not DMW has identified the source to
the Retailer, and DMW makes NO WARRANTY OF ANY KIND TO
RETAILER, WHETHER EXPRESSED OR IMPLIED, INCLUDING ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
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(4) DMW, in identifying sources for motor vehicles, will
endeavor to provide all Driver's Mart/registered
trademark/" Retailers with a fair and equitable
opportunity to negotiate with sources of used motor
vehicles. Retailer acknowledges and agrees that DMW may
exercise its own discretion, without liability to
Retailer, in identifying particular sources to Retailers
that in DMW's judgment best serve the markets in which
Driver's Mart/registered trademark/ T" Retailers are
located.
(5) Retailer recognizes that customers expect Retailer to have
a reasonable quantity and variety of motor vehicle models
in inventory. Accordingly, Retailer agrees to stock at all
times a minimum of 200 vehicles consisting of a mix of
brands and models appropriate for Retailer's market.
B. OTHER PRODUCTS AND SERVICES
DMW may from time to time provide other products and services
to Retailer for resale. including parts, accessories,
insurance and financing. Retailer's participation in such
product and service programs shall be in accordance with
Retailer's Market Area Plan.
12. FEE FOR VEHICLES SOLD OR LEASED
A. SALES OR LEASES BEFORE DRIVER'S MART/registered trademark/
STORE OPENS
It is contemplated that before Retailer opens its first
Driver's Mart/registered trademark/ T' store for business,
Retailer may sell or lease, through the existing used car
business associated with the Retailer's new car business,
vehicles obtained from sources identified for Retailer by DMW.
Retailer shall pay to DMW $200 for each such vehicle so sold
or leased to a retail customer.
B. SALES OR LEASES AFTER DRIVER'S MART/registered trademark/
STORE OPENS
Once Retailer's first Driver's Mart/registered trademark/
store is opened for business, Retailer shall pay DMW $200 for
each motor vehicle sold or leased to a retail customer by
Retailer's Driver's Mart/registered trademark/ TI business,
regardless of the source from which the Retailer obtains the
vehicle. Retailer shall also pay DMW $200 for each motor
vehicle obtained from sources identified for Retailer by DMW
which is sold or leased to a retail customer through
Retailer's used car business associated with Retailer's new
car business.
C. DUE DATE
All payments by Retailer to DMW for vehicles sold or leased,
in accordance with subparagraphs A and B, shall be made for
receipt by DMW by the fifteenth day of the month following the
month in which the sales or leases were made.
13. WARRANTIES TO CUSTOMERS
A. MOTOR VEHICLES
Retailer agrees to include with each sale of a used motor
vehicle by its Driver's Mart/registered trademark/tm"
business, regardless of the source from which the vehicle was
obtained, a written warranty in favor of the customer
designated "THE DRIVER'S MART/registered trademark/ LIMITED
WARRANTY and containing the terms, and no others, prescribed
for such warranty by the Retailer Operating Systems Manual.
Retailer, not DMW, shall be the sole obligor under such
warranty, and Retailer shall indemnify and hold DMW harmless
with regard to any claims under such warranty.
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Retailer understands and agrees that it is in the mutual
interests of all Retailers within the Driver's Mart/registered
trademark/ System to meet the warranty service needs of all
Driver's Mart/registered trademark/ customers, regardless of
which Driver's Mart/registered trademark/ store sold the
vehicle and issued the warranty to the customer. Accordingly,
Retailer agrees that when presented with a valid request for
service under the terms of THE DRIVER'S MART/registered
trademark/ LIMITED WARRANTY issued bv another Driver's
Mart/registered trademark/ , Retailer will perform that
warranty service without charge to the customer. In such
cases, the Driver's Mart/registered trademark/ Retailer that
sold the vehicle and issued the warranty to the customer shall
be responsible to the servicing Retailer for the warranty
service charges in accordance with the warranty reimbursement
rates prescribed for such service by the Retailer Operating
Systems Manual. The servicing Retailer shall submit claims for
warranty service reimbursement to the selling Retailer, and
the Selling Retailer shall pay such claims, in accordance with
the procedures prescribed by the Retailer Operating Systems
Manual.
B. OTHER PRODUCTS
Retailers shall issue such limited warranties on other
products sold by Retailer to customers. including parts and
accessories, as are prescribed from time to time by the
Retailer Operating Systems Manual. Any products sold to
Retailer for resale by a designated supplier are not warranted
by DMW and are warranted only as specified by the supplier.
14. BUSINESS PLANNING
A. MARKET AREA PLAN
Retailer and DMW will agree upon and execute a Market Area
Plan (Plan) which describes how Retailer will develop its Area
of Primary Responsibility (APR) and fulfill its sales and
service commitments. The Plan is an essential part of this
Agreement.
(1) Market Area Development
Retailer agrees to develop its assigned APR according
to the Market Area Plan. Its commitment for
development includes:
a. detailed description of the number,
location, type, size and opening date of the
first facilities to be provided;
b. detailed implementation schedules; and
c. statement of Retailer's legal and financial
structure, including capitalization, line of
credit and equity ownership.
(2) Operations
Retailer agrees to fulfill the sales and service
commitments described in the Marketing Area Plan. Its
commitments and operations include:
a. performance standards;
b. detailed organizational structure and
staffing plans;
c. plans for personnel development,
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d. specific plans for maximizing customer
enthusiasm, including hours of operation and
customer convenience systems,
e. advertising, merchandising, and community
relations plans. and
f. other items as agreed by DMW and Retailer.
B. ANNUAL PLAN REVIEW
(1) Performance Evaluation
Retailer's performance of its obligations under the
Market Area Plan is essential to its effective
operation as a Driver's Mart/registered trademark/tm
Tm Retailer, and to the reputation and goodwill of
the Driver's Mart/registered trademark/ System.
Therefore, Retailer agrees to review its performance
against the prior year's Plan in its updated Plan.
DMW and Retailer will use this analysis as the basis
for jointly evaluating Retailer's performance so that
any necessary improvements can be made.
Factors considered in evaluating Retailer's
performance will include its attainment of the prior
year's objectives, Retailer's performance trends,
Retailer's financial performance and the manner in
which Retailer has conducted its operations. Periodic
facility evaluations will be conducted, including an
evaluation of Retailer's compliance with thencurrent
requirements and standards for Retailer under the
Market Area Plan. Other factors considered in the
evaluation will include product availability and an
assessment of whether actual market conditions
adversely affected Retailer's ability to attain the
prior year's objectives.
(2) Plan Modifications
While Retailer's plan for APR development is subject
to update, modifications to facility plans will occur
only if DMW believes that a material change in
marketing conditions warrants a proposed
modification.
Plans for operations are subject to update, but
modifications can be implemented only if DMW and
Retailer reach consensus that the proposed
modifications are consistent with the Driver's
Mart/registered trademark/" Mission, Philosophy, and
systems.
15. DRIVER'S MART/registered trademark/ SYSTEMS
Retailer recognizes that achieving industry-leading customer enthusiasm
is a major objective of the Driver's Mart/registered trademark/
Mission. This level of satisfaction cannot be attained without
consistent application by all Retailers of designated sales, service,
marketing, facilities and other systems. Retailer agrees to purchase,
implement and maintain required systems identified in this agreement.
A. SYSTEM FOR WHICH RETAILER PAYS
(1) Sales and Service Systems
Retailer agrees to pay DMW or approved sources for
initial systems necessary to develop and implement
Driver's Mart/registered trademark/' sales and
services in Retailer's APR. These systems include
materials and programs which will promote proper,
consistent
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and competitive display, sales and service of
products. Periodically, the DMW Board of Directors
will determine that new updated materials,
information or programs are necessary. Retailer
agrees to accept and utilize such designated new or
updated materials, information or programs and pay
any applicable charges.
(2) Computer System
The Driver's Mart/registered trademark/ Mission
involves the integration of people, technology! and
business systems. This integration is possible only
if all Retailers have computer systems which meet the
customer's information needs and the Retailer's
internal business needs, permit direct communication
between Retailers and DMW, and give DMW ready access
to Retailer's accounts and records. Accordingly,
Retailer agrees to purchase and use the approved
computer system packages.
To maintain this integration, Retailer agrees to
update its computer system packAges when changes are
approved.
(3) Signs
To promote consistency of image, Retailer agrees to
purchase, maintain and use only signs approved by
DMW. Retailer agrees to make and pay for any changes
in signage.
(4) Tools and Equipment
Retailer agrees to provide adequate service tools and
equipment as required to fulfill its responsibilities
for service. Retailer also agrees to purchase and
maintain specified special tools and equipment, as
required to fulfill its responsibilities for service.
B. Other Systems
(1) Convenience Systems
An integral part of DMW's plan to develop
industry-leading Customer satisfaction is to promote
Driver's Mart/registered trademark/ Retailers as the
unsurpassed source of convenient motor vehicle sales
and service. Retailer agrees it will conduct Retailer
operations to support this concept in accordance with
the Retailer Operating Systems Manual.
(2) Accounts and Records
a. Uniform Accounting System
Both DMW and Retailers can benefit by using
Retailer operating information to develop
composite operating statistics, analyze
Retailers' business management practices,
and assess the impact of DMW's policies and
practices. To assure maximum benefit,
Retailer agrees to maintain a uniform
accounting system and furnish reports and
records as provided in the Driver's
Mart/registered trademark/ Retailer
Accounting Manual.
b. Examination of Accounts and Records
In addition to the access which DMW has to
Retailer's accounts and records through
computer systems, any designated
representative of DMW is authorized
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to examine, audit, reproduce and take copies
of any of the accounts and records Retailer
maintains under this Agreement. Retailer
agrees to make such accounts and records
readily available at its facilities during
business hours. DMW agrees to furnish
Retailer with a copy of any reproduced
records.
c. Confidentiality of Retailer Data
DMW will not furnish any personal or
financial data submitted to it by Retailer
to any non-affiliated entity in a format
that permits identification of the Retailer.
unless authorized by Retailer, required by
law, pertinent to proceedings under the
Dispute Resolution Process, or to court or
administrative proceedings.
(3) Additional Systems
Retailer can use additional systems that are
compatible with the Driver's Mart/registered
trademark/ Mission, Philosophy, and systems. Retailer
agrees to discontinue use of systems deemed
incompatible by DMW.
16. MARKETING ASSOCIATIONS
DMW and Retailer acknowledge the mutual benefits of comprehensive joint
advertising and merchandising by Retailers to promote sales and
service. It is the intent of DMW to retain a national advertising firm,
the cost of which shall be charged to each Retailer in a manner to be
agreed.
Any marketing associations established will assess a fixed amount for
each motor vehicle sold by Retailers to fund advertising and
merchandising programs. As a service to the associations, DMW will
collect the assessed amount.
Any and all advertising by Retailer (whether print, broadcast,
electronic, mail, or billboard) shall be subject to prior review and
approval by DMW.
17. TRAINING
Training of all Retailer team members is critical to the success of
Retailer and DMW in conducting business based on the Mission,
Philosophy and designated systems. Therefore, Retailer agrees that all
its team members will participate in initial and ongoing training
programs identified in the Driver's Mart/registered trademark/ Retailer
Training Manual, and any other approved by the Driver's Mart/registered
trademark/ Development Team, including any contracted training services
within the time frames specified. Retailer agrees to pay any specified
training charges.
18. CAPITALIZATION
Retailer will maintain the levels of capitalization mutually agreed
upon by DMW and Retailer in the Market Area Plan to ensure Retailer's
financial capability to fulfill its commitments. To avoid erosion of
DMW's and the Driver's Mart/registered trademark/ System's goodwill
which could result if Retailer is financially unable to fulfill its
commitments, Retailer agrees to have and maintain a line of credit from
a financial institution available for Retailer to draw upon which may
be supplemented by a line of credit obtained through DMW. The amount of
the line of credit and the identity of the financial institution shall
be included in Retafler's Market Area Plan.
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19. CHANGES IN OWNERSHIP
Retailer and DMW recognize that it is essential to success that each
Retailer be owned and operated by parties committed to the Mission and
Philosophy. It is equally important that the Retailer Operators remain
highly qualified and continue to meet the same high personal standards
of the initial Driver's Mart/registered trademark/ Retailer Operators.
Because DMW has entered into this Agreement based on the personal
qualifications of Retailer Operator and the qualifications of any
Owner(s), Retailer agrees that it cannot assign its right under this
Agreement except as provided in this Article.
A. SUCCESSION RIGHTS UPON DEATH OR INCAPACITY
(1) Successor Addendum
Retailer can apply for a Successor Addendum
designating a proposed Retailer Operator and/or
Owners of a successor Retailer to be established if
this Agreement expires because of death or incapacity
of the Retail Operator or Owners. DMW will execute
the Successor Addendum if the proposed Retailer
Operator successfully completes the Retailer
Selection Process then used by DMW to evaluate
proposed new Retailers. and any proposed Owners
satisfy applicable Retailer Selection Criteria. At
the time of application, Retailer will pay DMW a
non-refundable fee to defray costs associated with
review of the proposal.
(2) Rights of Remaining Owners
If this Agreement expires because of the death or
incapacity of the Retailer Operator, and Retailer and
DMW have not executed a Successor Addendum, the
remaining Owners may propose a Retailer, a Retailer
Operator, and Retailer Owners to continue the
operations identified in this Agreement. The proposal
must be made in writing to DMW at least 30 days prior
to the expiration of this Agreement, including any
deferrals granted under Article 8. At the time of
application, Retailer will pay DMW a non-refundable
fee to defray costs associated with review of the
proposal.
The proposal will be accepted if it meets the
requirements of Article 19A(3), if the proposed
Retailer Operator successfully completes the Retailer
Selection Process, and any proposed Owners satisfy
applicable Retailer Selection Criteria.
(3) Successor Retailer Requirements
DMW will accept a proposal to establish a successor
Retailer submitted by a proposed Retailer Operator
under Article 19A provided:
a. the proposed successor Retailer and the
proposed Retailer Operator are ready,
willing and able to comply with the
requirements of a new Retailer Agreement and
agree to adhere to and implement the Market
Area Plan agreed to by Retailer;
b. the proposed Retail Operator successfully
completes the Retailer Selecting Process,
and the proposed Owners satisfy the
applicable Retailer Selection criteria; and
c. all outstanding monetary obligations of
Retailer to DMW have been paid.
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(4) Limitation on Offers
Retailer will be notified in writing of the decision
on a proposal under Article 19A(3) within 60 days
after Retailer has submitted all applications and
information reasonably requested by DMW and the
proposed Retailer Operator has successfully completed
the Retailer Selection Process. DMW's offer of a new
Retailer Agreement under this Article 19A will
automatically expire if not accepted by the proposed
successor Retailer WiEllin 60 days after it receives
the offer.
(5) New Successor Addendum
Retailer may cancel an executed Successor Addendum at
any time prior to the death or incapacity of the
Retailer Operator. DMW may cancel an executed
Successor Addendum only if the proposed Retailer
Operator or proposed Owner(s) no longer meet the
Retailer Selection Criteria applicable to each. The
parties may execute a superseding Successor Addendum
by agreement.
B. Changes of Ownership or Retailer Operator
If Retailer proposes a change in Retailer Operator or a
transfer of its Driver's Mart/registered trademark/. Retailer
business to any person conditioned upon DMW's entering into a
Retailer Agreement with that person, DMW will consider
Retailer's proposal subject to the following:
(1) To maintain the high standard and quality of the
Retailer network, Retailer agrees to give DMW prior
written notice for approval of any proposed
disposition of its principal assets or any proposed
change of ownership in which a party:
a. first acquires a twenty percent equity
ownership or beneficial interest in
the retail business;
b. acquires an additional five percent equity
ownership or beneficial interest in the
retail business in a calendar year; or
c. acquires more than 49% ownership or voting
control in the retail business.
Retailer understands that if any such change is made
prior to DMW's approval of the proposal, termination
of this Agreement will be warranted and DMW will have
no further obligation to consider Retailer's
proposal.
(2) If the proposal involves a change of Retailer
Operator, Retailer will pay DMW a fee to defray the
costs of review of the proposal and completion of the
Retailer Selection Process. DMW has no obligation to
consider the proposal until it has received this
nonrefundable payment.
(3) Retailer will be notified in writing of the decision
on its proposal within 60 days after Retailer has
furnished all applications and information reasonably
requested by DMW and the proposed Retailer Operator
has successfully completed the Retailer Selection
Process. If DMW disagrees with the proposal, it will
specify its reasons.
(4) Any material change in Retailer's proposal, including
change in price, proposed Owners, or Retailer
Operators, will be considered a new proposal, and the
time period for DMW to respond shall recommence.
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<PAGE>
(5) Prior written approval is not required where the
transfer of equity ownership or beneficial interest
to an individual is:
a. less than five percent in a calendar year,
provided the aggregate amount remains less
than twenty percent, or
b. between existing Owners of Retailer
previously approved by DMW where there is no
change in majority ownership or voting
control. Retailer agrees to notify DMW
within 30 days of the date of the change and
to execute the then prescribed ownership
disclosure form.
(6) DMW is not obligated to execute a new Retailer
Agreement under this Article unless Retailer makes
arrangements acceptable to DMW to satisfy any
indebtedness to DMW.
(7) The owner(s) of a successor Retailer will be required
to own at least that number of units of stock in
Driver's Mart/registered trademark/ WORLDWIDE, INC.
as the owner(s) of the Retailer the successor will
succeed is(are) required to own pursuant to the
Amended and Restated Shareholders' Agreement between
such owner(s) and DMW, and the owners of the
successor will be required to be parties to the
Amended and Restated Shareholders' Agreement.
C. RIGHT OF FIRST REFUSAL OR OPTION TO PURCHASE
(1) Creation and Coverage
If a proposal is submitted by Retailer under Article
1913, DMW has a right of first refusal or option to
purchase the Retailer assets under this Article 19C.
If DMW exercises its right or option, it will do so
in the written decision on Retailer's proposal. DMW's
right or option may be assigned to any party and DMW
will guarantee the full payment of the purchase price
by the assignee. DMW has the right to disclose the
terms of the buy/sell agreement to any potential
assignee.
If Retailer has entered into a bona fide written
buy/sell agreement for its Retailer business or
assets, DMW's right under this Article is a right of
first refusal enabling DMW to assume the buyer's
right and obligations under such buy/sell agreement
and cancel this Agreement and all rights granted
Retailer. In the absence of a bona fide written
buy/sell agreement, DMW has the option to purchase
the principal assets of Retailer utilized in the
Retailer business, other than real property, and
cancel this agreement and all rights granted
Retailer. Real property will be included only if DMW
and Retailer agree.
If DMW exercises its right or option, the fee
described in Article 1913(2) will be refunded if the
person proposed by Retailer as replacement Retailer
operator or owner satisfies the Retailer Selection
Criteria.
DMW's rights under this Article 19C will be binding
on and enforceable against any assignee or successor
in interest of Retailer or purchaser of Retailer's
assets.
If DMW declines to exercise its right of first
refusal or option to purchase under this Article 19C,
DMW retains its right, in accordance with Article
1913, to decline the proposed change in ownership or
transfer of the Retailer's business, and to terminate
this Agreement in accordance with Article 2OA(4) in
the event of a change or transfer without its
approval.
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<PAGE>
(2) Purchase Price and Other Terms of Sale
a. Bona Fide Agreement
If Retailer has entered into a bona fide
written buy/sell agreement. the purchase
price and other terms of sale will be those
set forth in such agreement and any related
documents, unless Retailer and DMW agree to
other terms.
Upon DMW's request, Retailer agrees to
provide all other documents relating to the
proposed transfer, including, but not
limited to, those reflecting any other
agreements or understandings between the
parties to the buy/sell agreement. If
Retailer does not provide such documentation
or state in writing that such documents do
not exist, it will be presumed that the
agreement is not bona fide.
b. Absence of Bona Fide Agreement
In the absence of a bona fide written
buy/sell agreement, the purchase price of
the Retailer assets, excluding new and
undamaged parts and accessories, will he
determined by good faith negotiations
between the parties. If agreement cannot be
reached, the purchase price will be
determined through the Dispute Resolution
Process. Retailer agrees to transfer the
property by Warranty Deed and/or Bill of
Sale and Assignment conveying marketable
title free and clear. The Warranty Deed will
be in proper form for recording. Retailer
will also furnish DMW copies of any
easements and licenses necessary for the
conduct of the Retailer business.
20. TERMINATION
A. TERMINATION OF AGREEMENT
(1) By Retailer
Retailer may terminate this Agreement by written
notice to DMW. Termination will be effective 30 days
after DMW's receipt of the notice, unless otherwise
mutually agreed in writing. In the event of
termination under this Article 20, Retailer's stock
in Driver's Mart/registered trademark/tm WORLDWIDE,
INC. shall be redeemed pursuant to the terms of the
Amended and Restated Shareholders' Agreement.
(2) By Agreement
This Agreement may be terminated at any time by
written agreement between DMW and Retailer.
Termination assistance will be applicable only as
specified in the written termination agreement.
(3) Failure to be Licensed
If DMW or Retailer fails to secure or maintain any
license required for the performance of obligations
under this Agreement or such license is suspended or
revoked, either party may immediately terminate this
Agreement by giving the other party written notice.
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<PAGE>
(4) Misrepresentation, Failure to Conduct Operations, or
Disqualification or Change of Retailer Operator or
Owner
If Retailer submits any false information to DMW,
fails to conduct customary Retailer operations for
seven consecutive business days, or Retailer Operator
or Owner fails to continue to meet the Retailer
Selection Criteria applicable to each, or Retailer
Operator is changed or withdraws without prior
written approval of DMW, or a party, without the
prior approval of DMW:
a. first acquires a twenty percent equity
ownership or beneficial interest in
Retailer.
b. acquires an additional five percent equity
ownership or beneficial interest in a
calendar year, or
c. acquires more than 49% ownership or voting
control, of Retailer.
DMW will notify Retailer and provide 30 days for
Retailer to respond. Thereafter, DMW may notify
Retailer that the Agreement will be terminated not
less than 30 days after receipt of notice. If
Retailer chooses to use the Dispute Resolution
Process, the Agreement will continue pending a firial
resolution of the dispute.
(5) Failure of Performance
If Retailer fails to perform any other obligations it
has under this Agreement, including those in the
Market Area Plan, DMW will review the failure with
Retailer.
If DMW determines that corrective action by Retailer
is not forthcoming, it will notify Retailer of the
failure in writing and of the period of time during
which Retailer is expected to remedy the failure.
If the failure is not remedied within the agreed
period, DMW may terminate this Agreement by giving
Retailer three months advance written notice.
(6) Reliance on Any Applicable Termination Provision
The terminating party may select the termination
provision under which it elects to terminate without
reference in its notice of termination to any other
provisions that may also be applicable. The
terminating party subsequently also may assert other
grounds for termination.
(7) Option to Purchase
If this Retailer Agreement is to expire or terminate
for any reason, DMW has the option to purchase the
principal assets of Retailer utilized in the Retail
business, other than real property, and cancel this
Agreement and all rights granted Retailer, subject to
the Amended and Restated Shareholders' Agreement.
Real property will be included at the option of DMW-
The purchase price of the Retailer assets and other
terms will be determined under Article 19C(2)b. DMW
must advise Retailer of its intent to exercise this
option within 60 days after it notifies Retailer that
an event has occurred which would cause expiration or
warrant termination.
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<PAGE>
Exercise by DMW of the option to purchase shall not
he a condition for effectiveness of the expiration or
termination of the Retailer Agreement.
(8) Option to Lease or Sublease Facilities
If this Retailer Agreement is to expire or terminate
for any reason, DMW has the option, either for itself
or on behalf of DMW's nominee, to lease or sublease
from Retailer or its affiliate the facility utilized
for Retailer's Driver's Mart/registered trademark/tm"
business for a minimum term of seven years and on
terms and conditions that will enable DMW or its
nominee to continue the Driver's Mart/registered
trademark/ Retailer business at the facility. The
terms and conditions of such lease, including the
amount of the rent. will be determined by good faith
negotiations between the parties. If agreement cannot
be reached, the terms and conditions will be
determined through the Dispute Resolution Process.
If the Retail facilities are not owned by Retailer or
its affiliate at the time of the expiration or
termination of this Retailer Agreement, Retailer will
cooperate with and use its best efforts on behalf of
DMW or its nominee to secure from the owner a lease
or sublease of the facilities for DMW or its nominee
for a minimum term of seven years and on terms and
conditions no less favorable to DMW or its nominee
than the terms and conditions under which Retailer
leased the facility.
DMW must advise Retailer of its intent to exercise
this option within 60 days of either party's notice
to the other that an event has occurred which would
cause expiration or warrant termination. The right of
such option will survive during such 60 days period
even if the expiration or termination of this
Agreement becomes effective before expiration of the
60 days period.
B. TRANSACTIONS AFTER TERMINATION
(1) Orders
If Retailer and DMW do not enter into a new
Retailer Agreement when this Agreement
expires or is terminated, Retailer's
allocations and orders for products will be
automatically canceled unless otherwise
agreed by the parties.
Termination or expiration of this Agreement
will not release Retailer or DMW from the
obligation to pay any amounts owing the
other when due.
(2) Effect of Transactions after Termination
Neither the sale of products to Retailer nor
any other act by DMW or Retailer after
termination or expiration of this Agreement
will be a waiver of the termination or
expiration.
21. ACKNOWLEDGMENT OF FRANCHISE LAW COMPLIANCE
A. Retailer's Investigation
Retailer acknowledges that it has conducted an independent
investigation of the business venture contemplated by this
Agreement, and recognizes that it involves business risks and
that its success will be largely dependent upon the ability of
Retailer. DMW expressly disclaims the making of, and Retailer
acknowledges that it has not received, a warranty or
guarantee, express or implied,
16
<PAGE>
as to the potential volume, profits, or success of the
business venture contemplated by this Agreement.
B. DISCLOSURE
Retailer acknowledges having received a copy of this Agreement
(together with attachments and related documents that are in
effect) at least ten business days prior to the date on which
this Agreement was executed. Retailer further acknowledges
having received the disclosure documents which are required by
the Trade Regulation Rule of the Federal Trade Cominission
entitled "Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures," and which
contains a copy of this Agreement, at least ten business days
prior to the date on which this Agreement was executed.
C. REVIEW
Retailer acknowledges that it has read and understood this
Agreement (and its attachments and related agreements) and
that DMW has afforded Retailer ample time and opportunity to
consult with advisors of Retailer's own choosing about the
potential benefits and risk of its entering into this
Agreement.
22. GENERAL PROVISIONS
A. NO AGENT OR LEGAL REPRESENTATIVE STATUS
This Agreement does not make either party the agent or legal
representative of the other for any purpose, nor does it grant
either party authority to assume or create any obligation on
behalf of or in the name of the other. No fiduciary
obligations are created by this Agreement.
B. RETAILER'S RESPONSIBILITY FOR ITS OPERATIONS
Except as provided in this Agreement, Retailer is solely
responsible for all expenditures, liabilities and obligations
incurred or assumed by Retailer for the establishment and
conduct of its operations.
C. TAXES
Retailer is responsible for all local, state, federal or other
applicable taxes and tax returns related to its Retailer
business and will defend, indemnify and hold DMW harmless from
any related claims or demands made by any taking authority.
D. TRADEMARKS AND SERVICE MARKS
DMW or affiliate companies are the exclusive owners of the
various trademarks, service marks, names and designs (Marks)
used in connection with the Retailer business.
Retailer is granted non-exclusive rights to display Marks in
the form and manner approved by DMW in the conduct of its
Retailer business.
Retailer agrees to change or discontinue the use of any Marks
upon request by DMW.
Retailer agrees that no company owned by or affiliated with
Retailer or any of its owners may use any Mark to identify a
business without DMW's prior written permission.
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<PAGE>
Upon termination of this Agreement, Retailer agrees to
discontinue immediately, at its expense. all use of Marks.
Thereafter, Retailer will not use, either directly or
indirectly, any Marks or any other confusingly similar marks
in a manner that DMW determines is likely to cause confusion
or mistake or deceive the public.
E. NOTICES
Any notice required to be given by either party to the other
in connection with this agreement will be in writing and
delivered personally or by mail. Notices to Retailer will be
directed to Retailer or its representatives at Retailer's
principal place of business and notices by Retailer will he
directed to: Driver's Mart/registered trademark/ WORLDWIDE,
INC., 2851 Charlevoix Drive, Suite 203, Grand Rapids, MI
49546. Mailed notices will be deemed received on the date
deposited in U.S. or express mail.
F. NO IMPLIED WAIVERS
The delay or failure of DMW or Retailer to require performance
by the other party or the waiver by DMW or Retailer of a
breach of any provisions of this Agreement will not affect the
right subsequently to require such performance.
G. ASSIGNMENT OF RIGHTS OR DELEGATION OF DUTIEA
DMW may assign this Agreement and any rights or delegate any
obligations to any affiliated or successor company, and will
provide Retailer written notice of such assignment or
delegation. Such assignment or delegation by DMW will not
relieve DMW of liability for the performance of its
obligations under this Agreement.
Retailer may not assign this Agreement or any rights, by
operation of law or otherwise, or delegate any obligation to
any other party without the prior written approval of DMW.
H. ACCOUNTS PAYABLE
All moneys or accounts due by DMW to Retailer will be
considered net of Retailer's indebtedness to DMW. DMW may
deduct any amount due or to become due from Retailer to DMW
from any sum or accounts due or to become due from DMW or to
Retailer.
I. SOLE AGREEMENT OF PARTIES
Except as provided in this Agreement, DMW has made no promises
to Retailer, Retailer Operator, or Retailer Owner and there
are no other agreements or understandings, either oral or
written, between the parties affecting this Agreement or
relating to any of the subject matters covered by this
Agreement other than the Amended and Restated Shareholders'
Agreement.
Except as otherwise provided herein, this Agreement cancels
and supersedes all previous agreements between the parties
that relate to any matters covered herein other than the
Amended and Restated Shareholders' Agreement.
No agreement between DMW and Retailer which relates to matters
covered herein, and no change in, addition to (except the
filling in of blank line) or erasures of any printed portions
of this Agreement, will be binding unless it is approved in a
written agreement executed under Article 23.
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<PAGE>
J. REVIEW AND MODIFICATION OF AGREEMENT TERMS
To demonstrate its commitment to the Driver's Mart/registered
trademark/" Philosophy, Retailer has entered into this
indefinite term Agreement. However, neither DMW nor Retailer
wants to prevent the modification of their contractual
relationship as necessary to respond to changes in market
conditions. Therefore, the Board of Directors of DMW will
review the Agreement every five years, unless it determines an
earlier review is necessary.
In the event the Board of Directors of DMW recommends a
superseding form of Retailer Agreement, DMW and Retailer agree
to terminate this Agreement and to execute the new Agreement.
In such event and unless otherwise agreed in writing, the
rights and obligations of Retailer that may otherwise become
applicable upon termination or expiration of this Agreement
will not be applicable.
K. GOVERNING LAW
This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the Commonwealth of Virginia,
notwithstanding any Virginia choice of law rule to the
contrary. Notwithstandincy the foregoing, if the performance
of an obligation or the exercise of a right pursuant to this
Agreement would be unlawful under the valid, applicable and
effective law of any jurisdiction where such performance of
the obligation or exercise of the right is to take place. such
performance or exercise shall be modified to the minimum
extent necessary to comply with such law.
23. EXECUTION ON BEHALF OF RETAILER AND DMW
This Agreement and related agreements are valid only if signed:
A. on behalf of Retailer by its duly authorized representative
and, in the case of this Agreement, by its chief executive
officer, Retailer Operator and Retailer Owner(s); and
B. on behalf of DMW by its President and Chief Executive Officer.
DRIVER'S MART WORLDWIDE, INC.
---------------------------------
Retailer Name
By: By:
--------------------------------- -----------------------------
Retailer CEO Date President & CEO Date
By:
---------------------------------
Retailer Operator Date
By:
---------------------------------
Retailer Owner Date
By:
---------------------------------
Retailer Owner Date
By:
---------------------------------
Retailer Owner Date
19
<PAGE>
GLOSSARY
As used in this Retailer Agreement, the following terms shall have the
following definitions:
1. RETAILER: The corporation, partner or proprietorship designated on page 1 of
this Retailer Agreement.
2. RETAILER AGREEMENT: The Retailer Agreement and relatd documents as they are
developed.
3. RETAILER OPERATOR: Principal manager of Retailer upon whose personal service
DMW relies in entering into the Retailer Agreement.
4. RETAILER OWNER: Owner of five eprcent or more equity ownership or beneficial
interest of Retailer upon whom DMW relies in entering into the Retailer
Agreement.
5. RETAILER SELECTION CRITERIA: The qualificatins and standards which the
prospective Retailer Operator and Retailer Owners must satisfy.
6. RETAILER SELECTION PROCESS: The process which an applicant must successfully
complete prior to become a DRIVER'S MART/registered trademark/ Retailer
Operator. The process includes: the appliction, questionnaires, assessment
at the applicant's place of business, an orientation and interview and
agreement upon a Market Area Plan.
7. RETAILER PREMISES: Approved facilities provided by Retailer for Retailer
operations.
8. MARKET AREA: The geographic area assigned to Retailer and identified in a
Notice of Retailer's Market Area.
9. MARKS: The various trademarks, service marks, names and designs used by DMW
and its affiliated companies in connection with the DRIVER'S MART/registered
trademark/ Retailer system.
10. MOTOR VEHICLES: All model types or series of used motor vehicles to be
marketed through Retailers.
11. PARTS AND ACCESSORIES: New or remanufactured automotive parts and
accessories marketed or approved by DMW.
12. PRODUCTS: Motor Vehicles, Parts and Accessories, and DRIVER'S
MART/registered trademark/ Service Plans.
13. RETAIL ENVIRONMENT DESIGN PACKAGE: A comprehensive design package that
provides a design guide and access to a portfolio of DRIVER'S
MART/registered trademark/ Retailer facility design control drawings
(interior and exterior).
14. NON-AFFILIATED ENTITY: an entity that is not incorporated into or affiiated
by ownership with DMW or its subsidiaries.
15. AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT: The Agreement dated as of
April 24, 1996, between and among DMW and its Shareholders.
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MARKET AREA PLAN
This Agreement, effective the _____ day of ________, 1997, is entered into by
DRIVER'S MART WORLDWIDE, INC. (DMW), and _____________________. This Market Area
Plan (Plan) is referred to in Section 14(A) of Driver's Mart/registered
trademark/ Retailer Agreement separately entered into by the parties.
1. COMMITMENT
The condition which a "Market Area" is granted by Driver's Mart Worldwide, is
the commitment of the Retailer to maintain supremacy within the Area of Primary
Responsibility, including:
1. A detailed plan, acceptable to DMW, to build out the Market
Area, inclding location, inventory level, sales volume and
detailed roll-out timetable.
2. Annual attainment of minimum standards to remain in "good
standing".
3. Consistent adherence to Operating Standards.
4. Agreement to take remedial action if performance falls below
minimum levels.
2. ADHERENCE TO OPERATING STANDARDS
Failure to adhere to the Driver Mart/registered trademark/ Operating Standards
is a violation of a Retailer's Market Area Plan. Once a violation is discovered,
corrective action must be submitted in writing and include specific corrective
steps and a deadline for completion. The Mandatory Improvement Process will be
imposed immediately to assure correction.
Violation of any of the Standards listed below will place the Retailer on a 30
day probation. If corrective action is not taken by the Retailer of a material
violation, terminatin of the Retailer Agreement will become effective in three
months from the end of the probabion period for these violations:
1. Price negotiation of any kind.
2. All Trade-in valuations are at actual cost value.
3. Sale and/or display of any car that has not been submitted to,
passed, and/or meets the standards of the Driver's
Mart/registered trademark/ Vehicle Preparation process.
4. Failure to honor the 3 day refund period.
5. Failure to honor the 30 day exchange period.
6. Removal of the standard Driver's Mart/registered trademark/
warranty from any car or truck sold.
7. Use of advertising that has not been supplied by or otherwise
approved by DMW.
8. Failure to disclose all of the terms and conditions of any
finance and/or lease program/contract.
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3. ATTAINMENT OF MINIMUM STANDARDS
Each Retailer agrees to maintain minimum standards to assure the absolute
consistency of the customer experience in each Driver's Mart/registered
trademark/ store, set and evaluated as follows:
- Standards will be mutually agreed upon between DMW and Retailer by
January 31 of each year.
- DMW will provide quarterly reports to each Retailer that summarize
performance versus agreed upon standards.
- Prior to June 30 of each year, Retailer can petition DMW to reset
standard to new levels based upon mutual acceptance of business
conditions.
A variety of measures, including J.D. power customer surveys will be used to
judge attainment of mutually agreed upon minimum standards listed below.
Consistent annual attainment of all standards is required to be considered "in
good standing".
1. PEOPLE
- Completion of and competency with required training of store
staff
- Customer Satisfaction with performance of people
2. SHOPPING PROCESS
- Overall Customer Satisfaction with shopping process
- Repurchase intentins (loyalty)
- Mystery shop scores
3. SHOPPING ENVIRONMENT
- Customer Satisfaction with environment
- Adherence to Critical Design Elements
- Overall Facility Image (Annual Survey)
- Mystery shop scores
4. PRODUCT QUALITY
- Customer satisfaction with product quality
- Warranty failure rates
- Quality inspectin scores
5. BRAND IMAGE
- Awareness of Driver's Mart/registered trademark/ in local
market
6. SALES
- Sales vs. Objective
- Market share
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7. CONTRIBUTION TO DRIVER'S MART/REGISTERED TRADEMARK/ EARNINGS
- Cash flow to DMW
- Warranty expense
- Participation on Retailer Committes (other projects)
8. INNOVATION
- New ideas implemented
- Support of new DMW initiatives
9. COMMUNITY INVOLVEMENT
- Participation/Contribution to local community (including
contribution of Team Members)
Retailers who fail to maintain minim standards must take remedial action which
consists of the following steps:
1. DMW management provides written notification to Retailer
identifying which areas required improvement, the leels of
improvement required, and a timetable required to attain
mininum standards.
2. Retailer submits a plan to DMW management to address each
area identified.
3. DMW will provide monthly summary of performance versus new
targets for Retailer.
4. If attainment has not been achieved within the Plan deadline,
the Retailer shall be placed on probation with a final written
plan to be met in a time certain or to have the Retailer
Agreement terminated by the board.
4. GOOD STANDING
Retailers who adhere to all operating standards and maintain all annual minimum
standards will be considered in "good standing" and become eligible for the
following benefits:
- Participation in the Retailer Incentive Plan
- Eligibility for expansion
- additional stores with a Market area
- "First Option" on adjacent Market Areas
- assignment of new Market areas
- purchase of existing Driver's Mart/registered trademark/ location
which revert to DMW control
- Team recognition
- Other benefits which may be determined by the Board of Directors
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<PAGE>
5. SCHEDULE
1. Level: 3
2. Area of Primary Responsibility
3. Transition Plan:
- Commence April 1, 1997
- Total of 100 transactions/month with DMW achieved by:
a. Sales or leases or 100 vehicles obtained
from the DMW Sourcing Operations;
b. Originating 100 DMW/AON Premier
transactions;
c. Credit of up to 30 transactions per month
for a loan to Driver's Mart Worldwide, Inc.
in the principal amount of up to $200,000
at 8% interest, principal and interest
payable after 24 months; or
d. Shortfall fee of $200 for each transaction
below the 100 transactions per month.
4. Rollout Plan:
A. Market Area One:
- Site selection:
- Construction:
- Opening:
- Facility: acreage
B. Market AreaTwo:
- Site selection:
- Construction:
- Opening:
- Facility: acreage
5. Volume
A. Target Volume by June 1998: 4,000 units/year
annualized.
B. Target DMW Credit transactions booked by June 1998;
1,330 deals/year annualized.
C. Target Volume by June 1999; sales of 4,000 units/year
annualized and 1,330 DMW Credit transactions/year
annualized
D. Sales of 4,000 units at Retail and 1,330 DMW Credit
transactions for 12 months prior to June 30, 2000.
E. At risk if sales below 4,000 units at Retail and
1,300 DMW Credit transactions for 12 months prior to
June 30, 2002.
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6. EXECUTION ON BEHALF OF RETAILER AND DMW
This Agreement and related agreemens are valid only if signed:
A. on behalf of the Retailer by it duly authorized representative and,
in the case of this Agreement, by its chief executive officer,
Retailer Operator and Retailer Owner(s); and
B. on behalf of DMW by its Presidennt and Chief Executive Officer.
DRIVER'S MART WORLDWIDE, INC.
---------------------------------
Retailer Name
By: By:
--------------------------------- --------------------------------
Retailer CEO Date President & CEO Date
By:
---------------------------------
Retailer Operator Date
By:
---------------------------------
Retailer Owner Date
By:
---------------------------------
Retailer Owner Date
By:
---------------------------------
Retailer Owner Date
25
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of
_______________________, 1997, by and between FIRST TEAM AUTOMOTIVE CORP., a
Delaware corporation (the "Company"), and DONALD C. MEALEY (the "Executive").
R E C I T A L S:
In entering into this Agreement, the Company desires to provide the
Executive with substantial incentives to serve the Company, without distraction
or concern over minimum compensation, benefits or tenure, to develop and
implement the Company's initial development plan, and thereafter manage the
Company's future growth and development, in order to maximize the returns to the
Company's stockholders.
NOW, THEREFORE, in consideration of the foregoing and the mutual
provisions contained herein, and for other good and valuable consideration, the
parties hereto agree with each other as follows:
1. CERTAIN DEFINITIONS
1.1 CERTAIN DEFINITIONS. As used herein, the following terms have the
meanings assigned to them below:
"ACCRUED BENEFITS" means an amount equal to the sum of (a) the
portion of the Base Salary payable through and including the Termination Date
which has not yet been paid, (b) all compensation previously deferred by the
Executive (together with any accrued interest and earnings thereon) which has
not yet been paid, and (c) any accrued but unpaid expense reimbursements and
vacation pay.
"ACQUIRING PERSON" means any Person who or which, together
with all Affiliates and Associates of such Person, is or are the Beneficial
Owner of twenty percent (20%) or more of the shares of Common Stock then
outstanding; but does not include any Exempt Person.
"ACTIVE STATUS" means the Executive's Employment status from
the Effective Date to and including the Termination Date.
"AFFILIATE" has the meaning ascribed to that term in Exchange
Act Rule 12b-2.
"ANNUAL CASH COMPENSATION" of the Executive for any
Compensation Year means the sum of the salary and bonus earned by the Executive
during that Compensation Year, including all amounts deferred at the election of
the Executive pursuant to Section 4.2.5 hereof, a Compensation
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Plan intended to qualify as a plan under Section 401(k) of the Code, or
otherwise. If salary or bonus is paid in whole or in part in property other than
cash (such as Common Stock) the amount so paid shall be the fair market value
thereof on the date of payment.
"ASSOCIATE" means, with reference to any Person, (a) any
corporation, firm, partnership, association, unincorporated organization or
other entity (other than the Company or a subsidiary of the Company) of which
that Person is an officer or general partner (or officer or general partner of a
general partner) or is, directly or indirectly, the Beneficial Owner of 10% or
more of any class of its equity securities, (b) any trust or other estate in
which that Person has a beneficial interest of 10% or more or for or of which
that Person serves as trustee or in a similar fiduciary capacity, and (c) any
relative or spouse of that Person, or any relative of that spouse, who has the
same home as that Person.
"AVERAGE ANNUAL CASH COMPENSATION" of the Executive means, as
of the date of any termination, the average of (a) the Annual Cash Compensation
earned by the Executive in each of the two (2) Compensation Years next preceding
that date or, if less than two (2) Compensation Years have occurred prior to
that date and since the Effective Date, (b) the Annual Cash Compensation in each
whole Compensation Year, if any, and, restated on an annualized basis, the
Annual Cash Compensation in each partial Compensation Year (up to a maximum of
two (2) partial Compensation Years) next preceding the date of any termination.
"BASE SALARY" means the guaranteed minimum annual salary
payable by the Company to the Executive pursuant to Section 4.1.
"BENEFICIAL OWNER" A specified Person is deemed the Beneficial
Owner of, and is deemed to "beneficially own," any securities of which that
Person or any of that Person's Affiliates or Associates, directly or indirectly,
is the "beneficial owner" (as determined pursuant to Exchange Act Rule 13d-3) or
otherwise has the right to vote or dispose of, including pursuant to any
agreement, arrangement or understanding (whether or not in writing).
"BOARD" means the entire Board of Directors of the Company.
"BONUS" means an annual bonus, in an amount, and on terms
determined by the Compensation Committee pursuant to the Company's Incentive
Plans.
"CAUSE" for the Company's termination of the Executive's
Employment means: (a) the Executive's conviction, in a final, non-appealable
ruling, of a felony crime that enriched the Executive at the expense of the
Company; or (b) the Executive's deliberate and intentional continuing failure to
substantially perform his duties and responsibilities hereunder (except by
reason of the Executive's incapacity due to physical or mental illness or
injury) for a period of twenty (20) days after the Required Board Majority has
delivered to the Executive a written demand for substantial performance
hereunder which specifically identifies the bases for the Required Board
Majority's determination that
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the Executive has not substantially performed his duties and responsibilities
hereunder (such period being the "GRACE PERIOD"); provided, that for purposes of
this clause (b), the Company shall not have Cause to terminate the Executive's
Employment unless (1) at a meeting of the Board called and held following the
Grace Period in the city in which the Company's principal executive offices are
located, of which the Executive was given not less than ten (10) days' prior
written notice and at which the Executive was afforded the opportunity to be
represented by counsel, appear and be heard, the Required Board Majority shall
adopt a written resolution which (A) sets forth the Required Board Majority's
determination that the failure of the Executive to substantially perform his
duties and responsibilities hereunder has (except by reason of his incapacity
due to physical or mental illness or injury) continued past the Grace Period,
and (B) specifically identifies the bases for that determination; and (2) the
Company, at the written direction of the Required Board Majority, shall deliver
to the Executive a Notice of Termination for Cause to which a copy of that
resolution, certified as being true and correct by the secretary or any
assistant secretary of the Company, is attached. For purposes of determining
whether Cause has occurred, no act or failure to act on the part of the
Executive shall be considered "deliberate and intentional" unless it is taken or
omitted to be taken by the Executive in bad faith or without a reasonable belief
that the Executive's act or omission was in the best interests of the Company.
"CHANGE OF CONTROL" means the occurrence of any of the
following events that occurs after the Closing Date: (a) any Person, other than
an Exempt Person, becomes an Acquiring Person; (b) at any time the then
Continuing Directors cease to constitute a majority of the members of the Board;
or (c) a merger of the Company with or into, or a sale by the Company of all or
substantially all its properties and assets to, another Person occurs and,
immediately after that occurrence, any Person, other than an Exempt Person,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of twenty percent (20%) or more of the total voting power of
the then outstanding Voting Shares of the Person surviving that transaction (in
the case of a merger or consolidation) or the Person acquiring all or
substantially all of those properties and assets.
"CLOSING DATE" means the date the Company consummates the
closing of the first sale of its Common Stock to the public pursuant to an
effective Registration Statement filed under the Securities Act.
"CODE" means the Internal Revenue Code of 1986.
"COMMON STOCK" means the common stock of the Company.
"COMPANY" means (a) First Team Automotive Corp., a Delaware
corporation, and (b) any Person that assumes the obligations of the Company
hereunder, by operation of law, pursuant to Section 8.4(ii) or otherwise.
"COMPENSATION PLAN" means any compensation arrangement, plan,
policy, practice or program established, maintained or sponsored by the Company
or any subsidiary of the Company,
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or to which the Company or any subsidiary of the Company contributes, on behalf
of any Executive Officer or any member of the family of any Executive Officer,
(a) including (i) any "employee pension benefit plan" (as defined in Section
3(2) of ERISA) or other "employee benefit plan" (as defined in Section 3(3) of
ERISA), (ii) any other retirement and savings plan, including any supplemental
benefit arrangement relating to any plan intended to be qualified under Section
401(a) of the Code or whose benefits are limited by the Code or ERISA, (iii) any
"employee welfare plan" (as defined in Section 3(1) of ERISA), (iv) any
arrangement, plan, policy, practice or program providing for severance pay,
deferred compensation or insurance benefit, (v) any Incentive Plan, and (vi) any
arrangement, plan, policy, practice or program (A) authorizing and providing for
the payment or reimbursement of expenses attributable to first-class air travel
and first-class hotel occupancy while on travel or (B) providing for the payment
of business luncheon and country club dues, long-distance charges, mobile phone
monthly air time or other recurring monthly charges or any other fringe benefit,
allowance or accommodation of employment, but (b) excluding any compensation
arrangement, plan, policy, practice or program to the extent it provides for
annual base salary.
"COMPENSATION COMMITTEE" means the committee of the Board to
which the Board has delegated duties respecting the compensation of Executive
Officers and the administration of Incentive Plans, if any, intended to qualify
for the Exchange Act Rule 16b-3 exemption and the Code ss. 162(m)(4)(C)(i)
exemption.
"COMPENSATION YEAR" means any calendar year.
"CONFIDENTIAL INFORMATION" means, with respect to the Company
or any subsidiary of the Company, all trade secrets and other confidential,
nonpublic and/or proprietary information of that Person, including information
derived from reports, investigations, research, work in progress, codes,
marketing and sale programs, customer lists, records of customer service
requirements, capital expenditure projects, cost summaries, pricing formulae,
contract analyses, financial information, projections, confidential filings with
any governmental authority and all other confidential, nonpublic concepts,
methods of doing business, ideas, materials or information prepared or performed
for, by or on behalf of that Person.
"CPI" means for any period the Consumer Price Index for All
Urban Consumers--All Items Index for Orlando, Florida (or any substantially
similar index published for the same area), as published by the United States
Department of Labor, Bureau of Labor Statistics (or its successor) for that
period.
"CONTINUING DIRECTOR" means at any time any individual who
then (a) is a member of the Board and was a member of the Board as of the
Closing Date or whose nomination for his first election, or that first election,
to the Board following that date was recommended or approved by a majority of
the then Continuing Directors (acting separately or as a part of any action
taken by the Board or any committee thereof), and (b) is not an Acquiring
Person, an Affiliate or Associate of an
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Acquiring Person or a nominee or representative of an Acquiring Person or of any
such Affiliate or Associate.
"DISABILITY" of the Executive means the Executive has been
determined (which determination shall be final and binding on all Persons,
absent manifest error), as a result of a physical or mental illness or personal
injury he has incurred, by a Qualified Physician (who may be the doctor treating
or otherwise acting as the Executive's doctor in connection with the illness or
injury in question) selected by the Executive with the consent of the Company,
or by the Company at its expense and with the consent of the Executive (which
consent shall not be unreasonably withheld in either case), to be unable to
perform, at the time of that determination and, in all reasonable medical
likelihood, indefinitely thereafter, the normal duties then most recently
assigned, under and in accordance with the terms hereof, to the Executive while
on Active Status; provided that, if: (1)(A) the Company has reasonably withheld
its consent to the Qualified Physician, if any, selected by the Executive or (B)
the Executive has reasonably withheld his consent to the Qualified Physician, if
any, selected by the Company, and (2) the Qualified Physicians selected by the
Executive and the Company disagree as to whether the Executive has incurred a
Disability, the determination whether the Executive has incurred a Disability
shall be made by a majority of three (3) Qualified Physicians, (a) one (1) of
whom shall be selected by the Executive, (b) one (1) of whom shall be selected
by the Company, and (c) the remaining one (1) of whom shall be selected by the
Qualified Physicians selected by the Executive and the Company pursuant to
clauses (a) and (b) of this proviso and the fees and expenses of whom will be
shared and paid in equal amounts by the Executive and the Company. For purposes
of this definition, if the Executive is unable by reason of illness or injury to
give an informed consent to the performance of the treatment of that illness or
injury, a Qualified Physician selected by any Person who is authorized by
applicable law to give that consent will be deemed to have been selected by the
Executive.
"EFFECTIVE DATE" has the meaning ascribed to that term in
Section 8.15.
"ERISA" means the Executive Retirement Income Security Act of
1974.
"EMPLOYMENT" means the salaried employment of the Executive by
the Company or a subsidiary of the Company hereunder.
"EXCESS AMOUNT" has the meaning ascribed to that term in
Section 4.2.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"EXECUTIVE OFFICER" means any of the chairman of the board,
the chief executive officer, the chief operating officer, the chief financial
officer, the president, any executive or senior vice president or the general
counsel of the Company.
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"EXEMPT PERSON" means (a) (1) the Company, any subsidiary of
the Company, any employee benefit plan of the Company or of any subsidiary of
the Company and (2) any Person organized, appointed or established by the
Company for or pursuant to the terms of any such plan or for the purpose of
funding any such plan or funding other employee benefits for employees of the
Company or any subsidiary of the Company and (b) the Executive, any Affiliate or
Associate of the Executive or any group (as that term is used in Exchange Act
Rule 13d-5(b)) of which the Executive or any Affiliate or Associate of the
Executive is a member.
"GOOD REASON" for the Executive's termination of his
Employment means: (a) any violation hereof in any material respect by the
Company; (b) either (1) a failure of the Company to continue in effect any
Compensation Plan in which the Executive was participating, or (2) the taking of
any action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under, any such
Compensation Plan; or (c) the assignment to the Executive of duties inconsistent
in any material respect with the Executive's then current positions (including
status, offices, titles and reporting requirements), authority, duties or
responsibilities or any other action by the Company which results in a material
diminution in those positions, authority, duties or responsibilities.
"INCENTIVE PLAN" means any compensation arrangement, plan,
policy, practice or program established, maintained or sponsored by the Company
or any subsidiary of the Company, or to which the Company or any subsidiary of
the Company contributes, on behalf of any Executive Officer and which provides
for incentive, bonus or other performance-based awards of cash, securities or
the phantom equivalent of securities, including any stock option, stock
appreciation right and restricted stock plan, but excluding any plan intended to
qualify as a plan under any one or more of Sections 401(a), 401(k) or 423 of the
Code.
"NONTERMINATING PARTY" means the Executive or the Company, as
the case may be, to which the Terminating Party delivers a Notice of
Termination.
"NOTICE OF TERMINATION" to or from the Executive means a
written notice that: (a) 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, and (b) if the Termination Date is other than the
date of receipt of the notice, sets forth that Termination Date.
"OUTSIDE DIRECTOR" means at any time a member of the Board at
that time who is not then an employee of the Company or any subsidiary of the
Company.
"PERFORMANCE GOAL" has the meaning ascribed to that term in
Section 4.2.
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"PERSON" means any natural person, sole proprietorship,
corporation, partnership of any kind having a separate legal status, limited
liability company, business trust, unincorporated organization or association,
mutual company, joint stock company, joint venture, estate, trust, union or
employee organization or governmental authority.
"PRIME RATE" has the meaning ascribed to that term in Section
4.2.
"QUALIFIED PHYSICIAN" means, in the case of any determination
whether the Executive has sustained a Disability, a physician (a) holding an
M.D. degree from a medical school located in the United States, (b) specializing
and board certified in the treatment of the injury or illness that has or may
have caused that Disability, and (c) having admission privileges to one or more
hospitals located in Florida or in the state in which the Executive then is
domiciled.
"REQUIRED BOARD MAJORITY" means at any time a majority of the
members of the entire Board then in office which shall include at least a
majority of the Outside Directors then in office.
"SECURITIES ACT" means the Securities Act of 1933.
"SEVERANCE PAYMENT" means at any time an amount equal to three
(3) times the Executive's Average Annual Compensation during the term of this
Agreement.
"TERMINATING PARTY" means the Executive or the Company, as the
case may be, who or which terminates the Executive's Employment by means of a
Notice of Termination.
"TERMINATION DATE" means: (a) if the Executive's Employment is
terminated by reason of the Executive's death, the date of that death; (b) if
the Executive's Employment is terminated by Executive for Good Reason, or based
on a Change of Control pursuant to Section 5.2(b), the date specified in the
Executive's Notice of Termination; (c) if the Executive's Employment is
terminated by Executive without Good Reason and other than for Disability
pursuant to Section 5.2(d), the ninetieth (90th) day after the Company receives
Executive's Notice of Termination; and (d) if the Executive's Employment is
terminated by the Company at any time for Cause, the date the Executive receives
the Company's Notice of Termination for Cause.
"TERMINATION PAYMENT" means at any time an amount equal to one
and one-half (1.5) times the Executive's Average Annual Compensation during the
term of this Agreement.
"TRADE AREA" means any area within a fifty (50) mile radius
from a Dealership owned or operated by the Company.
"VOTING SHARES" means: (a) in the case of any corporation,
stock of that corporation of the class or classes having general voting power
under ordinary circumstances to elect a majority of that corporation's board of
directors; and (b) in the case of any other entity, equity interests of the
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class or classes having general voting power under ordinary circumstances
equivalent to the Voting Shares of a corporation.
1.2 OTHER DEFINITIONAL PROVISIONS.
(i) Except as otherwise specified herein, all references
herein to any statute defined or referred to herein, including the Code, ERISA
and the Exchange Act, shall be deemed references to that statute or any
successor statute, as the same may have been or may be amended or supplemented
from time to time, and any rules or regulations promulgated thereunder.
(ii) When used in this Agreement, the words "herein," "hereof"
and "hereunder" and words of similar import shall refer to this Agreement as a
whole and not to any provision of this Agreement, and the word "Section" refers
to a Section of this Agreement unless otherwise specified.
(iii) Whenever the context so requires, the singular number
includes the plural and vice versa, and a reference to one gender includes each
other gender and the neuter.
(iv) The word "including" (and, with correlative meaning, the
word "include") means including, without limiting the generality of any
description preceding such word, and the words "shall" and "will" are used
interchangeably and have the same meaning.
2. EMPLOYMENT
2.1 DUTIES. On the terms and subject to the conditions hereinafter set
forth, and beginning as of the Effective Date, the Company will employ the
Executive as Chairman of the Board, Chief Executive Officer and President of the
Company and the Executive will serve in the Company's employ in that position.
The Executive shall perform such duties, and have such powers, authority,
functions, duties and responsibilities for the Company and corporations
affiliated with the Company as are commensurate and consistent with his
employment as Chairman of the Board and Chief Executive Officer of the Company.
The Executive also shall have such additional powers, authority, functions,
duties and responsibilities as may be assigned to him by the Board; provided
that, without the Executive's written consent, such additional powers,
authority, functions, duties and responsibilities shall not be inconsistent or
interfere with, or detract from, those herein vested in, or otherwise then being
performed for the Company by, the Executive.
2.2 OTHER ACTIVITIES. The Executive shall not, at any time during his
Employment, engage in any other activities unless those activities do not
interfere materially with the Executive's duties and responsibilities for the
Company at that time, except that the Executive shall be entitled, subject to
the provisions of Section 8, (a) to continue with such activities as the
Executive has carried on prior to the Effective Date, including making and
managing his personal investments and participating in other business or civic
activities; and (b) to serve on corporate or other business, civic or charitable
boards or committees and trade association or similar boards or committees.
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3. TERM OF EMPLOYMENT
3.1 TERM. Subject to the provisions of Section 5, the term of the
Executive's Employment shall be for an initial term expiring on December 31,
2000, and shall automatically renew for consecutive three (3) year terms
thereafter, without any further action by either the Company or the Executive,
unless either the Company or the Executive shall, no less than one hundred
eighty (180) days prior to the expiration of the original term hereof, or any
renewal term, provide written notice to the other party of his or its election
not to renew Executive's Employment. The Executive's Employment shall terminate
when the Termination Date shall have occurred; provided no such termination
shall release the Company from its obligations to pay the Executive all the
applicable amounts Section 5 provides the Company shall pay as a result of the
termination of the Executive's Employment.
4. COMPENSATION
4.1 BASE SALARY. A Base Salary shall be payable to the Executive by the
Company as a guaranteed minimum annual amount hereunder for each Compensation
Year during the period from the Effective Date to the Termination Date. That
Base Salary shall be payable in accordance with the Company's normal payroll
schedules (but in no event less frequently than semi-monthly), shall be payable
initially at the annual rate of $500,000.00 and shall be increased (but not
decreased or adjusted other than as provided in Section 5) as follows:
(i) on the first and each subsequent anniversary of the
Effective Date, by the same percentage increase (if any) in the CPI for the
twelve (12) month period immediately preceding such anniversary; and
(ii) on the first and each subsequent anniversary of the
Effective Date, by such additional amount as shall be determined in the sole
discretion of the Compensation Committee, as evidenced by the written minutes or
records of the Compensation Committee and its written notices of such
determinations or approvals to the Executive.
4.2 BONUS. Executive shall be eligible for an annual Bonus based on
satisfaction of annual performance goals for the Company to be established from
time to time by the Compensation Committee, in accordance with the Company's
Incentive Plans.
4.2.1 The performance goals for the Company established by the
Compensation Committee pursuant to this Section 4.2 (the "PERFORMANCE GOAL") are
intended as "performance goals" for Executive, as that term is used in Section
162(m)(4)(C) of the Code and regulations promulgated thereunder. Such
Performance Goals will be determined and approved by the Compensation Committee,
consisting solely of two (2) or more outside directors, as required by Code ss.
162(m)(4)(C)(i) and regulations promulgated thereunder.
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4.2.2 Notwithstanding anything to the contrary contained
herein, in no event shall Executive receive any portion of his Bonus if the
Company could not reasonably deduct such portion solely by operation of Code ss.
162(m). For purposes of this limitation: (i) no portion of the Executive's
compensation or benefits, the receipt or enjoyment of which Executive shall have
effectively waived in writing prior to the date of payment, shall be taken into
account; (ii) no portion of any compensation or benefits shall be taken into
account which, in the opinion of tax counsel selected by the Company's
independent auditors and acceptable to Executive, does not constitute
"applicable employee remuneration" within the meaning of Code ss.162(m) and
regulations promulgated thereunder; and (iii) the value of any non-cash benefit
or any deferred payment or benefit included in the Executive's remuneration
shall be determined by the Company's independent auditors in accordance with the
Code. This subsection 4.2.2 shall not prohibit the accrual or payment of any
Bonus (or portion thereof) which is deferred in accordance with subsection 4.2.5
below.
4.2.3 At any time during the term of Employment, upon written
request of Executive, the Company shall submit the Performance Goal and other
material compensation terms provided herein for approval by the Company's
shareholders if necessary to comply with Code ss. 162(m)(4)(C)(ii) and
regulations promulgated thereunder, and the Company shall use reasonable efforts
to secure such shareholder approval; provided, (i) the Company shall not be
required to call a special shareholders meeting for the sole purpose of
complying with this section; and (ii) in order to have such approval sought at
the Company's annual shareholders meeting, Executive shall provide written
notice thereof to the Company no less than ninety (90) days prior to the
scheduled date of the annual meeting. If any executive officer of the Company
requests that his Performance Goal and compensation terms be submitted for
shareholder approval pursuant to this Agreement, the Company shall have the
right to submit the Performance Goals and compensation arrangements of all
executive officers for shareholder approval at the same meeting.
4.2.4 If required to comply with Code ss.162(m)(4)(C)(iii),
the Company's Compensation Committee shall, before the payment of any Bonus,
certify in writing, if applicable, that the Performance Goal and any other
material terms hereof were satisfied, as necessary to comply with Code ss.
162(m)(4)(C)(iii).
4.2.5 If for any reason the Performance Goal and Bonus
provided to Executive do not qualify for the Code ss. 162(m)(4)(C) exemption,
the payment of any portion of the Bonus causing Executive's compensation to
exceed $1,000,000 during any fiscal year of the Company (the "EXCESS AMOUNT")
will be deferred until a fiscal year during the term of employment in which
Executive earns less than $1,000,000; PROVIDED, HOWEVER, that in the event of
Executive's death, the termination of Executive's employment for any reason
(including without limitation termination by the Company for Cause or by
Executive for Good Reason), or the expiration of this Agreement, any Excess
Amount, including any interest earned thereon, shall be paid to Executive within
ten (10) days of such death, termination, or expiration. Any Excess Amount shall
earn interest at a variable rate of interest equal to the prime rate, as
published in THE WALL STREET JOURNAL from time to time (the "PRIME RATE"), until
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such amount is paid to the Executive. The Company shall hold any Excess Amount,
including any interest earned thereon, in trust for Executive until such amount
is paid to Executive in accordance with the terms hereof; provided, that all
amounts held in trust for Executive shall be subject to the claims of the
creditors of the Company.
4.2.6 The provisions of this Section 4.2 are intended, and
shall be interpreted, to comply with the requirements of Code ss. 162(m) so as
to permit the Company to deduct all payments of applicable employee remuneration
made to Executive pursuant to this Agreement.
4.3 OTHER COMPENSATION. Subject to subsection 4.2 above, the Executive
shall be entitled to participate in all Compensation Plans from time to time in
effect during the term of this Agreement, regardless of whether the Executive is
an Executive Officer. All awards to the Executive under all Incentive Plans
shall take into account the Executive's positions with and duties and
responsibilities to the Company and its subsidiaries.
4.4 EMPLOYEE BENEFIT PLANS AND PROGRAMS. The Executive shall also be
entitled to participate in all other group life insurance, pension, medical
insurance, hospitalization, disability and other similar employee benefit plans
and programs which at any time during the term of this Agreement may be offered
by the Company to its executive officers generally; provided that in the case of
medical, hospitalization and similar benefits, coverage shall also be provided,
at the Company's cost, to the Executive's spouse and minor children.
4.5 TAX INDEMNITY. Should any of the payments of Base Salary, Severance
Payments, Termination Payments, other incentive or supplemental compensation,
benefits, allowances, awards, payments, reimbursements or other perquisites, or
any other payment in the nature of compensation, singly, in any combination or
in the aggregate, that are provided for hereunder to be paid to or for the
benefit of the Executive be determined or alleged to be subject to an excise or
similar purpose tax pursuant to Section 4999 of the Code, or any successor or
other comparable federal, state or local tax law by reason of being an "excess
parachute payment" (within the meaning of Section 280G of the Code), the Company
shall pay to the Executive such additional compensation as is necessary (after
taking into account all federal, state and local taxes payable by the Executive
as a result of the receipt of such additional compensation) to place the
Executive in the same after-tax position (including federal, state and local
taxes) he would have been in had no such excise or similar purpose tax (or
interest or penalties thereon) been paid or incurred. The Company hereby agrees
to pay such additional compensation within the earlier to occur of five (5)
business days after (i) the Executive notifies the Company that the Executive
intends to file a tax return taking the position that such excise or similar
purpose tax is due and payable in reliance on a written opinion of the
Executive's tax counsel (such tax counsel to be chosen solely by the Executive)
that it is more likely than not that such excise tax is due and payable; or (ii)
the date of any notice or action by the Company that it intends to take the
position that such excise tax is due and payable. The costs of obtaining the tax
counsel opinion referred to in clause (i) of the preceding sentence shall be
borne by the Company, and as long as such tax counsel was chosen by the
Executive in good faith, the conclusions reached in
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such opinion shall not be challenged or disputed by the Company. If the
Executive intends to make any payment with respect to any such excise or similar
purpose tax as a result of an adjustment to the Executive's tax liability by any
federal, state or local tax authority, the Company will pay such additional
compensation by delivering its cashier's check payable in such amount to the
Executive within five (5) business days after the Executive notifies the Company
of his intention to make such payment. Without limiting the obligation of the
Company hereunder, the Executive agrees, in the event the Executive makes any
payment pursuant to the preceding sentence, to negotiate with the Company in
good faith with respect to procedures reasonably requested by the Company which
would afford the Company the ability to contest the imposition of such excise or
similar purpose tax; provided, however, that the Executive will not be required
to afford the Company any right to contest the applicability of any such excise
or similar purpose tax to the extent that the Executive reasonably determines
(based upon the opinion of his tax counsel) that such contest is inconsistent
with the overall tax interests of the Executive.
5. TERMINATION, DISABILITY AND DEATH
5.1 TERMINATION OF EMPLOYMENT BY THE COMPANY. The Company shall be
entitled, if acting at the direction of the Required Board Majority, to
terminate the Executive's Employment at any time with or without Cause. The
Company's termination of the Executive's Employment will be effective on the
date the Company delivers a Notice of Termination to the Executive pursuant to
this Section 5.1 (together with any required certified Board resolution). If the
Company terminates the Executive's Employment for Cause, the Company shall,
within five (5) business days thereafter, pay the Executive an amount equal to
the Accrued Benefits and, when that payment is made, the Company shall have no
further obligation hereunder to compensate the Executive. If the Company
terminates the Executive's Employment without Cause, or elects not to renew
Executive's Employment upon expiration of the original term or any renewal term,
the Company shall, within five (5) business days thereafter, pay the Executive
an amount equal to the sum of Accrued Benefits, plus the Severance Payment, and
shall continue to provide health insurance benefits for the Executive, his
spouse and minor children (on the same terms in effect on the Termination Date)
for a period of three (3) years after the Termination Date.
5.2 TERMINATION OF EMPLOYMENT BY THE EXECUTIVE. The Executive shall be
entitled to terminate his Employment, by delivery of a Notice of Termination to
the Company: (a) for Good Reason at any time within one hundred eighty (180)
days after the facts or circumstances constituting that Good Reason first exist
and are known to the Executive, (b) by reason of a Change of Control at any time
within three hundred sixty-five (365) days after that Change of Control occurs;
(c) in the event of his Disability, as provided in Section 5.3, or (d) without
Good Reason and other than for Disability at any time. If the Executive
terminates his Employment for Good Reason or as a result of a Change of Control,
the Company shall pay to the Executive in a cash lump sum within five (5)
business days after the date the Company receives the Executive's Notice of
Termination, an amount equal to the sum of Accrued Benefits plus the Severance
Payment, and shall continue to provide health insurance benefits for the
Executive, his spouse and minor children (on the same terms in effect
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on the Termination Date) for a period of three (3) years after the Termination
Date. If the Executive terminates his Employment without Good Reason and other
than for Disability, the Company shall pay to the Executive, in a cash lump sum
within five (5) business days after the Termination Date, the Accrued Benefits.
5.3 TERMINATION BY REASON OF DISABILITY. If the Executive incurs any
Disability while on Active Status, either the Executive or the Company may
terminate the Executive's Employment effective on the date the Nonterminating
Party receives a Notice of Termination from the Terminating Party pursuant to
this Section 5.3; provided, however that the Company shall, within five (5)
business days thereafter, pay the Executive an amount equal to the sum of
Accrued Benefits plus the Termination Payment, and the Company shall continue to
provide health insurance benefits for the Executive, his spouse and minor
children (on the same terms in effect on the Termination Date) for a period of
three (3) years after the Termination Date.
5.4 TERMINATION OF EMPLOYMENT BY DEATH. The Executive's Employment
shall terminate automatically at the time of his death. If the Executive's
Employment is terminated by reason of the Executive's death, the Company shall
pay to the Executive's estate, in a cash lump sum within thirty (30) days after
the Termination Date, an amount equal to the sum of the Accrued Benefits plus
the Termination Payment, and shall continue to provide health insurance benefits
for the Executive's spouse and minor children (on the same terms in effect on
the Termination Date) for a period of three (3) years after the Termination
Date.
5.5 RETURN OF PROPERTY. On termination of the Executive's Employment,
however brought about, the Executive (or his representatives) shall promptly
deliver and return to the Company all the Company's property that is in the
possession or under the control of the Executive.
5.6 STOCK OPTIONS. Notwithstanding any provision of this Agreement to
the contrary: (i) except in the case of a termination of the Executive's
Employment for Cause, all stock options previously granted to the Executive
under Incentive Plans that have not been exercised and are outstanding as of the
time immediately prior to the Termination Date shall, notwithstanding any
contrary provision of any applicable Incentive Plan, automatically become vested
and immediately exercisable, and remain outstanding until exercised or the
expiration of their term, whichever is earlier; and (ii) in the case of a
termination of the Executive's Employment for Cause, all stock options
previously granted to Executive under Incentive Plans that have not been
exercised and are outstanding as of the Termination Date shall automatically be
terminated, unless the Compensation Committee determines otherwise in its
discretion, notwithstanding any contrary provision of any applicable Incentive
Plan.
6. OTHER EXECUTIVE RIGHTS
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6.1 PAID VACATION; HOLIDAYS. The Executive shall be entitled to not
less than six (6) weeks of annual vacation and all legal holidays during which
times his applicable compensation shall be paid in full.
6.2 BUSINESS EXPENSES. The Executive is authorized to incur, and will
be entitled to receive prompt reimbursement for, all reasonable expenses
incurred by the Executive in performing his duties and carrying out his
responsibilities hereunder, including business meal, entertainment and travel
expenses, provided that the Executive complies with the applicable policies,
practices and procedures of the Company relating to the submission of expense
reports, receipts or similar documentation of those expenses. The Company shall
either pay directly or promptly reimburse the Executive for such expenses not
more than twenty (20) days after the submission to the Company by the Executive
from time to time of an itemized accounting of such expenditures for which
direct payment or reimbursement is sought. Unpaid reimbursements after such
20-day period shall accrue interest in accordance with Section 8.11.
6.3 SUPPORT. While on Active Status, the Executive shall be provided by
the Company with office space, furnishings and facilities, reserved parking,
secretarial and administrative assistance, supplies and other support equipment
(including a computer, facsimile machine and photocopier).
6.4 OTHER BENEFITS. The Executive and his family shall be entitled to
use two new automobiles from the Company's inventory and the Company shall pay
all operating, maintenance and repair costs thereof. The Executive shall be
entitled to reimbursement for all dues, assessments and dining or other minimum
spending requirements at one country club to be selected by Executive.
6.5 NO FORCED RELOCATION. The Executive shall not be required to move
his principal place of residence from the greater Orlando area or to perform
regular duties that could reasonably be expected to require either such move
against his wish or to spend amounts of time each week outside the greater
Orlando area which are unreasonable in relation to the duties and
responsibilities of the Executive hereunder, and the Company agrees that, if it
requests the Executive to make such a move and the Executive declines that
request, (i) that declination shall not constitute any basis for a determination
that Cause exists, and (ii) no animosity or prejudice will be held against
Executive.
7. COVENANT AGAINST UNFAIR COMPETITION
7.1 Executive will not, for as long as he is employed hereunder and for
a period of three years following any termination of his employment, for any
reason, for his own account or jointly with another, directly or indirectly, for
or on behalf of any individual, partnership, corporation or other legal entity,
as principal, agent or otherwise:
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<PAGE>
(i) own, control, manage, be employed by, consult with, or
otherwise participate in any business or activity (other than that of the
Company) involved within the Trade Area in the retail sales or service of new or
used vehicles;
(ii) solicit or induce, or in any manner attempt to solicit,
any person employed by the Company or its affiliates to leave such employment,
whether or not such employment is pursuant to a written contract and whether or
not such employment is at will, or hire any person who has been employed by the
Company or an affiliate thereof at any time during the six (6) month period
preceding such hiring; or
(iii) disclose to any third party or use any Confidential
Information concerning the Company.
7.2 Executive recognizes the importance of the covenant contained in
this Section 7 and acknowledges that, based on his past experience and training
as an executive of the Company, the projected expansion of the Company's
business, and the nature of his services to be provided under this Agreement,
the restrictions imposed herein are: (i) reasonable as to scope, time and area;
(ii) necessary for the protection of the Company's legitimate business
interests, including without limitation, the Company's and its affiliates' trade
secrets, goodwill, and its relationship with customers and suppliers; and (iii)
not unduly restrictive of Executive's rights as an individual. Executive
acknowledges and agrees that the covenants contained in this Section 7 are
essential elements of this Agreement and that but for these covenants, the
Company would not have entered into this Agreement. Such covenants shall be
construed as agreements independent of any other provision of this Agreement.
The existence of any claim or cause of action against the Company by the
Executive, whether predicated on the Company's breach of this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
the covenants contained in this Section 7.
7.3 If Executive commits a breach or threatens to commit a breach of
any of the provisions of this Section 7, the Company shall have the right and
remedy, in addition to any others that may be available, at law or in equity, to
have the provisions of this Section 7 specifically enforced by any court having
equity jurisdiction, through injunctive or other relief (without being required
to post any bond or other security), it being acknowledged that any such breach
or threatened breach will cause irreparable injury to the Company, the amount of
which will be difficult to determine, and that money damages will not provide an
adequate remedy to the Company.
7.4 The provisions of this Section 7 shall survive the expiration and
termination of this Agreement, and the termination of Executive's employment
hereunder, for any reason.
8. GENERAL PROVISIONS
8.1 SEVERABILITY. If any one or more of the provisions of this
Agreement shall, for any reason, be held or found by final judgment of a court
of competent jurisdiction to be invalid, illegal
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or unenforceable in any respect, (i) such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, (ii)
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein (except that this clause (ii) shall
not prohibit any modification allowed under subsection (iii) of this Section);
and (iii) if the effect of a holding or finding that any such provision is
invalid, illegal or unenforceable is to modify to the Executive's detriment,
reduce or eliminate any compensation, reimbursement, payment, allowance or other
benefit to the Executive intended by the Company and Executive in entering into
this Agreement, the Company shall, within thirty (30) days after the date of
such finding or holding, negotiate and expeditiously enter into an agreement
with the Executive which contains alternative provisions (reasonably acceptable
to the Executive) that will restore to the Executive (to the extent lawfully
permissible) substantially the same economic, substantive and income tax
benefits and legal rights the Executive would have enjoyed had such provision
been upheld as legal, valid and enforceable. Without limiting the foregoing, if
any covenant contained in Section 7, or any part thereof, is hereafter construed
to be invalid or unenforceable, the same shall not affect the remainder of the
covenants, which shall be given full effect, without regard to the invalid
portions, and any court having jurisdiction shall have the power to reduce the
duration, scope and/or area of such covenant and, in its reduced form, said
covenant shall then be enforceable.
8.2 NONEXCLUSIVITY OF RIGHTS. Nothing herein shall prevent or limit the
Executive's continuing or future participation in any Compensation Plan or,
subject to Section 8.14, limit or otherwise affect such rights as the Executive
may have under any other contract or agreement with the Company. Vested benefits
and other amounts to which the Executive is or becomes entitled to receive under
any Compensation Plan on or after the Termination Date shall be payable in
accordance with that Compensation Plan, except as expressly modified hereby.
8.3 FULL SETTLEMENT. The Company's obligations to make the payments
provided for in, and otherwise to perform its undertakings in, this Agreement
shall not be affected by any right of set-off, counterclaim, recoupment, defense
or other action, claim or right 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 provision hereof, and those amounts shall not be reduced,
regardless of whether the Executive obtains other employment or becomes
self-employed.
8.4 SUCCESSORS.
(i) This Agreement is personal to the Executive and, without
the prior written consent of the Company, is not assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit and be enforceable by the Executive's legal
representatives acting in their capacities as such pursuant to applicable law.
This Agreement is not assignable by the Company. Except as limited by the
preceding sentence, this Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
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(ii) The Company shall require any successor (direct or
indirect and whether by purchase, merger, consolidation, share exchange or
otherwise) to the business, properties and assets of the Company substantially
as an entirety expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Company would have been required to
perform it had no such succession taken place.
8.5 AMENDMENTS; WAIVERS. This Agreement may not be amended or modified
except by a written agreement executed and delivered by the parties hereto or
their respective successors or legal representatives acting in their capacities
as such pursuant to applicable law.
8.6 NOTICES. All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery or by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
appropriate Person at the address of such Person set forth below (or at such
other address as such Person may designate by written notice to each other party
in accordance herewith):
(a) if to the Executive, addressed as follows:
Donald C. Mealey
9220 Cromwell Gardens Court
Orlando, FL 32827
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(b) if to the Company, addressed as follows:
First Team Automotive Group, Inc.
350 South Lake Destiny Drive
Suite 200
Orlando, FL 32810
Attn: Board of Directors
8.7 NO WAIVER. The failure of the Company or the Executive to insist on
strict compliance with any provision of, or to assert any right under, this
Agreement (including the right of the Executive to terminate his Employment for
Good Reason or by reason of a Change of Control pursuant to Section 5.2) shall
not be deemed a waiver of that provision or of any other provision of or right
under this Agreement.
8.8 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Florida.
8.9 JURISDICTION AND VENUE. The parties irrevocably consent with
respect to any action, suit or other legal proceeding pertaining directly to
this Agreement or to the interpretation or enforcement of any of Executive's
rights hereunder to service of process in the State of Florida and hereby waive
any right to contest or oppose receipt of such service of process. The parties
irrevocably (i) agree that any such action, suit or other legal proceeding shall
be brought in the courts of such state or in the courts of the United States
sitting in Orlando, Florida, (ii) consent to the jurisdiction of each such court
in any such action, suit or other legal proceeding, and (iii) waive any
objection they may have to the laying of venue of any such action, suit or other
legal proceeding in any of such courts.
8.10 HEADINGS. The headings of Sections and subsections hereof are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
8.11 INTEREST. If any amounts required to be paid or reimbursed to the
Executive hereunder are not so paid or reimbursed at the times provided herein
(including amounts required to be paid by the Company pursuant to Sections 4 and
5), those amounts shall accrue interest compounded daily at a variable rate
which is three percentage points (3%) above the Prime Rate, from the date those
amounts were required to have been paid or reimbursed to the Executive until
those amounts are finally and fully paid or reimbursed; provided, however, that
in no event shall the amount of interest contracted for, charged or received
hereunder exceed the maximum non-usurious amount of interest allowed by
applicable law.
8.12 PUBLICITY. The Company agrees with the Executive that, except to
the extent required by law or legal process (including the Exchange Act and the
Securities Act), it will not make or
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publish, without the prior written consent of the Executive, any written or oral
statement concerning the terms of the Executive's employment relationship with
the Company and will not, if a Notice of Termination is given by either the
Company or the Executive for any reason, publish or cause to be published any
statement concerning the Executive, including his work-related performance or
the reasons or basis for the giving of that Notice of Termination.
8.13 TAX WITHHOLDING. Notwithstanding any other provision hereof, the
Company may withhold from amounts payable hereunder all Federal, state, local
and foreign taxes that are required to be withheld by applicable laws or
regulations.
8.14 ENTIRE AGREEMENT. The Company and the Executive agree that this
Agreement supersedes all prior written and oral agreements between them with
respect to the employment of the Executive by the Company, but has no effect on
any Compensation Plan in which the Executive was participating prior to the
Effective Date.
8.15 EFFECTIVE DATE. This Agreement shall be effective upon the
closing of the Company's sale of its common stock to the public pursuant to an
effective Registration Statement filed under the Securities Act.
8.16 INDEMNIFICATION. The Executive shall be indemnified by the Company
to the maximum extent permitted by the law of Delaware, the state of the
Company's incorporation, and the law of the state of incorporation of any
subsidiary of the Company of which the Executive is a director or an officer or
executive, as the same may be in effect from time to time.
8.17 ATTORNEYS FEES. In the event of any litigation arising under the
terms of this Agreement, the prevailing party or parties shall be entitled to
recover its or their reasonable attorneys fees and court costs from the other
party or parties.
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8.18 WAIVER OF JURY TRIAL. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT AND ANY DOCUMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES' ACCEPTANCE OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year indicated above.
FIRST TEAM AUTOMOTIVE CORP.
By: /s/ EZRA P. MAGER
--------------------------------
Ezra P. Mager, Vice Chairman
EXECUTIVE
------------------------------------
Donald C. Mealey
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EXHIBIT 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of May
25, 1997, by and between FIRST TEAM AUTOMOTIVE CORP., a Delaware corporation
(the "Company"), and W. WARNER PEACOCK (the "Executive").
R E C I T A L S:
In entering into this Agreement, the Company desires to provide the
Executive with substantial incentives to serve the Company, without distraction
or concern over minimum compensation, benefits or tenure, to develop and
implement the Company's initial development plan, and thereafter manage the
Company's future growth and development, in order to maximize the returns to the
Company's stockholders.
NOW, THEREFORE, in consideration of the foregoing and the mutual
provisions contained herein, and for other good and valuable consideration, the
parties hereto agree with each other as follows:
1. CERTAIN DEFINITIONS
1.1 CERTAIN DEFINITIONS. As used herein, the following terms have the
meanings assigned to them below:
"ACCRUED BENEFITS" means an amount equal to the sum of (a) the
portion of the Base Salary payable through and including the Termination Date
which has not yet been paid, (b) all compensation previously deferred by the
Executive (together with any accrued interest and earnings thereon) which has
not yet been paid, and (c) any accrued but unpaid expense reimbursements and
vacation pay.
"ACQUIRING PERSON" means any Person who or which, together
with all Affiliates and Associates of such Person, is or are the Beneficial
Owner of twenty percent (20%) or more of the shares of Common Stock then
outstanding; but does not include any Exempt Person.
"ACTIVE STATUS" means the Executive's Employment status from
the Effective Date to and including the Termination Date.
"AFFILIATE" has the meaning ascribed to that term in Exchange
Act Rule 12b-2.
"ANNUAL CASH COMPENSATION" of the Executive for any
Compensation Year means the sum of the salary and bonus earned by the Executive
during that Compensation Year, including all amounts deferred at the election of
the Executive pursuant to Section 4.2.5 hereof, a Compensation
<PAGE>
Plan intended to qualify as a plan under Section 401(k) of the Code, or
otherwise. If salary or bonus is paid in whole or in part in property other than
cash (such as Common Stock) the amount so paid shall be the fair market value
thereof on the date of payment.
"ASSOCIATE" means, with reference to any Person, (a) any
corporation, firm, partnership, association, unincorporated organization or
other entity (other than the Company or a subsidiary of the Company) of which
that Person is an officer or general partner (or officer or general partner of a
general partner) or is, directly or indirectly, the Beneficial Owner of 10% or
more of any class of its equity securities, (b) any trust or other estate in
which that Person has a beneficial interest of 10% or more or for or of which
that Person serves as trustee or in a similar fiduciary capacity, and (c) any
relative or spouse of that Person, or any relative of that spouse, who has the
same home as that Person.
"AVERAGE ANNUAL CASH COMPENSATION" of the Executive means, as
of the date of any termination, the average of (a) the Annual Cash Compensation
earned by the Executive in each of the two (2) Compensation Years next preceding
that date or, if less than two (2) Compensation Years have occurred prior to
that date and since the Effective Date, (b) the Annual Cash Compensation in each
whole Compensation Year, if any, and, restated on an annualized basis, the
Annual Cash Compensation in each partial Compensation Year (up to a maximum of
two (2) partial Compensation Years) next preceding the date of any termination.
"BASE SALARY" means the guaranteed minimum annual salary
payable by the Company to the Executive pursuant to Section 4.1.
"BENEFICIAL OWNER" A specified Person is deemed the Beneficial
Owner of, and is deemed to "beneficially own," any securities of which that
Person or any of that Person's Affiliates or Associates, directly or indirectly,
is the "beneficial owner" (as determined pursuant to Exchange Act Rule 13d-3) or
otherwise has the right to vote or dispose of, including pursuant to any
agreement, arrangement or understanding (whether or not in writing).
"BOARD" means the entire Board of Directors of the Company.
"BONUS" means an annual bonus, in an amount, and on terms
determined by the Compensation Committee pursuant to the Company's Incentive
Plans.
"CAUSE" for the Company's termination of the Executive's
Employment means: (a) the Executive's conviction, in a final, non-appealable
ruling, of a felony crime that enriched the Executive at the expense of the
Company; or (b) the Executive's deliberate and intentional continuing failure to
substantially perform his duties and responsibilities hereunder (except by
reason of the Executive's incapacity due to physical or mental illness or
injury) for a period of twenty (20) days after the Required Board Majority has
delivered to the Executive a written demand for substantial performance
hereunder which specifically identifies the bases for the Required Board
Majority's determination that
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the Executive has not substantially performed his duties and responsibilities
hereunder (such period being the "GRACE PERIOD"); provided, that for purposes of
this clause (b), the Company shall not have Cause to terminate the Executive's
Employment unless (1) at a meeting of the Board called and held following the
Grace Period in the city in which the Company's principal executive offices are
located, of which the Executive was given not less than ten (10) days' prior
written notice and at which the Executive was afforded the opportunity to be
represented by counsel, appear and be heard, the Required Board Majority shall
adopt a written resolution which (A) sets forth the Required Board Majority's
determination that the failure of the Executive to substantially perform his
duties and responsibilities hereunder has (except by reason of his incapacity
due to physical or mental illness or injury) continued past the Grace Period,
and (B) specifically identifies the bases for that determination; and (2) the
Company, at the written direction of the Required Board Majority, shall deliver
to the Executive a Notice of Termination for Cause to which a copy of that
resolution, certified as being true and correct by the secretary or any
assistant secretary of the Company, is attached. For purposes of determining
whether Cause has occurred, no act or failure to act on the part of the
Executive shall be considered "deliberate and intentional" unless it is taken or
omitted to be taken by the Executive in bad faith or without a reasonable belief
that the Executive's act or omission was in the best interests of the Company.
"CHANGE OF CONTROL" means the occurrence of any of the
following events that occurs after the Closing Date: (a) any Person, other than
an Exempt Person, becomes an Acquiring Person; (b) at any time the then
Continuing Directors cease to constitute a majority of the members of the Board;
or (c) a merger of the Company with or into, or a sale by the Company of all or
substantially all its properties and assets to, another Person occurs and,
immediately after that occurrence, any Person, other than an Exempt Person,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of twenty percent (20%) or more of the total voting power of
the then outstanding Voting Shares of the Person surviving that transaction (in
the case of a merger or consolidation) or the Person acquiring all or
substantially all of those properties and assets.
"CLOSING DATE" means the date the Company consummates the
closing of the first sale of its Common Stock to the public pursuant to an
effective Registration Statement filed under the Securities Act.
"CODE" means the Internal Revenue Code of 1986.
"COMMON STOCK" means the common stock of the Company.
"COMPANY" means (a) First Team Automotive Corp., a Delaware
corporation, and (b) any Person that assumes the obligations of the Company
hereunder, by operation of law, pursuant to Section 8.4(ii) or otherwise.
"COMPENSATION PLAN" means any compensation arrangement, plan,
policy, practice or program established, maintained or sponsored by the Company
or any subsidiary of the Company,
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or to which the Company or any subsidiary of the Company contributes, on behalf
of any Executive Officer or any member of the family of any Executive Officer,
(a) including (i) any "employee pension benefit plan" (as defined in Section
3(2) of ERISA) or other "employee benefit plan" (as defined in Section 3(3) of
ERISA), (ii) any other retirement and savings plan, including any supplemental
benefit arrangement relating to any plan intended to be qualified under Section
401(a) of the Code or whose benefits are limited by the Code or ERISA, (iii) any
"employee welfare plan" (as defined in Section 3(1) of ERISA), (iv) any
arrangement, plan, policy, practice or program providing for severance pay,
deferred compensation or insurance benefit, (v) any Incentive Plan, and (vi) any
arrangement, plan, policy, practice or program (A) authorizing and providing for
the payment or reimbursement of expenses attributable to first-class air travel
and first-class hotel occupancy while on travel or (B) providing for the payment
of business luncheon and country club dues, long-distance charges, mobile phone
monthly air time or other recurring monthly charges or any other fringe benefit,
allowance or accommodation of employment, but (b) excluding any compensation
arrangement, plan, policy, practice or program to the extent it provides for
annual base salary.
"COMPENSATION COMMITTEE" means the committee of the Board to
which the Board has delegated duties respecting the compensation of Executive
Officers and the administration of Incentive Plans, if any, intended to qualify
for the Exchange Act Rule 16b-3 exemption and the Code ss. 162(m)(4)(C)(i)
exemption.
"COMPENSATION YEAR" means any calendar year.
"CONFIDENTIAL INFORMATION" means, with respect to the Company
or any subsidiary of the Company, all trade secrets and other confidential,
nonpublic and/or proprietary information of that Person, including information
derived from reports, investigations, research, work in progress, codes,
marketing and sale programs, customer lists, records of customer service
requirements, capital expenditure projects, cost summaries, pricing formulae,
contract analyses, financial information, projections, confidential filings with
any governmental authority and all other confidential, nonpublic concepts,
methods of doing business, ideas, materials or information prepared or performed
for, by or on behalf of that Person.
"CPI" means for any period the Consumer Price Index for All
Urban Consumers--All Items Index for Orlando, Florida (or any substantially
similar index published for the same area), as published by the United States
Department of Labor, Bureau of Labor Statistics (or its successor) for that
period.
"CONTINUING DIRECTOR" means at any time any individual who
then (a) is a member of the Board and was a member of the Board as of the
Closing Date or whose nomination for his first election, or that first election,
to the Board following that date was recommended or approved by a majority of
the then Continuing Directors (acting separately or as a part of any action
taken by the Board or any committee thereof), and (b) is not an Acquiring
Person, an Affiliate or Associate of an
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Acquiring Person or a nominee or representative of an Acquiring Person or of any
such Affiliate or Associate.
"DISABILITY" of the Executive means the Executive has been
determined (which determination shall be final and binding on all Persons,
absent manifest error), as a result of a physical or mental illness or personal
injury he has incurred, by a Qualified Physician (who may be the doctor treating
or otherwise acting as the Executive's doctor in connection with the illness or
injury in question) selected by the Executive with the consent of the Company,
or by the Company at its expense and with the consent of the Executive (which
consent shall not be unreasonably withheld in either case), to be unable to
perform, at the time of that determination and, in all reasonable medical
likelihood, indefinitely thereafter, the normal duties then most recently
assigned, under and in accordance with the terms hereof, to the Executive while
on Active Status; provided that, if: (1)(A) the Company has reasonably withheld
its consent to the Qualified Physician, if any, selected by the Executive or (B)
the Executive has reasonably withheld his consent to the Qualified Physician, if
any, selected by the Company, and (2) the Qualified Physicians selected by the
Executive and the Company disagree as to whether the Executive has incurred a
Disability, the determination whether the Executive has incurred a Disability
shall be made by a majority of three (3) Qualified Physicians, (a) one (1) of
whom shall be selected by the Executive, (b) one (1) of whom shall be selected
by the Company, and (c) the remaining one (1) of whom shall be selected by the
Qualified Physicians selected by the Executive and the Company pursuant to
clauses (a) and (b) of this proviso and the fees and expenses of whom will be
shared and paid in equal amounts by the Executive and the Company. For purposes
of this definition, if the Executive is unable by reason of illness or injury to
give an informed consent to the performance of the treatment of that illness or
injury, a Qualified Physician selected by any Person who is authorized by
applicable law to give that consent will be deemed to have been selected by the
Executive.
"EFFECTIVE DATE" has the meaning ascribed to that term in
Section 8.15.
"ERISA" means the Executive Retirement Income Security Act
of 1974.
"EMPLOYMENT" means the salaried employment of the Executive
by the Company or a subsidiary of the Company hereunder.
"EXCESS AMOUNT" has the meaning ascribed to that term in
Section 4.2.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"EXECUTIVE OFFICER" means any of the chairman of the board,
the chief executive officer, the chief operating officer, the chief financial
officer, the president, any executive or senior vice president or the general
counsel of the Company.
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"EXEMPT PERSON" means (a) (1) the Company, any subsidiary of
the Company, any employee benefit plan of the Company or of any subsidiary of
the Company and (2) any Person organized, appointed or established by the
Company for or pursuant to the terms of any such plan or for the purpose of
funding any such plan or funding other employee benefits for employees of the
Company or any subsidiary of the Company and (b) the Executive, any Affiliate or
Associate of the Executive or any group (as that term is used in Exchange Act
Rule 13d-5(b)) of which the Executive or any Affiliate or Associate of the
Executive is a member.
"GOOD REASON" for the Executive's termination of his
Employment means: (a) any violation hereof in any material respect by the
Company; (b) either (1) a failure of the Company to continue in effect any
Compensation Plan in which the Executive was participating, or (2) the taking of
any action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under, any such
Compensation Plan; or (c) the assignment to the Executive of duties inconsistent
in any material respect with the Executive's then current positions (including
status, offices, titles and reporting requirements), authority, duties or
responsibilities or any other action by the Company which results in a material
diminution in those positions, authority, duties or responsibilities.
"INCENTIVE PLAN" means any compensation arrangement, plan,
policy, practice or program established, maintained or sponsored by the Company
or any subsidiary of the Company, or to which the Company or any subsidiary of
the Company contributes, on behalf of any Executive Officer and which provides
for incentive, bonus or other performance-based awards of cash, securities or
the phantom equivalent of securities, including any stock option, stock
appreciation right and restricted stock plan, but excluding any plan intended to
qualify as a plan under any one or more of Sections 401(a), 401(k) or 423 of the
Code.
"NONTERMINATING PARTY" means the Executive or the Company, as
the case may be, to which the Terminating Party delivers a Notice of
Termination.
"NOTICE OF TERMINATION" to or from the Executive means a
written notice that: (a) 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, and (b) if the Termination Date is other than the
date of receipt of the notice, sets forth that Termination Date.
"OUTSIDE DIRECTOR" means at any time a member of the Board at
that time who is not then an employee of the Company or any subsidiary of the
Company.
"PERFORMANCE GOAL" has the meaning ascribed to that term in
Section 4.2.
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"PERSON" means any natural person, sole proprietorship,
corporation, partnership of any kind having a separate legal status, limited
liability company, business trust, unincorporated organization or association,
mutual company, joint stock company, joint venture, estate, trust, union or
employee organization or governmental authority.
"PRIME RATE" has the meaning ascribed to that term in
Section 4.2.
"QUALIFIED PHYSICIAN" means, in the case of any determination
whether the Executive has sustained a Disability, a physician (a) holding an
M.D. degree from a medical school located in the United States, (b) specializing
and board certified in the treatment of the injury or illness that has or may
have caused that Disability, and (c) having admission privileges to one or more
hospitals located in Florida or in the state in which the Executive then is
domiciled.
"REQUIRED BOARD MAJORITY" means at any time a majority of the
members of the entire Board then in office which shall include at least a
majority of the Outside Directors then in office.
"SECURITIES ACT" means the Securities Act of 1933.
"SEVERANCE PAYMENT" means at any time an amount equal to three
(3) times the Executive's Average Annual Compensation during the term of this
Agreement.
"TERMINATING PARTY" means the Executive or the Company, as the
case may be, who or which terminates the Executive's Employment by means of a
Notice of Termination.
"TERMINATION DATE" means: (a) if the Executive's Employment is
terminated by reason of the Executive's death, the date of that death; (b) if
the Executive's Employment is terminated by Executive for Good Reason, or based
on a Change of Control pursuant to Section 5.2(b), the date specified in the
Executive's Notice of Termination; (c) if the Executive's Employment is
terminated by Executive without Good Reason and other than for Disability
pursuant to Section 5.2(d), the ninetieth (90th) day after the Company receives
Executive's Notice of Termination; and (d) if the Executive's Employment is
terminated by the Company at any time for Cause, the date the Executive receives
the Company's Notice of Termination for Cause.
"TERMINATION PAYMENT" means at any time an amount equal to one
and one-half (1.5) times the Executive's Average Annual Compensation during the
term of this Agreement.
"TRADE AREA" means any area within a fifty (50) mile radius
from a Dealership owned or operated by the Company.
"VOTING SHARES" means: (a) in the case of any corporation,
stock of that corporation of the class or classes having general voting power
under ordinary circumstances to elect a majority of that corporation's board of
directors; and (b) in the case of any other entity, equity interests of the
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class or classes having general voting power under ordinary circumstances
equivalent to the Voting Shares of a corporation.
1.2 OTHER DEFINITIONAL PROVISIONS.
(i) Except as otherwise specified herein, all references
herein to any statute defined or referred to herein, including the Code, ERISA
and the Exchange Act, shall be deemed references to that statute or any
successor statute, as the same may have been or may be amended or supplemented
from time to time, and any rules or regulations promulgated thereunder.
(ii) When used in this Agreement, the words "herein," "hereof"
and "hereunder" and words of similar import shall refer to this Agreement as a
whole and not to any provision of this Agreement, and the word "Section" refers
to a Section of this Agreement unless otherwise specified.
(iii) Whenever the context so requires, the singular number
includes the plural and vice versa, and a reference to one gender includes each
other gender and the neuter.
(iv) The word "including" (and, with correlative meaning, the
word "include") means including, without limiting the generality of any
description preceding such word, and the words "shall" and "will" are used
interchangeably and have the same meaning.
2. EMPLOYMENT
2.1 DUTIES. On the terms and subject to the conditions hereinafter set
forth, and beginning as of the Effective Date, the Company will employ the
Executive as Chief Financial Officer and Executive Vice President of the Company
and the Executive will serve in the Company's employ in that position. The
Executive shall perform such duties, and have such powers, authority, functions,
duties and responsibilities for the Company and corporations affiliated with the
Company as are commensurate and consistent with his employment as Chairman of
the Board and Chief Executive Officer of the Company. The Executive also shall
have such additional powers, authority, functions, duties and responsibilities
as may be assigned to him by the Board; provided that, without the Executive's
written consent, such additional powers, authority, functions, duties and
responsibilities shall not be inconsistent or interfere with, or detract from,
those herein vested in, or otherwise then being performed for the Company by,
the Executive.
2.2 OTHER ACTIVITIES. The Executive shall not, at any time during his
Employment, engage in any other activities unless those activities do not
interfere materially with the Executive's duties and responsibilities for the
Company at that time, except that the Executive shall be entitled, subject to
the provisions of Section 8, (a) to continue with such activities as the
Executive has carried on prior to the Effective Date, including making and
managing his personal investments and participating in other business or civic
activities; and (b) to serve on corporate or other business, civic or charitable
boards or committees and trade association or similar boards or committees.
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3. TERM OF EMPLOYMENT
3.1 TERM. Subject to the provisions of Section 5, the term of the
Executive's Employment shall be for an initial term expiring on December 31,
2000, and shall automatically renew for consecutive three (3) year terms
thereafter, without any further action by either the Company or the Executive,
unless either the Company or the Executive shall, no less than one hundred
eighty (180) days prior to the expiration of the original term hereof, or any
renewal term, provide written notice to the other party of his or its election
not to renew Executive's Employment. The Executive's Employment shall terminate
when the Termination Date shall have occurred; provided no such termination
shall release the Company from its obligations to pay the Executive all the
applicable amounts Section 5 provides the Company shall pay as a result of the
termination of the Executive's Employment.
4. COMPENSATION
4.1 BASE SALARY. A Base Salary shall be payable to the Executive by the
Company as a guaranteed minimum annual amount hereunder for each Compensation
Year during the period from the Effective Date to the Termination Date. That
Base Salary shall be payable in accordance with the Company's normal payroll
schedules (but in no event less frequently than semi-monthly), shall be payable
initially at the annual rate of $300,000.00 and shall be increased (but not
decreased or adjusted other than as provided in Section 5) as follows:
(i) on the first and each subsequent anniversary of the
Effective Date, by the same percentage increase (if any) in the CPI for the
twelve (12) month period immediately preceding such anniversary; and
(ii) on the first and each subsequent anniversary of the
Effective Date, by such additional amount as shall be determined in the sole
discretion of the Compensation Committee, as evidenced by the written minutes or
records of the Compensation Committee and its written notices of such
determinations or approvals to the Executive.
4.2 BONUS. Executive shall be eligible for an annual Bonus based on
satisfaction of annual performance goals for the Company to be established from
time to time by the Compensation Committee, in accordance with the Company's
Incentive Plans.
4.2.1 The performance goals for the Company established by the
Compensation Committee pursuant to this Section 4.2 (the "PERFORMANCE GOAL") are
intended as "performance goals" for Executive, as that term is used in Section
162(m)(4)(C) of the Code and regulations promulgated thereunder. Such
Performance Goals will be determined and approved by the Compensation Committee,
consisting solely of two (2) or more outside directors, as required by Code ss.
162(m)(4)(C)(i) and regulations promulgated thereunder.
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4.2.2 Notwithstanding anything to the contrary contained
herein, in no event shall Executive receive any portion of his Bonus if the
Company could not reasonably deduct such portion solely by operation of Code ss.
162(m). For purposes of this limitation: (i) no portion of the Executive's
compensation or benefits, the receipt or enjoyment of which Executive shall have
effectively waived in writing prior to the date of payment, shall be taken into
account; (ii) no portion of any compensation or benefits shall be taken into
account which, in the opinion of tax counsel selected by the Company's
independent auditors and acceptable to Executive, does not constitute
"applicable employee remuneration" within the meaning of Code ss.162(m) and
regulations promulgated thereunder; and (iii) the value of any non-cash benefit
or any deferred payment or benefit included in the Executive's remuneration
shall be determined by the Company's independent auditors in accordance with the
Code. This subsection 4.2.2 shall not prohibit the accrual or payment of any
Bonus (or portion thereof) which is deferred in accordance with subsection 4.2.5
below.
4.2.3 At any time during the term of Employment, upon written
request of Executive, the Company shall submit the Performance Goal and other
material compensation terms provided herein for approval by the Company's
shareholders if necessary to comply with Code ss. 162(m)(4)(C)(ii) and
regulations promulgated thereunder, and the Company shall use reasonable efforts
to secure such shareholder approval; provided, (i) the Company shall not be
required to call a special shareholders meeting for the sole purpose of
complying with this section; and (ii) in order to have such approval sought at
the Company's annual shareholders meeting, Executive shall provide written
notice thereof to the Company no less than ninety (90) days prior to the
scheduled date of the annual meeting. If any executive officer of the Company
requests that his Performance Goal and compensation terms be submitted for
shareholder approval pursuant to this Agreement, the Company shall have the
right to submit the Performance Goals and compensation arrangements of all
executive officers for shareholder approval at the same meeting.
4.2.4 If required to comply with Code ss.162(m)(4)(C)(iii),
the Company's Compensation Committee shall, before the payment of any Bonus,
certify in writing, if applicable, that the Performance Goal and any other
material terms hereof were satisfied, as necessary to comply with Code ss.
162(m)(4)(C)(iii).
4.2.5 If for any reason the Performance Goal and Bonus
provided to Executive do not qualify for the Code ss. 162(m)(4)(C) exemption,
the payment of any portion of the Bonus causing Executive's compensation to
exceed $1,000,000 during any fiscal year of the Company (the "EXCESS AMOUNT")
will be deferred until a fiscal year during the term of employment in which
Executive earns less than $1,000,000; PROVIDED, HOWEVER, that in the event of
Executive's death, the termination of Executive's employment for any reason
(including without limitation termination by the Company for Cause or by
Executive for Good Reason), or the expiration of this Agreement, any Excess
Amount, including any interest earned thereon, shall be paid to Executive within
ten (10) days of such death, termination, or expiration. Any Excess Amount shall
earn interest at a variable rate of interest equal to the prime rate, as
published in THE WALL STREET JOURNAL from time to time (the "PRIME RATE"), until
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such amount is paid to the Executive. The Company shall hold any Excess Amount,
including any interest earned thereon, in trust for Executive until such amount
is paid to Executive in accordance with the terms hereof; provided, that all
amounts held in trust for Executive shall be subject to the claims of the
creditors of the Company.
4.2.6 The provisions of this Section 4.2 are intended, and
shall be interpreted, to comply with the requirements of Code ss. 162(m) so as
to permit the Company to deduct all payments of applicable employee remuneration
made to Executive pursuant to this Agreement.
4.3 OTHER COMPENSATION. Subject to subsection 4.2 above, the Executive
shall be entitled to participate in all Compensation Plans from time to time in
effect during the term of this Agreement, regardless of whether the Executive is
an Executive Officer. All awards to the Executive under all Incentive Plans
shall take into account the Executive's positions with and duties and
responsibilities to the Company and its subsidiaries.
4.4 EMPLOYEE BENEFIT PLANS AND PROGRAMS. The Executive shall also be
entitled to participate in all other group life insurance, pension, medical
insurance, hospitalization, disability and other similar employee benefit plans
and programs which at any time during the term of this Agreement may be offered
by the Company to its executive officers generally; provided that in the case of
medical, hospitalization and similar benefits, coverage shall also be provided,
at the Company's cost, to the Executive's spouse and minor children.
4.5 TAX INDEMNITY. Should any of the payments of Base Salary, Severance
Payments, Termination Payments, other incentive or supplemental compensation,
benefits, allowances, awards, payments, reimbursements or other perquisites, or
any other payment in the nature of compensation, singly, in any combination or
in the aggregate, that are provided for hereunder to be paid to or for the
benefit of the Executive be determined or alleged to be subject to an excise or
similar purpose tax pursuant to Section 4999 of the Code, or any successor or
other comparable federal, state or local tax law by reason of being an "excess
parachute payment" (within the meaning of Section 280G of the Code), the Company
shall pay to the Executive such additional compensation as is necessary (after
taking into account all federal, state and local taxes payable by the Executive
as a result of the receipt of such additional compensation) to place the
Executive in the same after-tax position (including federal, state and local
taxes) he would have been in had no such excise or similar purpose tax (or
interest or penalties thereon) been paid or incurred. The Company hereby agrees
to pay such additional compensation within the earlier to occur of five (5)
business days after (i) the Executive notifies the Company that the Executive
intends to file a tax return taking the position that such excise or similar
purpose tax is due and payable in reliance on a written opinion of the
Executive's tax counsel (such tax counsel to be chosen solely by the Executive)
that it is more likely than not that such excise tax is due and payable; or (ii)
the date of any notice or action by the Company that it intends to take the
position that such excise tax is due and payable. The costs of obtaining the tax
counsel opinion referred to in clause (i) of the preceding sentence shall be
borne by the Company, and as long as such tax counsel was chosen by the
Executive in good faith, the conclusions reached in
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such opinion shall not be challenged or disputed by the Company. If the
Executive intends to make any payment with respect to any such excise or similar
purpose tax as a result of an adjustment to the Executive's tax liability by any
federal, state or local tax authority, the Company will pay such additional
compensation by delivering its cashier's check payable in such amount to the
Executive within five (5) business days after the Executive notifies the Company
of his intention to make such payment. Without limiting the obligation of the
Company hereunder, the Executive agrees, in the event the Executive makes any
payment pursuant to the preceding sentence, to negotiate with the Company in
good faith with respect to procedures reasonably requested by the Company which
would afford the Company the ability to contest the imposition of such excise or
similar purpose tax; provided, however, that the Executive will not be required
to afford the Company any right to contest the applicability of any such excise
or similar purpose tax to the extent that the Executive reasonably determines
(based upon the opinion of his tax counsel) that such contest is inconsistent
with the overall tax interests of the Executive.
5. TERMINATION, DISABILITY AND DEATH
5.1 TERMINATION OF EMPLOYMENT BY THE COMPANY. The Company shall be
entitled, if acting at the direction of the Required Board Majority, to
terminate the Executive's Employment at any time with or without Cause. The
Company's termination of the Executive's Employment will be effective on the
date the Company delivers a Notice of Termination to the Executive pursuant to
this Section 5.1 (together with any required certified Board resolution). If the
Company terminates the Executive's Employment for Cause, the Company shall,
within five (5) business days thereafter, pay the Executive an amount equal to
the Accrued Benefits and, when that payment is made, the Company shall have no
further obligation hereunder to compensate the Executive. If the Company
terminates the Executive's Employment without Cause, or elects not to renew
Executive's Employment upon expiration of the original term or any renewal term,
the Company shall, within five (5) business days thereafter, pay the Executive
an amount equal to the sum of Accrued Benefits, plus the Severance Payment, and
shall continue to provide health insurance benefits for the Executive, his
spouse and minor children (on the same terms in effect on the Termination Date)
for a period of three (3) years after the Termination Date.
5.2 TERMINATION OF EMPLOYMENT BY THE EXECUTIVE. The Executive shall be
entitled to terminate his Employment, by delivery of a Notice of Termination to
the Company: (a) for Good Reason at any time within one hundred eighty (180)
days after the facts or circumstances constituting that Good Reason first exist
and are known to the Executive, (b) by reason of a Change of Control at any time
within three hundred sixty-five (365) days after that Change of Control occurs;
(c) in the event of his Disability, as provided in Section 5.3, or (d) without
Good Reason and other than for Disability at any time. If the Executive
terminates his Employment for Good Reason or as a result of a Change of Control,
the Company shall pay to the Executive in a cash lump sum within five (5)
business days after the date the Company receives the Executive's Notice of
Termination, an amount equal to the sum of Accrued Benefits plus the Severance
Payment, and shall continue to provide health insurance benefits for the
Executive, his spouse and minor children (on the same terms in effect
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on the Termination Date) for a period of three (3) years after the Termination
Date. If the Executive terminates his Employment without Good Reason and other
than for Disability, the Company shall pay to the Executive, in a cash lump sum
within five (5) business days after the Termination Date, the Accrued Benefits.
5.3 TERMINATION BY REASON OF DISABILITY. If the Executive incurs any
Disability while on Active Status, either the Executive or the Company may
terminate the Executive's Employment effective on the date the Nonterminating
Party receives a Notice of Termination from the Terminating Party pursuant to
this Section 5.3; provided, however that the Company shall, within five (5)
business days thereafter, pay the Executive an amount equal to the sum of
Accrued Benefits plus the Termination Payment, and the Company shall continue to
provide health insurance benefits for the Executive, his spouse and minor
children (on the same terms in effect on the Termination Date) for a period of
three (3) years after the Termination Date.
5.4 TERMINATION OF EMPLOYMENT BY DEATH. The Executive's Employment
shall terminate automatically at the time of his death. If the Executive's
Employment is terminated by reason of the Executive's death, the Company shall
pay to the Executive's estate, in a cash lump sum within thirty (30) days after
the Termination Date, an amount equal to the sum of the Accrued Benefits plus
the Termination Payment, and shall continue to provide health insurance benefits
for the Executive's spouse and minor children (on the same terms in effect on
the Termination Date) for a period of three (3) years after the Termination
Date.
5.5 RETURN OF PROPERTY. On termination of the Executive's Employment,
however brought about, the Executive (or his representatives) shall promptly
deliver and return to the Company all the Company's property that is in the
possession or under the control of the Executive.
5.6 STOCK OPTIONS. Notwithstanding any provision of this Agreement
to the contrary: (i) except in the case of a termination of the Executive's
Employment for Cause, all stock options previously granted to the Executive
under Incentive Plans that have not been exercised and are outstanding as of the
time immediately prior to the Termination Date shall, notwithstanding any
contrary provision of any applicable Incentive Plan, automatically become vested
and immediately exercisable, and remain outstanding until exercised or the
expiration of their term, whichever is earlier; and (ii) in the case of a
termination of the Executive's Employment for Cause, all stock options
previously granted to Executive under Incentive Plans that have not been
exercised and are outstanding as of the Termination Date shall automatically be
terminated, unless the Compensation Committee determines otherwise in its
discretion, notwithstanding any contrary provision of any applicable Incentive
Plan.
6. OTHER EXECUTIVE RIGHTS
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6.1 PAID VACATION; HOLIDAYS. The Executive shall be entitled to not
less than six (6) weeks of annual vacation and all legal holidays during which
times his applicable compensation shall be paid in full.
6.2 BUSINESS EXPENSES. The Executive is authorized to incur, and will
be entitled to receive prompt reimbursement for, all reasonable expenses
incurred by the Executive in performing his duties and carrying out his
responsibilities hereunder, including business meal, entertainment and travel
expenses, provided that the Executive complies with the applicable policies,
practices and procedures of the Company relating to the submission of expense
reports, receipts or similar documentation of those expenses. The Company shall
either pay directly or promptly reimburse the Executive for such expenses not
more than twenty (20) days after the submission to the Company by the Executive
from time to time of an itemized accounting of such expenditures for which
direct payment or reimbursement is sought. Unpaid reimbursements after such
20-day period shall accrue interest in accordance with Section 8.11.
6.3 SUPPORT. While on Active Status, the Executive shall be provided by
the Company with office space, furnishings and facilities, reserved parking,
secretarial and administrative assistance, supplies and other support equipment
(including a computer, facsimile machine and photocopier).
6.4 OTHER BENEFITS. The Executive and his family shall be entitled to
use two new automobiles from the Company's inventory and the Company shall pay
all operating, maintenance and repair costs thereof. The Executive shall be
entitled to reimbursement for all dues, assessments and dining or other minimum
spending requirements at one country club to be selected by Executive.
6.5 NO FORCED RELOCATION. The Executive shall not be required to move
his principal place of residence from the greater Orlando area or to perform
regular duties that could reasonably be expected to require either such move
against his wish or to spend amounts of time each week outside the greater
Orlando area which are unreasonable in relation to the duties and
responsibilities of the Executive hereunder, and the Company agrees that, if it
requests the Executive to make such a move and the Executive declines that
request, (i) that declination shall not constitute any basis for a determination
that Cause exists, and (ii) no animosity or prejudice will be held against
Executive.
7. COVENANT AGAINST UNFAIR COMPETITION
7.1 Executive will not, for as long as he is employed hereunder and for
a period of three years following any termination of his employment, for any
reason, for his own account or jointly with another, directly or indirectly, for
or on behalf of any individual, partnership, corporation or other legal entity,
as principal, agent or otherwise:
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(i) own, control, manage, be employed by, consult with, or
otherwise participate in any business or activity (other than that of the
Company) involved within the Trade Area in the retail sales or service of new or
used vehicles;
(ii) solicit or induce, or in any manner attempt to solicit,
any person employed by the Company or its affiliates to leave such employment,
whether or not such employment is pursuant to a written contract and whether or
not such employment is at will, or hire any person who has been employed by the
Company or an affiliate thereof at any time during the six (6) month period
preceding such hiring; or
(iii) disclose to any third party or use any Confidential
Information concerning the Company.
7.2 Executive recognizes the importance of the covenant contained in
this Section 7 and acknowledges that, based on his past experience and training
as an executive of the Company, the projected expansion of the Company's
business, and the nature of his services to be provided under this Agreement,
the restrictions imposed herein are: (i) reasonable as to scope, time and area;
(ii) necessary for the protection of the Company's legitimate business
interests, including without limitation, the Company's and its affiliates' trade
secrets, goodwill, and its relationship with customers and suppliers; and (iii)
not unduly restrictive of Executive's rights as an individual. Executive
acknowledges and agrees that the covenants contained in this Section 7 are
essential elements of this Agreement and that but for these covenants, the
Company would not have entered into this Agreement. Such covenants shall be
construed as agreements independent of any other provision of this Agreement.
The existence of any claim or cause of action against the Company by the
Executive, whether predicated on the Company's breach of this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
the covenants contained in this Section 7.
7.3 If Executive commits a breach or threatens to commit a breach of
any of the provisions of this Section 7, the Company shall have the right and
remedy, in addition to any others that may be available, at law or in equity, to
have the provisions of this Section 7 specifically enforced by any court having
equity jurisdiction, through injunctive or other relief (without being required
to post any bond or other security), it being acknowledged that any such breach
or threatened breach will cause irreparable injury to the Company, the amount of
which will be difficult to determine, and that money damages will not provide an
adequate remedy to the Company.
7.4 The provisions of this Section 7 shall survive the expiration and
termination of this Agreement, and the termination of Executive's employment
hereunder, for any reason.
8. GENERAL PROVISIONS
8.1 SEVERABILITY. If any one or more of the provisions of this
Agreement shall, for any reason, be held or found by final judgment of a court
of competent jurisdiction to be invalid, illegal
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or unenforceable in any respect, (i) such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, (ii)
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein (except that this clause (ii) shall
not prohibit any modification allowed under subsection (iii) of this Section);
and (iii) if the effect of a holding or finding that any such provision is
invalid, illegal or unenforceable is to modify to the Executive's detriment,
reduce or eliminate any compensation, reimbursement, payment, allowance or other
benefit to the Executive intended by the Company and Executive in entering into
this Agreement, the Company shall, within thirty (30) days after the date of
such finding or holding, negotiate and expeditiously enter into an agreement
with the Executive which contains alternative provisions (reasonably acceptable
to the Executive) that will restore to the Executive (to the extent lawfully
permissible) substantially the same economic, substantive and income tax
benefits and legal rights the Executive would have enjoyed had such provision
been upheld as legal, valid and enforceable. Without limiting the foregoing, if
any covenant contained in Section 7, or any part thereof, is hereafter construed
to be invalid or unenforceable, the same shall not affect the remainder of the
covenants, which shall be given full effect, without regard to the invalid
portions, and any court having jurisdiction shall have the power to reduce the
duration, scope and/or area of such covenant and, in its reduced form, said
covenant shall then be enforceable.
8.2 NONEXCLUSIVITY OF RIGHTS. Nothing herein shall prevent or limit the
Executive's continuing or future participation in any Compensation Plan or,
subject to Section 8.14, limit or otherwise affect such rights as the Executive
may have under any other contract or agreement with the Company. Vested benefits
and other amounts to which the Executive is or becomes entitled to receive under
any Compensation Plan on or after the Termination Date shall be payable in
accordance with that Compensation Plan, except as expressly modified hereby.
8.3 FULL SETTLEMENT. The Company's obligations to make the payments
provided for in, and otherwise to perform its undertakings in, this Agreement
shall not be affected by any right of set-off, counterclaim, recoupment, defense
or other action, claim or right 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 provision hereof, and those amounts shall not be reduced,
regardless of whether the Executive obtains other employment or becomes
self-employed.
8.4 SUCCESSORS.
(i) This Agreement is personal to the Executive and, without
the prior written consent of the Company, is not assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit and be enforceable by the Executive's legal
representatives acting in their capacities as such pursuant to applicable law.
This Agreement is not assignable by the Company. Except as limited by the
preceding sentence, this Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
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(ii) The Company shall require any successor (direct or
indirect and whether by purchase, merger, consolidation, share exchange or
otherwise) to the business, properties and assets of the Company substantially
as an entirety expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Company would have been required to
perform it had no such succession taken place.
8.5 AMENDMENTS; WAIVERS. This Agreement may not be amended or modified
except by a written agreement executed and delivered by the parties hereto or
their respective successors or legal representatives acting in their capacities
as such pursuant to applicable law.
8.6 NOTICES. All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery or by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
appropriate Person at the address of such Person set forth below (or at such
other address as such Person may designate by written notice to each other party
in accordance herewith):
(a) if to the Executive, addressed as follows:
W. Warner Peacock
520 Shepherd Avenue
Winter Park, FL 32827
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<PAGE>
(b) if to the Company, addressed as follows:
First Team Automotive Group, Inc.
350 South Lake Destiny Drive
Suite 200
Orlando, FL 32810
Attn: Board of Directors
8.7 NO WAIVER. The failure of the Company or the Executive to insist on
strict compliance with any provision of, or to assert any right under, this
Agreement (including the right of the Executive to terminate his Employment for
Good Reason or by reason of a Change of Control pursuant to Section 5.2) shall
not be deemed a waiver of that provision or of any other provision of or right
under this Agreement.
8.8 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Florida.
8.9 JURISDICTION AND VENUE. The parties irrevocably consent with
respect to any action, suit or other legal proceeding pertaining directly to
this Agreement or to the interpretation or enforcement of any of Executive's
rights hereunder to service of process in the State of Florida and hereby waive
any right to contest or oppose receipt of such service of process. The parties
irrevocably (i) agree that any such action, suit or other legal proceeding shall
be brought in the courts of such state or in the courts of the United States
sitting in Orlando, Florida, (ii) consent to the jurisdiction of each such court
in any such action, suit or other legal proceeding, and (iii) waive any
objection they may have to the laying of venue of any such action, suit or other
legal proceeding in any of such courts.
8.10 HEADINGS. The headings of Sections and subsections hereof are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
8.11 INTEREST. If any amounts required to be paid or reimbursed to the
Executive hereunder are not so paid or reimbursed at the times provided herein
(including amounts required to be paid by the Company pursuant to Sections 4 and
5), those amounts shall accrue interest compounded daily at a variable rate
which is three percentage points (3%) above the Prime Rate, from the date those
amounts were required to have been paid or reimbursed to the Executive until
those amounts are finally and fully paid or reimbursed; provided, however, that
in no event shall the amount of interest contracted for, charged or received
hereunder exceed the maximum non-usurious amount of interest allowed by
applicable law.
8.12 PUBLICITY. The Company agrees with the Executive that, except to
the extent required by law or legal process (including the Exchange Act and the
Securities Act), it will not make or
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publish, without the prior written consent of the Executive, any written or oral
statement concerning the terms of the Executive's employment relationship with
the Company and will not, if a Notice of Termination is given by either the
Company or the Executive for any reason, publish or cause to be published any
statement concerning the Executive, including his work-related performance or
the reasons or basis for the giving of that Notice of Termination.
8.13 TAX WITHHOLDING. Notwithstanding any other provision hereof, the
Company may withhold from amounts payable hereunder all Federal, state, local
and foreign taxes that are required to be withheld by applicable laws or
regulations.
8.14 ENTIRE AGREEMENT. The Company and the Executive agree that this
Agreement supersedes all prior written and oral agreements between them with
respect to the employment of the Executive by the Company, but has no effect on
any Compensation Plan in which the Executive was participating prior to the
Effective Date.
8.15 EFFECTIVE DATE. This Agreement shall be effective upon the
closing of the Company's sale of its common stock to the public pursuant to an
effective Registration Statement filed under the Securities Act.
8.16 INDEMNIFICATION. The Executive shall be indemnified by the Company
to the maximum extent permitted by the law of Delaware, the state of the
Company's incorporation, and the law of the state of incorporation of any
subsidiary of the Company of which the Executive is a director or an officer or
executive, as the same may be in effect from time to time.
8.17 ATTORNEYS FEES. In the event of any litigation arising under the
terms of this Agreement, the prevailing party or parties shall be entitled to
recover its or their reasonable attorneys fees and court costs from the other
party or parties.
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8.18 WAIVER OF JURY TRIAL. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT AND ANY DOCUMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES' ACCEPTANCE OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year indicated above.
FIRST TEAM AUTOMOTIVE CORP.
By: /s/ EZRA P MAGER
----------------------------------
Ezra P. Mager, Vice Chairman
EXECUTIVE
------------------------------------
W. Warner Peacock
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EXHIBIT 10.14
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 9th day of June,
1997, by and between FIRST TEAM AUTOMOTIVE CORP., a Delaware corporation (the
"COMPANY"); and EZRA P. MAGER, a resident of New York (the "EXECUTIVE").
RECITALS. The parties wish to provide for the employment of the
Executive by the Company from and after the Effective Date (defined below) and
to restrict the ability of the Executive to compete with the Company, all on the
terms and conditions herein set forth.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. EMPLOYMENT.
1.1 EFFECTIVE DATE. This Agreement shall be effective April 1,
1997 (the "EFFECTIVE DATE").
1.2 TERM AND DUTIES. The effective date of this Agreement
shall be April 1, 1997 and it shall continue in force and effect until March 31,
2000, unless earlier terminated as hereafter provided, to serve as Vice-Chairman
of the Company. During the Employment Term, and subject to the restrictions set
forth in Section 7, Executive shall perform such services and duties as are
consistent with such position. Without limiting the generality of the foregoing,
Executive shall:
(a) Act as a liaison between Company and the
investment banking community with respect to Company's operations as a public
company.
(b) To assist identifying acquisition opportunities
and to provide information to Company as requested by Company to facilitate
analysis and review of proposed acquisitions and the structure of same.
<PAGE>
(c) To perform hereunder at the highest possible
level of integrity and honesty.
(d) To participate in management meetings and to
continually seek ways to improve operations and maximize profitability.
(e) To consult with Company as requested with respect
to financial relationships and structuring.
(f) Work a schedule of hours as necessary to provide
the services set forth herein.
2. EXCLUSIVE DEVOTION TO DUTIES. During the term of this Agreement,
Executive shall devote his full time to his duties outlined herein and shall not
engage in or carry on or be employed by, directly or indirectly, any other
business or profession without the consent of Company, provided, however, that
nothing herein contained shall prohibit Executive from investing or trading in
stocks, bonds, commodities or other securities or forms of investments,
including real property. Executive shall not engage in any activities
competitive with or adverse to Company's business or welfare during the term of
this Agreement. The Executive agrees that in the event of his breach of the
requirements of this paragraph, Company shall be entitled to injunctive relief,
in addition to such other remedies and relief which would be available to
Company.
3. COMPENSATION AND BENEFITS. During the Employment Term, the Company
shall pay Executive the compensation and other amounts set forth below.
3.1 SALARY. For the period from April 1, 1997 through March
31, 2000, the Company shall pay Executive a salary ("SALARY") of $20,000.00 per
month, payable in installments according to the Company's regular payroll
practices and subject to such deductions as may be required by law. During any
subsequent year(s) of the Employment Term, Executive's Salary shall be as
determined by the
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Compensation Committee of the Company's Board of Directors (the "COMPENSATION
COMMITTEE") in its discretion.
3.2 BENEFITS. Executive shall receive: (i) one (1)
demonstrator vehicle, provided by the Company from time-to-time; (ii) as
approved by the Company in writing, reimbursement for reasonable and necessary
out-of-pocket expenses incurred in the performance of his duties hereunder,
including but not limited to travel expenses (such expenses shall be reimbursed
by the Company, from time to time (but not less frequently than monthly), upon
presentation of appropriate receipts therefor); and (iii) reasonable expenses
with respect to the Executive's office in New York (not to exceed $________ per
month).
4. REPAYMENT OF EXCESSIVE COMPENSATION. In the event that any part of
the compensation in the form of salary, bonuses, contribution to retirement
plans, or otherwise, paid to or on behalf of or for the benefit of the Executive
shall be disallowed in whole or in part as a deductible expense of Company by
the Internal Revenue Service, or by Company as being inappropriate, such
disallowed amount shall be reimbursed by the Executive to Company within thirty
(30) days after Company has notified the Executive of the amount of the
disallowance. In the event Company has not been fully repaid within said
thirty-day period, Company shall have the right to withhold the unpaid amount
from future salary payments, in one or more equal monthly installments, until
the amount owed to Company has been recovered in full.
5. TERMINATION.
5.1 Executive's employment pursuant to this Agreement shall be
terminated by the first to occur of the following events:
(a) The death of Executive.
(b) Executive retires.
(c) Company abandons the pursuit of an initial public
offering of its shares by itself or an affiliate.
(d) This Agreement expires by its terms.
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<PAGE>
(e) The Complete Disability of Executive. "COMPLETE
DISABILITY" as used herein shall mean the inability of Executive, due to
illness, accident or any other physical or mental incapacity, to perform the
services provided for in this Agreement for thirty (30) consecutive days or for
an aggregate of sixty (60) days within any period of twelve (12) consecutive
months during the Employment Term, as certified by a licensed competent
physician employed by the Company at the Company's expense.
(f) The resignation of Executive, or the discharge of
Executive by the Company for Cause. Executive may resign his employment solely
upon thirty (30) days' prior written notice. In such event, Executive shall
continue to render his full services to Company and Company shall pay Executive
full compensation up to the date of termination (unless Company does not desire
such performance during the notice period). "CAUSE" as used herein shall mean:
(i) the use of alcohol, narcotics, or
other drugs to the extent that it prevents Executive from effectively performing
services for the Company or the Dealership, as determined by the Company after
investigation, notice of the charge to Executive and after allowing the
Executive an opportunity to explain the conduct in question;
(ii) the use at any time while performing
services required under this Agreement of any illegal non-prescription drug or
medication, as determined by the Company after investigation, notice of the
charge to Executive and after allowing the Executive an opportunity to explain
the conduct in question;
(iii) conviction of a felony or a crime
involving moral turpitude;
(iv) acts of fraud by the Executive
against the Company or its affiliates, or in connection with the performance of
his duties hereunder, as determined by the Company after investigation, notice
of the charge to Executive and after allowing the Executive an opportunity to
explain the conduct in question; or
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<PAGE>
(v) Disclosing to a competitor or other
unauthorized persons proprietary information, confidences or trade secrets of
Company.
(vi) Recruitment of Company's personnel
on behalf of a competitor or potential competitor of Company.
(vii) solicitation of business on behalf of
a competitor or potential competitor of Company.
(viii) the Executive's willful or repeated
failure to comply with the provisions of this Agreement or to perform
Executive's duties and obligations under this Agreement, in any material respect
(a "DEFAULT"); provided, however, that in the case of this subsection (v),
termination for "Cause" shall occur only if the Company has given written notice
of the Default to Executive and Executive has failed to cure the Default in
question during a period of seven (7) days after the date of Executive's receipt
of such notice.
5.2 Upon any termination for any of the reasons set forth in
Section 5.1, the Company shall be released from all obligations hereunder,
including without limitation, the obligation to compensate Executive pursuant to
Section 3 hereof; provided, however, that Executive shall receive payment for
Salary, and reimbursement for business expenses, accrued through the date of
termination.
5.3 Notwithstanding the foregoing, the Company may terminate
Executive's employment pursuant to this Agreement at any time without Cause;
provided, however, that in the event of such termination the Company shall, in
addition to paying Executive for Salary and expense reimbursements accrued
through the date of termination, pay Executive, as severance pay and in full
satisfaction of all rights and claims of Executive under this Agreement, an
amount (the "Severance Payment") equal to: (i) one month's base salary, at the
rate in effect on the date of termination; multiplied by (ii) the number of
years the Executive has been continuously employed by the Company or one of its
predecessors or subsidiaries; provided, that in no event shall the aggregate
Severance Payment to Executive exceed one year's Salary. No other allowances,
salary payments or benefits of any kind shall be paid after the effective date
of termination. Solely for
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purposes of this Section 5.3, Executive is deemed to have been first employed by
the Company on April 1, 1997.
6. SURRENDER OF RECORDS, EQUIPMENT, ETC., ON TERMINATION OF EMPLOYMENT.
Executive agrees that, on termination of his employment, Executive will
surrender and return to the Company, in good condition, any and all equipment,
keys, records, books, tapes, credit cards, vehicles, compilations, materials, or
property of any description whatsoever, of the Company or the Dealership, all in
good condition, ordinary wear and tear excepted.
7. COVENANT AGAINST UNFAIR COMPETITION.
(a) Subject to subsection (g) below, Executive will
not, for as long as he is employed hereunder and for a period of three years
following any termination of his employment, for any reason, for his own account
or jointly with another, directly or indirectly, for or on behalf of any
individual, partnership, corporation or other legal entity, as principal, agent
or otherwise:
(i) own, control, manage, be employed
by, consult with, or otherwise participate in, a business (other than that of
the Company) involved anywhere within the Trade Area (as hereinafter defined) in
the retail sale or service of new or used motor vehicles (the activities
described in this clause (i) are hereinafter referred to collectively as the
"Business");
(ii) solicit or induce, or in any manner
attempt to solicit, any person employed by the Company or its affiliates to
leave such employment, whether or not such employment is pursuant to a written
contract and whether or not such employment is at will, or hire any person who
has been employed by the Company or an affiliate thereof at any time during the
six (6) month period preceding such hiring; or
(iii) disclose to any third party or use any
trade secrets or confidential information concerning the Company, except in
connection with the performance of his duties hereunder. Such trade secrets and
confidential information shall include, but not be limited to, (x) lists of
names and addresses of customers and suppliers of the Company or its affiliates,
and (y) software and computer programs, market research and data bases, sources
of leads and methods of obtaining new business, sales figures, prices,
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<PAGE>
projections, estimates, tax records, personnel history, accounting procedures,
and methods of purchasing, marketing, selling, promoting, performing and pricing
products and services employed by the Company or its affiliates in the Business
or any segment thereof.
(b) As used herein, the term "TRADE AREA" shall mean
the United States.
(c) Executive recognizes the importance of the
covenant contained in this Section 7 and acknowledges that, based on his past
experience and training as an executive of the Company, the projected expansion
of the Company's business, and the nature of his services to be provided under
this Agreement, the restrictions imposed herein are: (i) reasonable as to scope,
time and area; (ii) necessary for the protection of the Company's legitimate
business interests, including without limitation, the Company's and its
affiliates' trade secrets, goodwill, and its relationship with customers and
suppliers; and (iii) not unduly restrictive of Executive's rights as an
individual. Executive acknowledges and agrees that the covenants contained in
this Section 7 are essential elements of this Agreement and that but for these
covenants, the Company would not have entered into this Agreement. Such
covenants shall be construed as agreements independent of any other provision of
this Agreement. The existence of any claim or cause of action against the
Company by the Executive, whether predicated on the Company's breach of this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of the covenants contained in this Section 7.
(d) If Executive commits a breach or threatens to
commit a breach of any of the provisions of this Section 5, the Company shall
have the right and remedy, in addition to any others that may be available, at
law or in equity, to have the provisions of this Section 7 specifically enforced
by any court having equity jurisdiction, through injunctive or other relief
(without being required to post any bond or other security), it being
acknowledged that any such breach or threatened breach will cause irreparable
injury to the Company, the amount of which will be difficult to determine, and
that money damages will not provide an adequate remedy to the Company.
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<PAGE>
(e) If any covenant contained in this Section 7, or
any part thereof, is hereafter construed to be invalid or unenforceable, the
same shall not affect the remainder of the covenants, which shall be given full
effect, without regard to the invalid portions, and any court having
jurisdiction shall have the power to reduce the duration, scope and/or area of
such covenant and, in its reduced form, said covenant shall then be enforceable.
(f) The provisions of this Section 7 shall survive
the expiration and termination of this Agreement, and the termination of
Executive's employment hereunder, for any reason.
(g) Notwithstanding the foregoing, in the event
Executive is terminated by the Company without Cause pursuant to Section 5.3,
and the Company desires to enforce the restrictions set forth in subsection
(a)(i) of this Section 7, then the Company shall continue to pay to Executive
his monthly Salary as provided in Section 3 during the period of non-competition
desired by the Company, but which shall in no event exceed the three year term
provided in 7(a) above. While Executive is receiving Salary pursuant to this
subsection (g), he shall not be entitled to any other compensation or benefits
under this Agreement. The Company may terminate its obligation to pay Salary
under this subsection (g) at any time, by written notice to Executive, whereupon
Executive shall be free to compete with the Company. Notwithstanding any
termination without Cause, the restrictions of subsections (a)(ii) and (a)(iii)
above shall apply to Executive without any obligation of the Company to pay
Salary to Executive after termination.
8. SALE OF SHARES. Executive shall purchase from the underwriters at
the time of the Company's initial public offering for a purchase price of
$1,000,000 that number of shares of Company's common shares determined as
follows:
1,000,000 # of Shares (the"Shares")
=
--------
Opening price of
Company's common
shares on the date of
Company's Initial Public
Offering (the "IPO")
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<PAGE>
9. GRANT OF SHARES. -- Company hereby grants to Buyer the same number
of the Company's common shares purchased by Executive (the "Grant Shares")
pursuant to Section 1 above, subject to the following:
(a) Executive shall vest in his right to receive the Grant
Shares:
(i) after 1 year of employment with Company 33-1/3%
(ii) after 2 years of employment with Company 33-1/3/%
(iii) after 3 years of employment with Company 33-1/3%
(b) The IPO shall have closed on or before November 15, 1997,
and Executive has purchased the Shares.
(c) Executive shall be employed by Company and shall not have
been terminated for cause as defined herein.
10. REPRESENTATIONS AND WARRANTIES OF EXECUTIVE. -- Executive
represents and warrants to Company as follows:
10.1 INVESTMENT REPRESENTATION. -- Executive represents, and
in making this purchase it is specifically understood and agreed, that he is
acquiring the Shares being purchased hereunder for his own account for the
purpose of investment and not with a view to or for sale in connection with any
distribution thereof, and that he has no present intention of distributing same.
10.2 ABILITY TO BEAR RISK. -- Executive warrants to Company
that he is willing and financially able to bear the economic risks of the
investment contemplated by this Agreement and that he has knowledge and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of such investment. Executive realizes that, in the view of
the state and federal regulatory bodies, a purchase with the intent to resell by
reason of any foreseeable specific contingency or an anticipated change in
market conditions or in his financial condition or that of Company or its
industry or in connection with a contemplated liquidation or settlement of any
loan obtained by Executive for the acquisition of the Shares purchased hereby
would represent a purchase with an intent inconsistent with the representations
required by the Executive and that state and federal regulatory bodies might
regard such sale or distribution as a deferred sale as to which the exemptions
from registration would not be available. Executive acknowledges that he must
bear the economic risk of the investment contemplated by this Agreement for an
indefinite period of time because the Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act") and, therefore, cannot
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be sold unless they are subsequently registered under the Securities Act or an
exemption from such registration is available.
Executive acknowledges that the purchase of the Shares
involves a high degree of risk and that he has made such investigation of the
business and prospects of the Executive as he deems adequate. Executive further
acknowledges that, to the extent he is relying upon any projections of the
future business operations, growth, prospects, or development of the Company,
that he is aware that some or even all of such projections may never be
realized. Executive further acknowledges that such projections are based upon
assumptions, presuppositions, and subjective judgments and do not constitute
warranties or representations. However, they do constitute the Company's best
judgment as to the matters described therein, and the Company has no reason to
believe that such projections are not realizable.
Further, Executive understands and agrees that the Company has
no obligation to register the Shares under the Securities Act or the Securities
Exchange Act of 1934. Executive acknowledges he has been advised that when sales
are made to five (5) or more persons in Florida, that pursuant to Florida
Statutes 517.061, the Executive has three (3) days from his first tender of
consideration to consider the transaction described hereunder as voidable.
10.3 ACCESS TO INFORMATION. -- Executive warrants to Company
that he has received the financial statements of the Company for the year ending
December 31, 1996, and the month ending March 31, 1997, and has reviewed same
and has had an opportunity to ask questions of and receive answers from,
appropriate officers and representatives of the Company, and to obtain any
additional information concerning the Company which Executive has requested. In
addition, Executive warrants that the Company has made available for inspection
by Executive various documents connected with the Company's business and has not
refused in any way to permit Executive to inspect any document requested to be
inspected by Executive.
10.4 AGENTS OR BROKERS. -- Executive represents and warrants
that he has taken no action which would give rise to any claim by any person for
finders fees, brokerage or other commissions relating to this Agreement or the
transactions contemplated hereby, and Executive will indemnify and hold harmless
the Company from and against any claims for any such fee as a result of any
agreement or understanding between any of them and any third party.
11. TRANSFER RESTRICTIONS. --
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11.1 CONSENT AND AGREEMENT TO TRANSFER RESTRICTIONS. --
Executive consents and agrees that the Shares being purchased pursuant to this
Agreement have been acquired pursuant to an investment representation on his
part and shall not be sold, pledged, hypothecated, donated or otherwise
transferred, whether or not for consideration, by Executive, and the Company may
not permit the transfer of such Shares, except upon the issuance to the Company
of a favorable opinion of its counsel or the submission to the Company of such
other evidence as may be reasonably satisfactory to counsel for the Company, in
either case, to the effect that any such transfer shall not be in violation of
the Securities Act and any applicable state securities laws. Executive agrees
that a conspicuous legend shall be placed upon any certificate or certificates
delivered to them or any substitutes thereof in substantially the following
form:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED PURSUANT
TO AN INVESTMENT REPRESENTATION ON THE PART OF THE PURCHASER
HEREOF AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED
OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, BY
THE PURCHASER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A
FAVORABLE OPINION OF ITS COUNSEL OR THE SUBMISSION TO THE
COMPANY OF SUCH OTHER EVIDENCE AS MAY BE REASONABLY
SATISFACTORY TO COUNSEL FOR THE COMPANY, IN EITHER CASE, TO
THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF
THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS.
12. MISCELLANEOUS.
(a) MODIFICATION AND WAIVER. Any term or condition of
this Agreement may be waived at any time by the party hereto that is entitled to
the benefit thereof; provided, however, that any such waiver shall be in writing
and signed by the waiving party, and no such waiver of any breach or default
hereunder is to be implied from the omission of the other party to take any
action on account thereof. A waiver on one occasion shall not be deemed to be a
waiver of the same or of any other breach on a future occasion. This Agreement
may be modified or amended only by a writing signed by all of the parties
hereto.
(b) GOVERNING LAW. The validity and effect of this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Florida. Any dispute, controversy or question of
interpretation arising under, out of, in connection with or in relation to this
Agreement or any amendments hereof, or any breach or default hereunder, shall be
litigated and
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determined, and personal jurisdiction over Executive shall be vested, in the
appropriate County or Circuit Court of the Ninth Judicial Circuit in and for
Orange County, Florida, or the Federal District Court for the Middle District of
Florida, Orlando, Division. Venue for any legal action authorized hereunder
shall be in Orange County, Florida.
(c) TAX WITHHOLDING. 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.
(d) SECTION CAPTIONS. Section and other captions
contained in this Agreement are for reference purposes only and are in no way
intended to describe, interpret, define or limit the scope, extent or intent of
this Agreement or any provision hereof.
(e) SEVERABILITY. Every provision of this Agreement
is intended to be severable. If any term or provision hereof is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall not
affect the validity of the remainder of this Agreement.
(f) INTEGRATED AGREEMENT. This Agreement consti-
tutes the entire understanding and agreement among the parties hereto with
respect to the subject matter hereof, and supersedes any other employment
agreements executed before the date hereof. There are no agreements,
understandings, restrictions, representations or warranties among the parties
other than those set forth herein or herein provided for.
(g) INTERPRETATION. No provision of this Agreement is
to be interpreted for or against any party because that party or that party's
legal representative drafted such provision. For purposes of this Agreement:
"herein", "hereby", "hereunder", "herewith", "hereafter" and "hereinafter" refer
to this Agreement in its entirety, and not to any particular subsection or
paragraph. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same instrument.
(h) NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly
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<PAGE>
given if delivered by hand delivery, or by facsimile (with confirmation of
transmission), or by overnight courier, or by registered or certified mail,
return receipt requested, postage prepaid, in each case addressed as follows:
IF TO THE EXECUTIVE: Ezra P. Mager
540 Madison Ave.
20th Floor
New York, NY 10022
Telecopier no. 212-644-8333
IF TO THE COMPANY: First Team Automotive Corp.
350 S. Lake Destiny Drive
Suite 200
Orlando, FL 32810
Telecopier no.407-660-1576
Attn: W. Warner Peacock
With a copy to: J. Gregory Humphries, Esq.
Shutts & Bowen
20 N. Orange Avenue
Suite 1000
Orlando, FL 32801-4626
Telecopier no.407-425-8316
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by addressee.
(i) ATTORNEYS FEES. In the event of any litigation
arising under the terms of this Agreement, the prevailing party or parties shall
be entitled to recover its or their reasonable attorneys fees and court costs
from the other party or parties.
(j) WAIVER OF JURY TRIAL. THE PARTIES HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY DOCUMENT CONTEMPLATED TO BE
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION
-13-
<PAGE>
IS A MATERIAL INDUCEMENT FOR THE PARTIES' ACCEPTANCE OF THIS AGREEMENT.
IN WITNESS WHEREOF, the undersigned have hereunto set their
hands and seals the day and year first above written.
WITNESSES: FIRST TEAM AUTOMOTIVE CORP., a
Delaware corporation
- --------------------------------
By:
- -------------------------------- --------------------------------
Title:
--------------------------------
WITNESSES:
- --------------------------------
- -------------------------------- --------------------------------
Executive EZRA P. MAGER
-14-
EXHIBIT 21.1
FTAC SUBSIDIARIES
--------------------------
Don Mealey Imports, Inc.
Colonial Imports, Inc.
Don Mealey Infiniti, Inc.
Don Mealey Chevrolet, Inc.
Don Mealey Oldsmobile, Inc.
Chevrolet World, Inc.
Tallahassee Auto Group, Inc.
Tallahassee Motors, Inc.(1)
Tallahassee Chrysler-Plymouth, Inc.(1)
Tallahassee Imports, Inc.(1)
First Team Cadillac-Oldsmobile, Inc.
Dealership Accounting Services, Inc.
Bill Graham Ford Co.
Seminole Ford, Inc.
First Team Jeep Eagle, Chrysler- Plymouth, Inc.
Cook-Whitehead Ford, Inc.
First Team Management, Inc.
Driver's Mart of Central Florida, Inc.
- ------------
(1) These companies are wholly owned subsidiaries of Tallahassee Auto
Group, Inc.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of First Team Automotive
Corp. on Form S-1 of our reports dated May 9, 1997 (relating to the combined
financial statements of First Team Automotive Corp.), dated April 25, 1997
(relating to the financial statements of Bill Graham Ford Company, Inc.), and
dated May 9, 1997 (relating to the financial statements of Royal Jeep Eagle
Chrysler-Plymouth, Inc.), appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the headings "Selected Combined
Financial Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Orlando, Florida
June 9, 1997
EXHIBIT 23.3
GEORGE B. JONES & CO., P.C.
---------------------------
CERTIFIED PUBLIC ACCOUNTANTS
[LETTERHEAD]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
February 28, 1997 on the financial statements of Cook-Whitehead Ford, Inc.
included in First Team Automotive Corp.'s Form S-1 dated June 9, 1997 and to all
references to our Firm included in this registration statement.
/s/ BRIAN P. BENTZ
- ----------------------
GEORGE B. JONES & CO., P.C.
Tampa, Florida
June 9, 1997
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, Donald C. Mealey,
Chairman, President and Chief Executive Officer of First Team Automotive Corp.,
a Delaware corporation, has made, constituted and appointed, and by these
presents does make, constitute and appoint W. Warner Peacock his true and lawful
attorney-in-fact for him and in his name, place, and stead to sign the Form S-1
Registration Statement and all amendments thereto (including Pre- and Post-
Effective Amendments and amendments filed pursuant to Rule 462 under the
Securities Act of 1933) for First Team Automotive Corp., and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, giving and granting unto said attorney full
power and authority to do and perform all and every act and thing whatsoever
requisite and necessary to be done in and about the premises as fully, to all
intents and purposes, as he might or could do if personally present, with full
power of substitution and revocation, hereby ratifying and confirming all that
said attorney-in-fact or his substitute shall lawfully do or cause to be done by
virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand the ___ day of May,
1997.
---------------------------
Donald C. Mealey
STATE OF FLORIDA )
COUNTY OF __________ )
BE IT KNOWN, that on the ___ day of May, 1997, before me,
____________________, a notary in and for the State of Florida, duly
commissioned and sworn, personally came and appeared Donald C. Mealey, to me
personally known (or has produced __________ as identification), and known to me
to be the same person described in and who executed the within Power of
Attorney, and he acknowledged the within Power of Attorney to be his act and
deed.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my
seal of office the day and year last above written.
______________________________
Notary Public
______________________________
Name of Notary (Typed, Printed
or Stamped)
My Commission Expires:
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, W. Warner Peacock,
Executive Vice President, Secretary, Chief Financial Officer and Director of
First Team Automotive Corp., a Delaware corporation, has made, constituted and
appointed, and by these presents does make, constitute and appoint Donald C.
Mealey his true and lawful attorney-in-fact for him and in his name, place, and
stead to sign the Form S-1 Registration Statement and all amendments thereto
(including Pre- and Post-Effective Amendments and amendments filed pursuant to
Rule 462 under the Securities Act of 1933) for First Team Automotive Corp., and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, giving and granting unto
said attorney full power and authority to do and perform all and every act and
thing whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as he might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all that said attorney-in-fact or his substitute shall lawfully do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand the ___ day of May,
1997.
---------------------------
W. Warner Peacock
STATE OF FLORIDA )
COUNTY OF ___________ )
BE IT KNOWN, that on the ___ day of May, 1997, before me,
____________________, a notary in and for the State of Florida, duly
commissioned and sworn, personally came and appeared W. Warner Peacock, to me
personally known (or has produced __________ as identification), and known to me
to be the same person described in and who executed the within Power of
Attorney, and he acknowledged the within Power of Attorney to be his act and
deed.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my
seal of office the day and year last above written.
_______________________________
Notary Public
_______________________________
Name of Notary (Typed, Printed
or Stamped)
My Commission Expires:
-1-
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, Richard L.
Higginbotham, Director of First Team Automotive Corp., a Delaware corporation,
has made, constituted and appointed, and by these presents does make, constitute
and appoint, Donald C. Mealey and W. Warner Peacock, and each of them severally,
each with full power to act without the other, his true and lawful
attorney-in-fact for him and in his name, place, and stead to sign the Form S-1
Registration Statement and all amendments thereto (including Pre- and Post-
Effective Amendments and amendments filed pursuant to Rule 462 under the
Securities Act of 1933) for First Team Automotive Corp., and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, giving and granting unto said attorney full
power and authority to do and perform all and every act and thing whatsoever
requisite and necessary to be done in and about the premises as fully, to all
intents and purposes, as he might or could do if personally present, with full
power of substitution and revocation, hereby ratifying and confirming all that
each said attorney-in-fact or his substitute shall lawfully do or cause to be
done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand the ___ day of May,
1997.
---------------------------
Richard L. Higginbotham
STATE OF FLORIDA )
COUNTY OF ___________ )
BE IT KNOWN, that on the ___ day of May, 1997, before me,
____________________, a notary in and for the State of Florida, duly
commissioned and sworn, personally came and appeared Richard L. Higginbotham, to
me personally known (or has produced ________________ as identification), and
known to me to be the same person described in and who executed the within Power
of Attorney, and he acknowledged the within Power of Attorney to be his act and
deed.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my
seal of office the day and year last above written.
_______________________________
Notary Public
_______________________________
Name of Notary (Typed, Printed
or Stamped)
My Commission Expires:
-1-
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, Ezra P. Mager,
Vice Chairman of the Board of First Team Automotive Corp., a Delaware
corporation, has made, constituted and appointed, and by these presents does
make, constitute and appoint, Donald C. Mealey and W. Warner Peacock, and each
of them severally, each with full power to act without the other, his true and
lawful attorney-in-fact for him and in his name, place, and stead to sign the
Form S-1 Registration Statement and all amendments thereto (including Pre- and
Post-Effective Amendments and amendments filed pursuant to Rule 462 under the
Securities Act of 1933) for First Team Automotive Corp., and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, giving and granting unto said attorney full
power and authority to do and perform all and every act and thing whatsoever
requisite and necessary to be done in and about the premises as fully, to all
intents and purposes, as he might or could do if personally present, with full
power of substitution and revocation, hereby ratifying and confirming all that
each said attorney-in-fact or his substitute shall lawfully do or cause to be
done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand the ___ day of May,
1997.
---------------------------
Ezra P. Mager
STATE OF FLORIDA )
COUNTY OF ___________ )
BE IT KNOWN, that on the ___ day of May, 1997, before me,
____________________, a notary in and for the State of Florida, duly
commissioned and sworn, personally came and appeared Ezra P. Mager, to me
personally known (or has produced ________________ as identification), and known
to me to be the same person described in and who executed the within Power of
Attorney, and he acknowledged the within Power of Attorney to be his act and
deed.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my
seal of office the day and year last above written.
_______________________________
Notary Public
_______________________________
Name of Notary (Typed, Printed
or Stamped)
My Commission Expires:
-1-
